TaxTMI 
TaxTMI 
2022 (2) TMI 1481
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....e APTEL has directed the Andhra Pradesh Electricity Regulatory Commission (hereinafter referred to as "the State Commission") to dispose of O.P. No. 21 of 2015 filed by HNPCL for determination of capital cost and O.P. No. 19 of 2016 filed by the appellants - DISCOMS for approval of amended and restated Power Purchase Agreement (hereinafter referred to as "PPA") (Continuation Agreement) on merits. 2. The facts, in brief, giving rise to the present appeal are as under: 3. The erstwhile Andhra Pradesh State Electricity Board (hereinafter referred to as "APSEB") entered into a Memorandum of Understanding (hereinafter referred to as "MoU") with HNPCL on 17th July, 1992. As per the said MoU, APSEB transferred all the licenses, approvals, clearance and permits, fuel linkage, water required for establishment of the power project at Visakhapatnam in the erstwhile State of Andhra Pradesh, to HNPCL to generate and supply the electricity to APSEB. 4. An initial PPA was entered into between APSEB and HNPCL on 9th December, 1994. On 25th July, 1996, the Central Electricity Regulatory Commission (CERC) granted a Techno Economic Clearance for the power project for an estimated c....
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....his regard, HNPCL addressed a letter dated 6th August, 2012 to the then Hon'ble Chief Minister of the erstwhile State of Andhra Pradesh, thereby conveying its intention to develop the project and seeking State's support. Vide communication dated 26th December, 2012, the State Government addressed a letter to HNPCL accepting its proposal and agreeing to purchase 100% power from the project of HNPCL as per the Amended and Restated PPA. Vide communication dated 14th January, 2013, HNPCL agreed to supply 100% power to the State Distribution Companies at the tariff to be determined by the State Commission. 8. The HNPCL vide communication dated 16th May, 2013, addressed to the appellants - DISCOMS, inter alia, provided therein the details with regard to the estimated capital cost of the power project to the tune of Rs. 6098 crores as against Rs. 5545 crores that was given in June, 2010. The appellants - DISCOMS vide communication dated 17th May, 2013, expressed their reservations about the capital cost furnished by HNPCL and reserved their rights to contest the same before the State Commission. 9. On the same day, i.e., 17th May, 2013, a Memorandum of Agreement (hereinaft....
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....sp;19 of 2016 before the State Commission for approval of the Continuation Agreement dated 28th April, 2016, read with the Amended and Restated PPA dated 15th April, 1998. 17. The State Government vide order dated 1st June, 2016, accorded approval for purchase of 100% power from HNPCL. 18. On 3rd July, 2016, the second unit of the HNPCL (520 MW) came to be declared COD by HNPCL. 19. Vide order dated 6th August, 2016, the State Commission re­determined the provisional tariff at the rate of Rs. 3.82 per unit, payable by the appellants - DISCOMS for the power supplied by HNPCL. 20. On 15th May, 2017, the State Commission after hearing the parties on merits, reserved the judgment in both the petitions, i.e., in O.P. No. 19 of 2016 and O.P. No. 21 of 2015. 21. It is further to be noted that in the appeal arising out of interlocutory proceedings, the APTEL vide order dated 1st June, 2017, directed the State Commission to dispose of O.P. No. 19 of 2016 and O.P. No. 21 of 2015 on or before 14th August, 2017. The said period came to be extended from time to time, the last of such extension was granted till 31st January, 2018, vide order dated 10th....
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....8, refused to interfere with the said order, since it was an interim order. However, this Court directed the appeal to be decided expeditiously without taking into consideration the observations, in the order impugned before it, as conclusive. 28. Vide impugned judgment and order dated 7th January, 2020, the APTEL allowed the appeal filed by HNPCL and directed the State Commission to dispose of O.P. No. 21 of 2015 and O.P. No. 19 of 2016. Being aggrieved thereby, the appellants - DISCOMS have approached this Court by way of the present appeal. 29. On 14th July, 2020, this Court passed the following order in the present appeal: "The appeal is admitted. Until further orders, the impugned order passed by the Appellate Tribunal for Electricity New Delhi in Appeal No. 41/2019 shall remain stayed. List for hearing after four weeks." 30. An application being I.A. No. 67061 of 2020 for modification of the said order dated 14th July, 2020, came to be filed by HNPCL. This Court vide order dated 21st August, 2020, modified the order as under: "Heard. By order dated 14.07.2020, we directed the stay of impugned order pass....
