TaxTMI 
TaxTMI 
2023 (4) TMI 1425
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....Sharma, Adv. Ms. Gargi Srivastava, Adv. Ms. Adviteeya, Adv. Ms. Aparna Bhat, AOR Mr. Sajan Povayya, Sr. Adv. Mr. Amit Kapur, Adv. Mr. Pukhrambam Ramesh Kumar, AOR Mr. Rahul Kinra, Adv. Mr. Aditya Ajay, Adv. Mr. Karun Shrama, Adv. Mr. Girdhar Gopal Khattar, Adv. Ms. Aliva Ahmed, Adv. Ms. Raksha Agrawal, Adv. Ms. Divyya Kaul, Adv. Mr. Hasan Murtaza, AOR Mr. K. V. Mohan, AOR JUDGMENT K. M. JOSEPH, J. (1) The six appeals with which we are concerned have been filed under Section 125 of the Electricity Act, 2003 (hereinafter referred to as 'Act' for brevity). The appeals are directed against the order passed by the Appellate Tribunal for Electricity (hereinafter referred to as 'Tribunal' for brevity) in an appeal carried by the first respondent under Section 111 of the Act. (2) The appeal before the Tribunal, in turn, was lodged against the order passed by the Central Electricity Regulatory Commission (hereinafter referred to as 'Commission' for brevity). The Commission passed the order purporting to be one under Section 79(b) inter alia of the Act in a petition filed by the first respondent. FACTS (3) It was decided to set up an Ultra Mega Power Project. Towards this end, the Po....
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....eparation of Detailed Project Report (DPR), where applicable. The bidder shall be free to verify geological data through his own sources, as the geological risk would lie with the project developer. The project site shall be transferred to the successful bidder at a declared price. Provided that for the projects from which more than one distribution licensees located in different States intend to procure power and if the preparations for such projects are being facilitated by the Central Government, the activities referred to above shall be initiated before the bidding process and should be completed before signing the power purchase agreement with the selected bidder. (6) Under the guidelines, tariff structure is contemplated which consists of capacity charges and energy charges which are dealt with in detail. It also deals with bidding process. The bidding process itself is divided into two stages, viz., a determination of the qualification by a prequalification system and thereafter submission and consideration of essentially what consists of the financial bid. There is a guideline which deals with arbitration and it was contained in guideline 5.17: "5.17 The procur....
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....n prepared in good faith, neither the Procurers, Authorised Representative and Power Finance Corporation Limited (PFC) nor their directors or employees or advisors/consultants make any representation or warranty, express or implied, or accept any responsibility or liability, whatsoever, in respect of any statements or omissions herein, or the accuracy, completeness or reliability of information contained herein, and shall incur no liability under any law, statute, rules or regualations as to the accuracy, reliability or completeness of this RFP, even if any loss or damage is caused to the Bidder by any act or omission on their part. 1.3 The objective of the bidding process is to select a SuccessfulBidder for development of the Project as per the terms of the RFP. The Project will have a Contracted Capactiy of minimum of 3500 MW and maximum of 3800 MW in accordance witht he terms of the PPA. The Selected Bidder shall purchase the entire shareholding of the Authorised Representative from PFC and its nominees in accordance with Share Purchase Agreement and cause the Seller to enter into the RFP Project Documents. The Selected Bidder shall be responsible for ensuring that the Seller....
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....r any law, statute, rules or regualtions as to the accuracy, reliability or completeness of such water intake study report and Project Report, even if any loss or damage is caused to the Selected Bidder by any act or omission on their part. The Ministry of Power and the State Government of Madhya Pradesh have expressed their support to the Seller, on best endeavour basis, in enabling the Seller to develop the Project. 2.7.2.1 The Bidder shall make independent enquiry and satisfy itself with respect to all the required information, inputs, conditions and cirumstances and factors that may have any effect on his Bid. In assessing the Bid, it is deemed that the Bidder has inspected and examined the site conditions and its surroundings, examined the laws and regulations in force in India, the transportation facilities available in India, the grid conditions, the conditions of roads, bridges, ports, etc. For unloading and/or transporting heavy pieces of material and has based its design, equipment size and fixed its price taking into account all such relevant conditions and also the risks, contingencies and other circumstances which mayh influence or affect the supply of power. 2.7....
