TaxTMI 
TaxTMI 
TaxTMI 
2008 (5) TMI 680
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.... 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 including privatization. It took into considerat....
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....a 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 Government of Andhra Pradesh, upon taking into consideration the said applications allowed the respond....
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.... 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 the said purpose four months prior to the commencement of commercial operation. In view of the said direction of the Commission, the company commenced construction of ....
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....s 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 terms of subsidy. Further, to the extent the government subsidy is limited the burden of cross subsidy will increase on those industrial and commercial consumers who stay with the Licensee. This ....
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....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 consent of the Commission. (23). If there is no agreement between APTRANSO and the MPPs on supply terms within a month's time, the Commission will hear the eight MPPs and APTRANSCO on 4.6.2001 for further or....
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....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 plants in the country by observing: Reference is invited to GOAP letter dated 29.12.2001 seeking the advice of CEA under Section 3 of Electricity (Supply) Act, 1948. The matter has been examined based on the subsequent details/clarifications....
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....iff 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 hearing the applicant argued that it had always complied with the orders of the APERC and on-off-on attitude of ANTRANSCO was very confusing not only to LVS but also to other energy developers and the credibility of APTRANSCO and GoAP was at stake. It requested the APTRANSCO should be directed t....
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....s 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 the power at the rate at which it purchased during the trial operations, subject to the final orders to be passed by the Commission, or to takeover the plant from the appellant and to perform the duties of a generating company, as provided under Section 18-A(2) of the Electricity (Supply) Act, 1948, until it enters into Power Purcha....
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.... 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 the tariff, transmission and wheeling charges. APTRANSCO was called upon to amend the draft agreement with RVK. 39. Vide its letter dated 24.9.1999, RVK requested APERC to process the exemption application dated 20.9.1999 expeditiously. 40. On 14.10.1999, the Power Purchase and the Wheeling Agreement was signed between RVK and APTRANSCO. In....
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....s 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 under Section 43A of the 1948 Act granted to a generating company for sale of electricity did not authorize the supply of electricity to the consumers. Re: civil Appeal No. 8101 of 2002 46. On 9.12.1995, the State Government under Section 18A of the 1948 Act granted permission to M/s Astha Power Corporation Pvt. Ltd. to set up a 28.7 MW residual fuel based p....
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....icence/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 Astha again to negotiate with APTRANSCO so as to arrive at an agreement. 56. By an order and judgment dated 8.6.01, the High Court dismissed the said appeal. Upholding the order of Commission. 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 fu....
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....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 consideration that the supply and distribution cannot be maintained unless the charges for the electricity supplied are adequately levied and duly collected. (f) to promote competitiveness and progressively involve the participation of private sector, while ensuring fair deal to the customers. 72. Section 12 provides for the general powers of the State Government to issue policy directions on matters concerning electricity in....
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....led 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 it to heavy industrial units including public sector undertakings. 81. The issues involved in relation to these industries are two fold. 82. Where the industries had been asked to sell electrical energy to the APTRANSCO, writ petitions filed there against had been allowed by one Division Bench of the High Court. It, however, appears that another batch of cases where interim order had been passed by the Commission to supply power to the APTRANSCO at one stage and pursuant to the said directions....
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....g 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 14 of the 1998 Act but also in exercise of its power to regulate supply and all that is contained in Section 11 thereof. 6) Apart from LVS Power, as no other company, had set up the power plant, although the Commission in its order dated 4th May, 2001, in purported exercise of its suo motu power, expressed its disinclination to permit third party sales and fixation of rate, it asked the parties to negotiate thereabout and only in the event such negotiations failed, they were given the liberty to approach the Commission in the matter. 7) When, however, it was fou....
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....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) The State having the power to lay down the policy decision in terms of Section 12 of the 1998 Act, the Commission is bound to give effect thereto having regard to its functions as envisaged in Section 11(1)(f) of the Act. It was, thus, bound to promote competitiveness involving participation of private sector progressively and not regressively. 11) APTRANSCO having been constituted under the Act and its functions being subject to supervision by the Commission, was bound to obey the directions of the Commission. 87. Mr. Narsimhan and Mr. Dushyant Dave, learned senior counsel appearing on behalf of G.V.K. and Astha Power submitted that having regard ....
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....dents 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 institutions. They not only entered into Power Purchase Agreements but also entered into Power Wheeling Agreements with APTRANSCO. The said arrangements were entered into in view of the fact that the private generating companies did not have the requisite infrastructure for transmission of electrical energy from their generating stations to the consumers. 93. It was in the aforementioned background, we must take into account that the applications for exemptions were filed pursuant to the order passed by the Commission as indicated hereinbefore. It was the Commission which opined that such an application for exemption was not required to be filed. However, while dealing with the....