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.... performance of a contract, which is void ab initio. He further submitted that MoA dated 17th May, 2013 and the Continuation Agreement dated 28th April, 2016 were themselves contrary to the National Tariff Policy issued under Section 3 of the Act of 2003 and Regulation 5.2(b) of the Andhra Pradesh Electricity Regulatory Commission (Terms and conditions for determination of tariff for supply of electricity by a generating company to a distribution licensee and purchase of electricity by distribution licensees) Regulation, 2008 (Regulation No. 1 of 2008) (hereinafter referred to as 'the Tariff Regulations') issued by the State Commission. As such, the direction by the APTEL, to continue to get the electricity supply from HNPCL, being contrary to the statutory provision, would not be tenable in law. 35. Shri Vaidyanathan submitted that the present project does not fall under any of the categories mentioned in Regulation 5.2 of the Tariff Regulations, which aspect has not been taken into consideration by the APTEL. 36. Shri Vaidyanathan further submitted that the finding of the APTEL, that HNPCL had made huge investments on the basis of the assurance given by the appellants ....
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....NPCL for determination of capital cost and O.P. No. 19 of 2016 filed by the appellants - DISCOMS for approval of Amended and Restated PPA on merits. 39. Dr. Singhvi submits that the APTEL has given sound and elaborate reasons and as such, no interference is warranted in the present appeal. 40. Shri M.G. Ramachandran, learned Senior Counsel, submitted that when withdrawal of an application is sought, which has the effect of frustrating the contract and defeating the defendant's right, the appellants cannot be said to have the right to withdraw the proceedings. He relied on the following authorities in support of this proposition. (i) Madhu Jajoo v. State of Rajasthan [AIR 1999 Raj 1] (ii) Kiran Girhotra & Ors. v. Raj Kumar & Ors. [(2009) 164 DLT 483] (iii) M. Radhakrisna Murthy v. Government of A.P. & Ors. [(2001) 3 ALD 330 (DB)] (iv) Smt. Ajita Debi v. Musst. Hossenara Begum [AIR 1977 Cal 59] (v) Mathuralal v. Chiranji Lal [AIR 1962 Raj 109] (vi) The Registrar, Manonmaniam Sundaranar University v. Suhura Beevi [AIR 1995 Mad 42] 41. Shri Ramachandran has further submitted that a right of withdrawal is not an absolut....
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....the contention of the appellants - DISCOMS, that if the power generated by the HNPCL is purchased by them, it will be at a very heavy cost, is totally erroneous. He submitted that, as a matter of fact, when as per the interim orders passed by the APTEL and this Court, the appellants - DISCOMS could have purchased the power from HNPCL at the rate of Rs. 3.82 per unit, the appellants - DISCOMS are purchasing the power at a much higher rate from the generators, which were ranked much below HNPCL in the merit order. He further submits that the conduct of the appellants - DISCOMS is totally mala fide. When under the interim orders of this Court as well as of the APTEL, they were bound to purchase the power at much lesser price than compared to the rate at which they are purchasing, they continued to purchase power at much higher price. He therefore submits that such an act, apart from being violative of the order of this Court, is contrary to the public interest. 44. Dr. Singhvi further submits that on account of mala fide attitude of the appellants - DISCOMS, it is not only HNPCL, but also the public at large, who are the sufferers. He submits that huge investment of thousands ....