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....ted applied pursuant to the RFP. Though, initially, its bid was not the lowest, but on account of the fact that the lowest bidder was found to be not eligible, Reliance Power Limited emerged as the lowest bidder. In keeping with the conditions, Reliance Power Limited acquired 100 per cent share holding of the first respondent and it was favoured with the Letter of Intent on 01.08.2007. It entered into a Power Purchase Agreement (hereinafter referred to as 'PPA') on 07.08.2007. In the second week of December, 2007, it would appear that the first respondent which now stood transformed as a fully owned company of the successful bidder Reliance Power Limited, commissioned a new Study by WAPCOS. WAPCOS submitted its report on 04.04.2008. We must at this juncture notice that '21.07.2007' has been determined as the cut off date, the relevance of which will be unfolded in the later part of the judgment. (11) The PPA contemplated two phases. The first phase was the construction of the power plant. The second was the operation of the power plant. The PPA was to be enforced for a period of 25 years. Therefore, we can safely characterise it as a long term agreement to purchase power. Since th....
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....resentative had to provide water intake study report. WAPCOS (a premier Government of India agency) was appointed to conduct the water intake study. WAPCOS, as the expert agency identified the water intake pump house location and the pipeline route from the intake pump house to the power plant in its Report. This report was made available to all the bidders before bid submission so that the bidders could factor in the cost of the water intake system in preparation of their financial bid i.e., the tariff at which power would be supplied to the Procurers. The total estimated cost for the construction of water intake system for the location and route indicated in the report by WAPCOS was estimated to be approximately Rs.92 Crores. The WAPCOS Report along with the estimated cost are annexed herewith and marked as Annexure P24 (Colly)." "66. After RPower acquired the Petitioner, WAPCOS was appointed to confirm the technical feasibility as part of detailed engineering exercise. During this process, it was discovered that the water intake location as finalized by WAPCOS before the bidding was not an appropriate location and does not ensure reliable supply of water to the power plant. I....
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....n UMPP is an integrated power project with captive coal mines viz. Moher, Moher Amlohri Extension and Chhatrasal Coal Blocks. The captive coal mines allocated for Sasan UMPP form an integral and essential part of the Project and any equipment imported in relation to the captive coal mines would therefore be treated as goods imported for setting up the Project." "79. The Petitioner was required to import mining equipment for setting up the captive coal mines from which coal will be sourced for the Project since the required mining equipments were not available in India." "80. On 05.05.2011, the Petitioner applied to the Energy Department, Government of Madhya Pradesh for recommendation letter to import mining equipments for Sasan UMPP under nil custom duty as is applicable for the other equipment such as power plants of the Project. This application was premised on Notification 21 of 2002-Customs. However, vide an Office Memorandum dated 17.06.2011, the Ministry of Power has intimated that the exemption for customs duty for UMPPs is given only with respect to power equipment, which was forwarded to Petitioner by Government of Madhya Pradesh on 20.06.2011. Copies of letters date....
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.... of electricity sector while ensuring fair pricing and quality of supply. (b) Power procurement under Section 63 of the Act is governed by the statutory framework comprising (i) Section 63 of the Act, (ii) Government of India's Guidelines and (iii) standard documents being RFP and PPA. (c) In terms of Section 63 of the Act the successful bid must be selected consistent with the guiding principles under Section 61 of the Act meaning thereby that while adoption of tariff under Section 63 of the Act, the principles as laid down under Section 61 need to be complied. (d) Power procurement pursuant to the statutory framework constitutes a statutory contract in terms of the pre-approved and finalized PPA governed by provisions of the Act as well as the Guidelines. (e) The PPA envisages the adjustment of tariff by this Hon'ble Commission to restore/restitute the party adversely affected (the Petitioner in the present case)." "90. It is also pertinent to note that under Section 79(1)(b) of the Act, this Hon'ble Commission has been given the power to regulate the tariff of generating companies like the Petitioner which have a composite scheme for generation and sal....