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....s 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 remedied" (at page 79). Having regard to the context and other relevant circumstances, it has been held in some cases that the expression "regulation" does not include "prohibition" whereas in certain other contexts, it has been understood as taking within its fold "prohibition" as well. 100. It has been held by this Court in Jiyajeerao Cotton Mills Ltd. and Anr. v. Madhya Pradesh Electricity Board and Anr. AIR1989SC788 that the power to regulate does not include power to prohibit. The Court held: The expression "regulate" occurs in other statutes also, as for example, the Essential Commodities Act, 1955, and it has been found difficult to give the word a precise definition. It has different shades ....
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....with. 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 State with some purpose in mind provided for taking of licence under the 1998 Act but the very fact that they had the requisite licence in terms of the provisions of 1910 Act, itself was one of the relevant considerations for the purpose of grant of exemption. It could have been rejected in which event the MPPs would have applied for grant of licence. Indisputably the State Government has the power to grant provisional licence. In terms of Sub-section (4) of Section 14 of 1998 Act, the provisional licences are also issued by the State Government. Indisputably again the said provisional licences have been granted to avoid a situation as a result whereof the MPPs would be forced to stop their function during interregnum period....
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....ontrary. 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) and (f) of the Reform Act read as under: (e) `licence' means a licence granted under Chapter VI; (f) `licence' or `licence-holder' means a person licensed under Chapter VI to transmit or supply energy including GRIDCO. Chapter VI deals with licensing of transmission and supply. Section 14(1) reads as under: No person, other than those authorised to do so by licence or by virtue of exemption under this Act or authorised or exempted by any other authority under the Electricity (Supply) Act, 1948 shall engage in the State in the business of (a) transmitting; or (b) supplying electricity. From the facts noted hereinabove and in view of Section 14(1) of the Reform Act it is quite clear that ICCL was/is authoris....
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.... 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, 2001 it appears that APSEB Engineers' Association and Assistant Engineers' Association, APSEB were heard. The main contention appears to have been advanced was as to whether MPPs should be allowed to generate power with residual fuel. The Commission noticed that out of 31 MPPs permission granted to 12 were cancelled. Out of 19, LVS Power Ltd. survived. 116. It noticed that some of the MPPs changed their capacities. It furthermore took notice of the fact that LVS had already drawn moneys from the financiers and the extension granted by GOAP in their case was to expire on 30th April, 2001. 117. Interestingly the State of Andhra Pradesh did not put in their appearance before the Commission. The Commission merely received a communication from the Principal Secretary to the Government which was no....
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....VS 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 work out to as follows: Unit generated Total FC VC With FE variation - 272.9 115.4 157.5 Without FE variation -270.2 112.6 157.5 The above tariff projections have been informed to the developer on 17.8.2001. In reply, the project company has informed that they are agreeable to the levelised tariff of 115.4 FC 157.5 VC per unit generated and with foreign exchange variation on ROE, presently accepting the capital cost of Rs. 125 Crs. Subject to condition that the tariff is to be re- fixed after the capital cost is approved by the GoAP. 123. Supply commenced in September, 2001. On the aforementioned basis only the private agreements were terminated. Important developments took place in the next three months. 124. By a letter dated 26th November, 2001, APTRANSCO asked the Principal Secretary to the Government of Andhra Pr....
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....l 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 beyond 30.11.2001. 126. A stand appears to have been taken by the Commission in its letter dated 27th December, 2001 addressed to the Chief Engineer, APTRANSCO by the Commission stating: This is to inform you that further proceedings in the above matter will be held at 11 AM on 7th February 2002 at the Commissions office with the APTRANSCO, GOAP and LVS representatives must attend. In the meanwhile APTRANSCO shall finalise all the documents and issue outstanding including with the Government of Andhra Pradesh as stated in the letter dated 03.12.2001 addressed to the Commission and file with the Commission relevant documents, details etc. by 31.01.2002 127. In the meantime the State referred the matter to the Central Electricity Authority seeking advise under Section 3 of the 1948 Act about the reasonableness of the capital cost of the project proposed by APTRANSCO in view of the experience and expertise of the Authority in....
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....er 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 some displeasure that we must notice as to how Commission mis- directed itself at every stage. Despite the State supported the application for grant of exemption, the third party sale was prohibited. Parties were asked to negotiate and come back for fixation of tariff but then without realizing the consequence which has to be suffered by the parties, it says it could not do anything in the matter. If APTRANSCO was not agreeable to the orders passed by the Commission, which might have been passed during the pendency of the proceedings, it could have questioned the same. It did not do that. It accepted the orders. It for all intent and purport forced the respondent to alter its position to its great detriment. The Commission itself is responsible for the said situation. If it has the power to regulate, as it has been contending, it should have proceeded progressively and not regressively. It could have taken into consideration the provisions of Section 11 (1)(f) whereby one....
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....reement 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 activities of APTRANSCO. 136. It is in the aforementioned situation that the doctrine of promissory estoppel should be held to be applicable. 137. In Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and ETIO and Ors. AIR2007SC1984 , on the question of doctrine of promissory estoppel, it was held: 121. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. The appellants had undoubtedly been enjoying the benefit of (sic exemption from) payment of tax in respect of sale/consumption of electrical energy in relation to the cogenerating power plants. 138. The Court further opi....