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....ds thus: "As per our discussion I am summarizing herein below our proposal for your ready reference: 1. Vizag Power project will be mainly structured as a Merchant plant and implemented in a period manner with an initial capacity of 1040 MW and increasing upto 400 MW in a phased manner. 2. GoAP will sign a MoU with the Project Sponsors to provide: - Title deeds for 1122.38 acres of land against balance payment of Rs. 16.48 cr. - Transfer of remaining land of 1921.34 acres against payment of an amount of Rs. 67.63 cr. - Infrastructure support including for construction, power and water. - Recommend to GoI mega status for the project. - Revive the Coal supply and Transportation Agreements. - Facilitate environment clearance from MOEF. - Sanction of all other applicable State Approvals. 3. GoAP will have the first right of refusal, in the MoU, to purchase 25% of the power at regulated tariff." 46. It could thus be seen that when HNPCL proposed to revive the project in the year 2007, it was mainly structured as a Merchant plant, wherein the Government of Andhra Pradesh was to....
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....f power therefrom. In this regard, HNPCL has sought certain support so as to achieve scheduled commissioning of the Project commencing in July 2013. On this matter I am to clarify that Government of Andhra Pradesh reiterates its Interest in purchasing 100% power (through APDISCOMs) from the said project, as already contemplated in the restated PPA entered into between APSEB and HNPCL in 1998 based on the MOU in 1992 on the broad conditions mentioned in the PPA signed in 1998, except to the extent they may stand modified due to Impact of change in laws/rules and regulatory standards guiding such power projects post 1998. 2. In this background, the Government of Andhra Pradesh hereby agrees to facilitate the implementation of the power project to achieve the timeline for schedule commissioning. The Government has also decided to direct the APDlSCOMs as the successor entities of APSEB to enter into a continuation Agreement to the PPA of 1998 With HNPCL to this effect." [emphasis supplied] 50. A perusal of the said letter dated 26th December, 2012, would reveal that the Government of Andhra Pradesh has reiterated its interest in purchasing 100% of power (through APDISCOM....
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....d the same without demur. 54. On the same day, i.e., 17th May, 2013, an MoA for continuation of the Amended and Restated PPA dated 15th April, 1998, came to be executed between APDISCOMS and HNPCL. It will be relevant to refer to clauses E and F of the said MoA dated 17th May, 2013, which read thus: "E. HNPCL shall agree that the entire capacity of the project and all the units of the power station shall at all times be for the exclusive benefit of the DISCOMs and the DISCOMs shall have the exclusive right as well as obligation to purchase the entire capacity from the project. HNPCL shall not grant to any third party or allow any third party to obtain any entitlement to the Available Capacity and/or scheduled energy. In case DISCOMs do not avail power up to the Available Capacity provided by HNPCL, DISCOMs shall pay to HNPCL the capacity charges for such unavailed Available Capacity. Notwithstanding the above, in case DISCOMS do not avail power up to the Available Capacity provided by HNPCL, HNPCL shall have the option to sell such Available Capacity not availed by DISCOMS to any third party or require the payment of capacity charges from DISCOMS towards such u....
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....t on 2nd June, 2014, thereby bifurcating the erstwhile State of Andhra Pradesh into the State of Andhra Pradesh and the State of Telangana. It is the contention of HNPCL that after the bifurcation of the erstwhile State of Andhra Pradesh, though the State of Telangana demanded 54% of the power from the project, the Government of Andhra Pradesh insisted HNPCL to supply 100% of the power to the State of Andhra Pradesh. 58. It is not in dispute that HNPCL filed an Addendum Application in O.P. No. 21 of 2015 on 28th July, 2015, thereby showing the capital cost of the project to have increased to Rs. 8087 crores. 59. When O.P. No. 21 of 2015, was listed before the State Commission on 26th September, 2015, the State Commission passed the following order: "Sri P. Shiva Rao, learned Standing Counsel for the respondents filed counter on behalf for the respondents and sought for further time to respond to the further material filed by the petitioner by way of addendum before the Commission. Sri P. Shiva Rao, learned Standing Counsel for the respondents also represented that they are filing an application to dispense with the earlier Consultant as the respondents....