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.... custom duty on mining equipments." "106. It is submitted that vide an Office Memorandum dated 17.06.2011, the Ministry of Power intimated Government of Madhya Pradesh that the exemption for customs duty for UMPPs is given only with respect to power equipment. The total amount of customs duty paid by the Petitioner on mining equipments imported for Sasan UMPP is Rs.361.47 Crores till date. Total custom duty for mining equipments is estimated to be about Rs. 531 Crores." "107. It is submitted that the decision of the Ministry of Power amounts to a Change in Law under Article 13.1 of the PPA and the Petitioner is entitled to be compensated for the same. It is further submitted that the Petitioner not being allowed to import mining equipment under nil customs duty as is granted for the other equipment such as power plants of the Project qualifies as Change in Law under Article 13.1 of the PPA." "108. It is submitted that as per RFP for Sasan UMPP, the Procurers had to provide water intake study report. This study was conducted by WAPCOS and the report was made available to all the bidders before bid submission. The cost of the water intake system as per the report was approxi....
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...., this is a fit case for this Hon'ble Commission to exercise its powers under Section 79 and devise a mechanism to uphold the objective and purpose of Article 13 - to provide economic restitution." "129. It is further submitted that PPA envisages a scenario where this Hon'ble Commission can interfere with the issues relating to the claim made by a party for any change and/or determination of the tariff or any matter relating to the tariff or claims made by any party which partly or wholly related to any change in the tariff or determination of any such claim which can result in change in the tariff. In this context, Articles 13 and 17 are noteworthy. While Article 13 of the PPA envisages tariff adjustment in the event of "Change in Law", Article 17 of the PPA provides for dispute resolution, by the Hon'ble Commission in case of claim made by any party for any change in or determination of tariff or any matter related to tariff or claims made by any party, which partly or wholly relate to any change in the tariff or determination of any of such claims could result in change in tariff." "142. The Petitioner therefore most humbly and respectfully prays that this Hon'ble Commissio....
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....ation for water intake, which was 23 km from the power plant as against 12.5 km initially indicated at the time of bidding (original location). It was highlighted that new location would ensure reliable water supply to the power plant. Due to increase in distance, submergence area along the route and construction time, there has been considerable increase in cost of the water intake system as per following details (Annexure P-26 of the petition) and as per the earlier report of WAPCOS:- S. No. Cost Item As per earlier WAPCOS Report Current estimate (Rs. Crore) (Rs. Crore) 1 Cost of Pump House 21.00 62.97 2 Cost of Bridge 10.50 3 Supply of Pipeline 30.50 73.91 4 Laying of pipeline 16.70 57.97 5 Mechanical 10.20 20.32 6 Electrical 3.50 4.02 7 Dredging for PumpHouse 25.13 8 Total 92.40 244.32 31. MPPMCL has submitted that it is an expense incurred by the petitioner but is not covered under "Change in Law" under Article 13.1.1 of the PPA. However, it is concluded that the cost has been incurred by the petitioner and exceeds the estimates given by the procurer's authorized representative prior to b....
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....onditions and also the risks, contingencies and other circumstances which may influence or affect supply of power." Further para 4 of the RfP document provides that the pricing and other details given in the bidding documents are by way of information only and it was for the bidders to conduct independent enquiry and verify the details and information. Para 4 are extracted as under: "4. While the RFP has been prepared in good faith, neither the Procurers, Authorised Representative and Power Finance Corporation (PFC) nor their directors or employees or advisors/consultants make any representation or warranty, express or implied, or accept any responsibility or liability, whatsoever, in respect of any statements or omission herein, or the accuracy, completeness or reliability of information contained herein, and shall incur no liability under any law, statute, rules or regulations as to the accuracy, reliability or completeness of this RFP, even if any loss or damage is caused to the Bidder by any act or omission on their part." Therefore, it is the responsibility of the petitioner to verify the suitability of the location of water intake and ensure reliable water supply for....