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....in order to give full and complete effect to such transfer of contracts, deeds, agreements and other instruments of whatever nature to the Procurers. 4) The Procurers hereby agree that they are jointly and separately liable for all obligations under the Agreement. 5) Subject to Clause 3 hereof and pending the execution of such other or further documents as envisaged under Clause 3 hereof, the Parties hereto are entering into this Continuation Agreement to the 1998 PPA and confirm, agree to the following: (a) The 1998 PPA shall stand amended as mentioned hereunder and as indicated in the Annexure attached hereto, which Annexure shall constitute an integral part of this Continuation Agreement. (b) The 1998 PPA and the MoA shall stand modified or amended to the extent provided herein. All other terms and conditions of the 1998 PPA including the obligations of the Parties as stated thereunder shall continue to be binding on the Parties. This Continuation Agreement and the 1998 PPA shall together constitute one and the same agreement and the provisions of this Continuation Agreement shall form an Integral part of the 1998 PPA. However, notwithstanding....
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....so not in dispute that in an appeal between the parties arising out of interlocutory proceedings, the APTEL had directed the State Commission to decide O.P. No. 19 of 2016 and O.P. No. 21 of 2015 expeditiously and on or before 14th August, 2017. The said period came to be extended from time to time, the last of such extension was granted till 31st January, 2018, vide order dated 10th January, 2018. 67. At this juncture, the appellants - DISCOMS filed two Interlocutory Applications on 4th January, 2018, viz., (i) I.A. No. 1 of 2018 in O.P. No. 19 of 2016 for withdrawal of O.P. No. 19 of 2016 together with initial PPA; and (ii) I.A. No. 2 of 2018 in O.P. No. 21 of 2015 for disposal of O.P. No. 21 of 2015. 68. Vide order dated 31st January, 2018, passed by the State Commission, which was impugned before the APTEL, the State Commission allowed withdrawal of O.P. No. 19 of 2016 filed by the appellants ­ DISCOMS and consequently dismissed O.P. No. 21 of 2015 filed by HNPCL. 69. As discussed herein above, being aggrieved, HNPCL filed Appeal No. 41 of 2018 before the APTEL, which came to be admitted by the APTEL on 26th Fe....
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....the Bid Evaluation Committee, that HNPCL was discarded from the bidding process since the entire generation capacity of HNPCL was encumbered to the State of Andhra Pradesh/APDISCOMS. The minutes of the meeting dated 28th September, 2012 of the Bid Evaluation Committee, as has been noticed in the order of the State Commission dated 13th August, 2013, clarify this position. 74. It is the State of Andhra Pradesh, which had expressed its interest in purchasing 100% power from HNPCL, as could be seen from the various documents placed on record. The communication addressed by the Principal Secretary to the Government of Andhra Pradesh, Energy Department, to HNPCL dated 26th December, 2012, clearly reiterates the intention of the Government of Andhra Pradesh in purchasing 100% power (through DISCOMS) from the project of HNPCL. The said communication would also show that the State has assured to take all necessary steps for commissioning the project at the earliest including execution of PPA and for making provision of Transmission system for start­up power and power evacuation. The said communication would clearly show that the parties had agreed to abide by the conditions mentione....
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....ellants - DISCOMS and its predecessors that the appellants ­ DISCOMS were to purchase 100% power generated by HNPCL. 77. It is also not in dispute that in pursuance of the MoA, executed on 17th May, 2013, HNPCL had also entered into FSA dated 26th August, 2013 with Mahanadi Coalfield Limited for supply of coal for the project. 78. It is thus clear that the consistent stand of the appellants ­ DISCOMS from the year 2012, for the first time, changed on 4th January, 2018, when they filed Interlocutory Applications before the State Commission for withdrawal of O.P. No. 19 of 2016 and disposal of O.P. No. 21 of 2015. 79. As already observed hereinabove, in the open bidding process, conducted in the year 2011­2012, HNPCL emerged as the successful L­2 bidder. It is however on account of the stand taken by the Bid Evaluation Committee, that it was discarded from the bidding process. As such, the stand of the appellants - DISCOMS, that the revival of the project of HNPCL was as a Merchant­power plant and therefore, the appellants - DISCOMS cannot be compelled to purchase power from it, is self-contradictory. On one hand, HNPCL was discarded from the op....