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....n that State, each of which has a population of more than one million, within a period to be fixed by the Ministry of Power.". [F.No.354/104/2003-TRU] It is noticed that the revised policy guidelines issued by Government of India, Ministry of Power vide its letter No. A118/2003-IPC dated 2.8.2006 has stated that an inter-State thermal power plant of a capacity of 1000 MW or more is eligible for grant of mega power status. It further states as under: "Zero Customs Duty: In terms of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 21/2002Customs dated 1.3.2002 read together with No. 49/2006-Customs dated 26.5.2006, the import of capital equipment would be free of customs duty for these projects." 41. It is to be considered whether under the notification as stated above, mining equipments were exempted from customs duty. General Exemption No.122 under the Customs Notification No.21/2002 as amended from time to time contains the list of items which are exempted from customs duty. It is observed that Notification 21 of 2002-Customs clearly demarcates the power projects and mining projects separately. It is seen that at ....
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....earlier report prepared for PFC/ Procurers and made available to all bidders prior to bid submission was not an appropriate location and does not ensure reliable supply of water to the power plant. It also emerged that the water intake at the original location indicated by WAPCOS in the pre-bid report would have resulted in shutdown of the power plant for a considerable period in a year during the lean season. Therefore, WAPCOS recommended a new location for water intake, which was 23 km from the power plant as against the 12.5 kms initially indicated at the time of bidding (original location). It was highlighted that the new location would ensure reliable water supply to the power plant. Due to increase in the distance, submergence area along the route and construction time, there has been considerable increase in the cost of water intake system due to change in location as detailed below. The report of WAPCOS recommending the revised location is annexed herewith and marked as Annexure A-15. 9.7 It is submitted that due to the change in location, cost for water intake system has increased on following counts: (a) While the route length itself increased to 23 kms, the increas....
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.... the WAPCOS Report was unfeasible. Therefore, the disclaimer does not absolve the Procurers of their liability to compensate the Appellant for the increase in cost. It is submitted that due to the error in WAPCOS's report, the Appellant is faced with an additional burden of Rs.176 Crore which has adversely impacted the project economics. It is submitted that the disclaimers contained in Para 2.7.2.1 and Para 4 of the RFQ ought not to be considered absolute in nature so as to prevent loading of costs which are incurred by the Appellant as a direct result of omission or error on part of the Procurers in providing information during the pre-bid stage. This approach is counter-intuitive to ensuring that the Appellants Project is able to supply cheap and affordable power to over 42 million consumers in the Procurer States. It is further submitted that the disclaimers cannot act as an absolute bar to the liability of the Procurers. Any duty to independently verify inputs, information factors etc. require only a reasonable duty of care. The grave technical deficiencies and huge differences between actual cost and estimates provided to the bidders defeat the fundamental objective of provid....
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....which comprises of captive coal mines. It is not separately indulging in mining activities. Moreover, the coal from the Project is being used only for the Project. The entire capital cost of the power project includes the cost of the coal mines. This is also evident from Article 13 of the PPA where increase in cost of land and R&R expenditure for the coal mines is included as change in law. Therefore, the finding that the captive coal mines are a separate activity and will fall under Serial No. 399 is incorrect and ought to be set aside. FINDINGS OF THE TRIBUNAL (17) As far as the complaint about the increased costs on account of change in water intake system, the following is the finding of the Tribunal. "12.4 After due consideration of the rival contentions of both the parties, what emerges is that after being declared as the successful bidder, the SPL with a view to affirm the technical suitability of the preliminary report of the WAPCOS on Water Intake System, re-engaged the same agency for finalization of the said report. It is not in dispute that the Consultant, WAPCOS reviewed its earlier report and came to a conclusion that the earlier location of Water Intake was not ....
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....the most competitive tariff in the country. It is noted from the contentions of the Respondent procurers that such an issue has not been dealt with either in the PPA or in the competitive bidding guidelines issued by Ministry of Power under Section 63 of the Act, however, in view of the criticality of such situation, we opine that the matter needs afresh re-look for suitable redressal. While the Central Commission has correctly concluded that it does not qualify as change in law under Articles 13.1.1 of the PPA, it, however, needs to be addressed on the basis of settled principles of law and equity also, in the light of the Hon'ble Supreme Court findings in its judgment at Para 19 in Energy Watchdog vs. CERC dated 11.04.2017. Thus, we are of the considered view that this issue involving substantial additional expenditure basically arising out of erroneous report of the consultants needs to be re-examined afresh by the Central Commission. Hence, this issue is answered in favour of the Appellant." (18) In regard to the complaint relating to the O.M. dated 17.06.2011 forming change in law, we note the following findings: "14.5 We have considered the submissions of the learned coun....
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....400) in the said custom duty notifications and has not appreciated that the captive coal mines being integral part of the UMPP cannot be equated to a stand alone coal mines, having commercial line of utilization. The Appellant was thus right in assuming that Custom Duty exemption will be available for the coal mining equipments. As such, this issue needs to be examined afresh in accordance with law and various provisions of the RFQ/RFP/PPA. Therefore, we answer this issue in favour of the Appellant." (19) On the basis of the aforesaid findings, the Tribunal remanded the matter back to the Commission. We may also notice the sequel to the impugned judgment. Pursuant to the remand, the Commission reconsidered the matter in regard to the water intake. The Commission ordered payment of sum of Rs.176 crores. As far as the claim for compensation on the basis that the issuance of the office memorandum by the Joint Secretary in the Ministry of Power having brought about a change in law, it was found that the goods in question had been imported not by the first respondent but by its parent company. This, in turn, has triggered two sets of appeals again before the Tribunal and they are stil....
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....a study of the site. Nothing prevented the first respondent from carrying out inspection of the site and verifying for itself the information which was provided through the report of the WAPCOS. (23) Mr. P. Chidambaram, learned senior counsel, further pointed out that a perusal of the second WAPCOS report, which is the sole basis for the huge claim raised by the first respondent, would show that the second report does not, in any manner, rubbish the first report. It is not in dispute, it is pointed out, that the procurers were in no way associated with the carrying out of the second WAPCOS report. Unilaterally, the first respondent without any basis gets the second report commissioned and it is on the said basis alone that the claim was made and what is more, allowed by the Tribunal. This is clearly impermissible. As regards the claim for compensation alleging change in law brought about by the Office Memorandum issued by the Joint Secretary is concerned, in the first place, it is pointed out that the proper thing for the first respondent to do would have been to take up the matter with the Department and claim a refund and he would submit it is strange instead of doing that the b....
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...., that the Court may not view the PPA in question as an ordinary contract. He pointed out that what is at stake is the interpretation to be placed on a long term power procurement contract. It is not as if in such a contract, the matters are fixed with reference to the point of time when the contract is entered into. It is not cast in stone, in other words. It is open to change. More appropriately, it is open to regulation. We are invited to consider that the Act represents a paradigm shift from the previous regime under which the price of power was fixed essentially at the whims and caprice of the State Electricity Boards. There was a stagnation in the production and supply of power. It is realising the need for increasing private participation in the generation of power that the Act was enacted in the year 2003. Being the subject matter of regulations means that tariff was open to be revisited from time to time. It is precisely this regime which is reflected by Section 79 of the Act. It is further pointed out that the complaint of the appellants regarding the Tribunal in regard to the water intake system despite agreeing with the Commission that there was no change in law renderi....