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.... the parties have no further rights or privileges in the matter and it is only for the convenience of the Court that Or der XX. Rule 1 permits judgment to be delivered after interval after the hearing is completed. It would, therefore, follow that after the stage contemplated by Order IX. Rule 7 is passed the next stage is only the passing of a decree which on the terms of Order IX. Rule 6 the Court is competent to pass. And then follows the remedy of the party to have that decree set aside by application under Order IX. Rule 13. There is thus no hiatus between the two stages of reservation of judgment and pronouncing the judgment so as to make it necessary for the Court to afford to the party the remedy of getting orders passed on the lines of Order IX. Rule 7. We are, therefore, of the opinion that the Civil Judge was not competent to entertain the application dated May 31, 1958 purporting to be under Order IX. Rule 7 and that consequently the reasons given in the order passed would not be res judicata to bar the hearing of the petition undo Order IX. Rule 13 filed by the appellant." [emphasis supplied] 81. It can be seen that this Court has held that CPC contemplates two s....
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....on behalf of the respondent­plaintiff for withdrawal of the suit. The same was objected to. The trial court overruled the objection of the appellant­defendant, holding that the plaintiff had a right to withdraw the suit and that right could be exercised at any time before judgment. The defendant could only claim an order for costs in his favour. The suit was therefore dismissed awarding costs of the suit to the appellantdefendant. The appellant­defendant filed revision in the High Court. The High Court dismissed the revision. Being aggrieved, the appellant­defendant had approached the Apex Court. In this factual background, this Court observed thus: "2. The short question that, in these circumstances, falls for decision is whether the respondent was entitled to withdraw from the suit and have it dismissed by the application dated 5th May, 1953 at the stage when issues had been framed and some evidence had been recorded, but no preliminary decree for rendition of accounts had yet been passed. The language of order 23 Rule 1 sub­rule (1) CPC, gives an unqualified right to a plaintiff to with­ draw from a suit and, if no permission to file a fresh suit....
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....set­off. It was further found that there could be no counter­claim, since no provision was shown under which a counter­claim could have been filed in the trial court in such a suit. It was further found that the right claimed by the appellant was a contingent one and did not exist at the time at which the written statement was filed. 86. The facts in the present case are totally different, wherein, after execution of various agreements, an application being O.P. No. 19 of 2016 came to be filed for grant of approval of PPA. Not only this, but the said O.P. No. 19 of 2016 was clubbed along with O.P. No. 21 of 2015, which was filed for determination of capital cost of the project as well as for determination of tariff. It can further be seen that in the aforesaid case, an application for withdrawal of the suit was filed at the stage of leading of evidence. It is not as if the application was filed after the suit was closed for judgment. 87. In any case, we are of the considered view that the conduct of the appellants - DISCOMS, in the present case, would disentitle them to withdraw the application. 88. Another argument, that on account of increase o....
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....4 and with regard to the grant of approval of PPA, the procedures laid down in Regulation 24 are required to be followed. 91. It will also be relevant to refer to paragraph 119 of the said judgment. "119. The 2003 Act even permits the generating company to supply electricity to a consumer directly. For the said purpose what is necessary is to comply with the provisions of the Act, the Rules and the Regulations. Section 14 of the Act categorically provides for grant of licence to any person who is transmitting electricity or distributing supply or undertaking trading therein, indisputably, however, the generator of an electrical energy, although is not subject to the grant of licence but while supplying electrical energy to a distributing agency, in turn would be subject to approval and directions of the Commission." 92. It can thus clearly be seen that this Court has held that though the Act of 2003 permits the generating company to supply electricity to a consumer directly, and that the generator of an electrical energy is not subject to the grant of license, but while supplying electrical energy to a distributing agency, in turn, it would be subject to approval and....