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....r essentially for the proposition that there is power under Order XLI Rule 22 and Rule 33: Prahlad & Ors. v. State of Maharashtra & Anr. (2010) 10 SCC 458, State of Punjab & Ors. v. Bakshish Singh (1998) 8 SCC 222, Mahant Dhangir & Anr. v. Madan Mohan & Ors. (1987) (Supp) SCC 528. (30) It is contended by Mr. Sajjan Povayya, learned senior counsel that there is indeed power, at any rate, under the provisions of Section 79(1)(b) of the Act to revisit the fixation of tariff de hors even the specific relief which is contemplated under the contract. In this regard, emphasis is laid on the fact that clauses 4.7 and 5.1.17 of the guidelines came to be amended and it is the amended guidelines which apply to the facts of the case. That it is the amended guidelines which were applied can be perceived from the fact that the amended guidelines are seen reflected in the PPA. The amended provisions are found in 17.3.1 and 13.1.1 (31) Amended Guideline 4.7 is reflected in 13.1.1 whereas amended guideline 5.17 is reflected in Article 17.3.1. (32) With regard to 17.3.1, it is pointed out that a reading of the same, in particular, the opening limb of the provision would show that there is clearly....
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.... to the appellants to ward off a just fixation of tariff based on the discovery of the fact that the first WAPCOS report was highly flawed. We are reminded that it was of the greatest importance for the first respondent that it ran the power plant on a yearly basis. The second report of the WAPCOS would clearly indicate that if the appellant had to take water in terms of the first WAPCOS report, during the lean months, the first respondent would not get sufficient water supply to operate the plant. If such an eventuality had taken place, the result would be that the procurers would end up paying the charges towards capacity charge even though, it would not get power. The appellants would be compelled to buy power from outside and finally the end consumer would have to bear the brunt of the loss. It is to avoid all this that the first respondent has acted in a manner which was not only in tune with its best interest but also ensuring that the procurers and finally the consumers were best protected. It is further pointed out by the learned counsel that the Court must bear in mind that the contract in question permits the passing of the benefit not only to the contractor but also to t....
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....hen we sought assistance from the learned counsel. We heard the following submissions. Mr. M. G. Ramachandran, learned senior counsel, would point out that the observations relating to the power under Section 92 must be understood as confined to the situation obtaining under Section 61 read with Section 62 of the Act. The said power may not be available when the tariff is fixed under Section 63 of the Act. When we queried as to whether the provisions of Section 61 are totally unconnected with Section 63, Mr. M. G. Ramachandran, learned senior counsel, would submit that Section 61 may not be entirely inapplicable. He would submit that particular provisions of Section 61 may, in fact, apply. They include Section 61(b). He would submit that even the guidelines issued under Section 63 have their echo in Section 61 and, therefore, it cannot be said that Section 61 and 63 are strange bedfellows. (39) He would, however, contend that in no circumstances can the power under regulation 92 of 1999 regulations apply when parties have after competitive bidding and approval of the tariff under Section 63 become bound by a long term contract under the PPA. In a case where there is a determinatio....
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....city by the Seller to the Procurers under the terms of this Agreement, or (iv) any change in the (a) Declared Price of Land for the Project or (b) the cost of implementation of the resettlement and rehabilitation package of the land for the Project mentioned in RFP or (c) the cost of implementing Environmental Management Plan for the Power Station mentioned in the RFP or (d) the cost of implementing compensatory afforestation for the Coal Mine, indicated under the RFP and the PPA; but shall not include (i) any change in any withholding tax on income or dividends distributed to the shareholders of the Seller, or (ii) change in respect of UI Charges or frequency intervals by an Appropriate Commission. Provided that if Government of India does not extend the income tax holiday for power generation projects under Section 80 IA of the Income Tax Act, upto the Scheduled Commercial Operation Date of the Power Station, such non-extension shall be deemed to be a Change in Law." (42) Article 13.1.2 declares that the Supreme Court or High Court or a Tribunal or in similar judicial or quasi judicial body in India that has jurisdiction to adjudicate upon issues relating to the project will....
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.... by reason of Change in Law, as determined in accordance with this Agreement, the Monthly Invoice to be raised by the Seller after such change in Tariff shall appropriately reflect the changed Tariff." (45) We may notice the other foundational articles relied upon by the first respondent. Article 17 relates to Governing law and Dispute resolution. Article 17.2.1 reads as follows: "17.2.1 Either Party is entitled to raise any claim, dispute or difference of whatever nature arising under, out of or in connection with this Agreement including its existence or validity or termination (collectively "Dispute") by giving a written notice to the other Party, which shall contain: (i) a description of the Dispute; (ii) the grounds for such Dispute; and (iii) all written material in support of its claim." (46) The further articles which we need not capture contemplate that the claim may be met even with a counter claim and an attempt should be made to settle the dispute amicably (see Article 17.2.3). Failure to arrive at a settlement opens the doors of Article 17.3. It is justifiable as the caption is 'Dispute Resolution'. (47) Article 17.3.1 is the crucial article. It reads: - ....
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....f. In regard to the said argument, we must notice the following obstacles which are indisputable. We notice that the pleadings which we have set out, position before the Commission and what is more, even before the Tribunal, do not reveal that the first respondent has taken such a stand. No express reference is found to Schedule 2 containing the alleged deemed initial consent being overridden by the subsequent consent as a foundation for the claim based on change in law. (52) The second obstacle which we must notice is that we are dealing with an appeal under Section 125 which is based on the existence of a substantial question of law. In this regard, indisputably both the Commission and the Tribunal have rendered the concurrent finding that the first respondent has failed to establish any change in law. Thus, the first respondent is up against concurrent findings which we cannot lightly disregard. (53) Thirdly, we may notice that the first respondent has not independently challenged the finding rendered by the Tribunal holding that there is no change in law. We have noticed that the Tribunal has proceeded to premise the grant of relief to the first respondent and remanding the m....
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....btains. For the avoidance of doubt, it is clarified that the Seller shall also be responsible for maintaining/renewing the Initial Consents and for fulfilling all conditions specified therein." (57) It is true that the procurers were to secure certain initial consents whereas the vast majority of the consents were to be procured by the seller. Whatever was to be procured by the procurers apparently has been described as initial consents. It is also not in dispute that though the word consent is used in Article 13.1.1, the initial consent would also qualify as consent. The contention of the appellants is that as far as the initial consent contemplated which was to be performed by the procurers it was to provide the water linkage. The water linkage consisted of making available the source of water which consisted of the Govind Ballabh Pant Sagar(Rihand Reservoir). There has been no change in the said consent. It is not a case of the first respondent, in other words, that the first respondent has been forced to take water from any other water source. In this regard by communication dated 23.10.2006, we find the following: "6. Reference Clause: RFP 1.4(v) - regarding tying up water ....
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....ilable to the seller on the date of the PPA except two matters: (1) Forest clearance and the declaration under Section 6 of the Land Acquisition Act. It is in Part I Schedule 2 of the PPA stated that the notification under Section 6 of the Land Acquisition Act was an act to be performed by the procurers. It is this act which was not done initially at the stage of the PPA. Also forest clearance is mentioned in the Part I of Schedule 2. Even the said clearance was also apparently not obtained as is indicated at the beginning of the PPA. Thereafter, Part II of Schedule 2 contains the clause which is the fountainhead of the argument based on initial consent. (62) It contemplated performing of the task mentioned in Article 3.1.2A also shall be part of the initial consent on their completion within the time provided. Article 3.1.2A contemplated performance of the task with which we are concerned viz., making available the land for the power plant and for the water intake pipeline. This task was to be performed within a period of eight months from the date of the letter of intent being issued or six months from the PPA whichever is later. It is true that the task which was to be performe....
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....within a period of thirty days, purchase the entire shareholding in the Seller for the following amount. Provided such purchase of shares shall be undertaken by the Procurers in the ratio of their then existing Allocated Contracted Capacity: a) total amount of purchase price paid by the Successful Bidder to the shareholders of the Seller acquire the equity shares of the Seller as per the RFP; plus b) total amount of the Declared Price of Land and Geological Report (GR) to the extent already paid by the Seller after the acquisition of its 100% shareholding by the Selected Bidder; plus c) an additional sum equal to ten percent (10%) of the sum total of the amounts mentioned in sub-clauses (a) and (b). In addition, the Performance Guarantee of the Seller shall also be released forthwith." (65) A perusal of the aforesaid articles would reveal that the parties have provided for the consequences of failure on the part of the procurers to make available land as contemplated in Article 3.1.2A. The long and short of it is that if a certain timelimit is crossed by the procurers in the performance of its obligations in this regard, the seller (the first respondent) has been give....