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....nd to refer any such dispute for arbitration. 95. Another argument made on the basis of Section 21 of the Reform Act is also not tenable. Much reliance is placed on sub­section (5) of Section 21 of the said Act, which reads thus: "(5) Any agreement relating to any transaction of the nature described in sub sections (1), (2), (3) or (4) unless made with or subject to such consent as aforesaid, shall be void." 96. It could thus be seen that any of the agreements mentioned in sub­sections (1), (2), (3) or (4) of Section 21 would be void unless they are made with the consent of the Commission or subject to such consent. Undisputedly, understanding this legal position, O.P. No. 19 of 2016 came to be filed by the appellants - DISCOMS, so as to obtain approval of the State Commission for the PPA entered into by them with HNPCL. 97. Insofar as the reliance placed on the provision of Regulation 5.2 of the Tariff Regulations is concerned, the same deals with approach to determination of tariff. It could be seen that, whereas Regulation 5.1 of the Tariff Regulations provides that where tariff has been determined through transparent process of bidding in accordan....
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.... as such, a State within the meaning of Article 12 of the Constitution of India. Every action of a State is required to be guided by the touch­stone of non-­arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest. Every holder of a public office is a trustee, whose highest duty is to the people of the country. The Public Authority is therefore required to exercise the powers only for the public good. 101. We may gainfully refer to the following observations of this Court in the case of Kumari Shrilekha Vidyarthi and others v. State of U.P. and others [(1991) 1 SCC 212]: "27. Unlike a private party whose acts uninformed by reason and influenced by personal predilections in contractual matters may result in adverse consequences to it alone without affecting the public interest, any such act of the State or a public body even in this field would adversely affect the public interest. Every holder of a public office by virtue of which he acts on behalf of the State or public body is ultimately accountable to the people in whom the sovereignty vests. As such, all powers so vested in him are meant to be....
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....of non­arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review. 8. The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non­arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision­making process. Whether the expectation of the claimant is reasonable or legitim....
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....ts on record would reveal that the State has also allotted thousands of acres of land for the project to HNPCL. It is not in dispute that in pursuance of the MoA of 2013 (dated 17th May, 2013) and the Continuation Agreement of 2016 (dated 28th April, 2016), the entire project has been erected and is operational. Not only this, but from the year 2016 till 14th July, 2020, the power has been purchased by the appellants - DISCOMS from HNPCL. It could thus be seen that after investment of huge resources including the land belonging to the State, the project is complete and has become operational. The question, at this juncture, would be, whether to discard such a project is in the public interest or against it. At the cost of repetition, it may be reiterated, that the determination of the capital cost of the project and the rate of tariff at which the power has to be purchased would always be subject to regulatory control of the State Commission. What has been done by the APTEL is only directing the State Commission to determine the same. 105. The record would clearly reveal that from the year 2012 onwards till 4th January, 2018, it was the consistent stand of the State of Andhra Pr....
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....y and wilfully without reasonable or probable cause, and not necessarily an act done from ill feeling and spite. It is a deliberate act in disregard to the rights of others. Where malice is attributed to the State, it can never be a case of personal ill will or spite on the part of the State. It is an act which is taken with an oblique or indirect object. It means exercise of statutory power for "purposes foreign to those for which it is in law intended". It means conscious violation of the law to the prejudice of another, a depraved inclination on the part of the authority to disregard the rights of others, which intent is manifested by its injurious acts. (Vide ADM, Jabalpur v. Shivakant Shukla [(1976) 2 SCC 521 : AIR 1976 SC 1207], S.R. Venkataraman v. Union of India [(1979) 2 SCC 491 : 1979 SCC (L&S) 216 : AIR 1979 SC 49], State of A.P. v. Goverdhanlal Pitti [(2003) 4 SCC 739 : AIR 2003 SC 1941], BPL Ltd. v. S.P. Gururaja [(2003) 8 SCC 567] and W.B. SEB v. Dilip Kumar Ray [(2007) 14 SCC 568 : (2009) 1 SCC (L&S) 860] .) 26. Passing an order for an unauthorised purpose constitutes malice in law. (Vide Punjab SEB Ltd. v. Zora Singh [(2005) 6 SCC 776] and Union of India v.....