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....involve the procurers in the second study. There is no intimation given that the first respondent was commissioning a new study. There is no basis forthcoming as to what prompted the first respondent to commission a fresh study. What is stated is only that it wished to confirm the availability of water in terms of the first water intake study. In other words, we must sum up as follows: (67) Even in terms of the case built around Part II of Schedule 2 to the PPA under which the performing of the task mentioned in Article 3.1.2A within the time provided was to be treated as a deemed initial consent, the consequence of failure to do that have been expressly spelt out as we have already noticed. At best or at worst, it could have empowered the first respondent to rescind the contract. That apart, we are not in a position, for the reasons which we have indicated already, to come to the conclusion that it would amount to change in law. While on change in law, we may notice another aspect of the matter. (68) Article 13.3.1 reads as follows: "13.3.1 If the Seller is affected by a Change in Law in accordance with Article 13.2 and wishes to claim a Change in Law under this Article, it sh....
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....r can bind the other procurers is contested by Shri M. G. Ramachandran, learned senior counsel. (72) We have noticed that a notice in terms of Article 13.3.1 notifying the change in law as claimed today before the Court was not given at the relevant time. (73) The argument that the procurers agreed to the acquisition of the land through which the new route had to travel also does not appeal to us as firmly founding the claim of the first respondent in law. The matter must be viewed from the prism of the specific provisions defining the change in law and the actual change in law which is as we have explained above. In short, being awarded a contract and having entered into the PPA and without any basis as such in facts, the first respondent ventured to commission a new study and acting on the same, a new pipeline corridor came on the scene. Necessarily the cost may go up. But the question we are to decide is as to whether it is change in law and we are of the view that it could not be a change in law as contemplated in the agreement as it is not a change in initial consent which is the only case which has been argued in this regard. (74) The argument further is only that the esti....
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....OS report. At least, there is, in fact, no express whisper about the first report. All that the second WAPCOS report seems to indicate is upon being awarded the work, WAPCOS has gone about preparing another report. At least we are unable to find as to how the Tribunal could on the basis of the second report find that the first WAPCOS report was grossly erroneous. The Tribunal has not undertaken a comparative study of the two reports. There is no discussion whatsoever of the two reports. Nor is there any other material provided to render such a finding. The only area where we find what could perhaps be understood as a reference to the first report is clause 4.2.2. It reads as follows: "4.2.2. As intimated by project authority that and acquisition of pipeline corridor on the right side of Vallabhh Pant Sagar is in the final stages and other information gathered during site visit by WAPCOS/CWPRS team by local enquiry survey area 'A' was identified for detailed survey during detailed survey it is found that sufficient depth is not available for intake well as bed level of the reservoir is around 252.5 and this was also in a small patches. So, this area is discarded." (76) It would ....
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....any further inquiry on their own, runs the argument. (80) We are afraid that this argument cannot hold water as the need for making more inquiry in relation to geology cannot relieve the bidder from the operation of other clauses. A just result in the matter of what a contract produces by way of a legal relationship must be viewed holistically on a harmonious survey of all the relevant clauses. In any other approach, the result would have the effect of rendering specific clauses dealing with the topic in question dead letter. In view of clause 1.4 of the RFP, in other words, the bidder was duty bound if it felt advised to check the correctness of the report made by the WAPCOS. It could have undertaken its own study. What it did four months after it was granted the contract and entered into the PPA, it could have done before it decided to make the bid and enter into the PPA. At least we are not shown anything which stood in the way of the bidder conducting its own study and being convinced by the correctness of the report. We say this for the reason that what is involved is an international competitive bid. The bidding process is the foundation for the determination of the price in....
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....chanism of monthly tariff payments through supplementary bills(see Article 13.4.2). But it is to the extent as contemplated in Article 13. The question would arise as to whether the parties contemplated that it gave authority to the competent body viz., the Commission to discard the formula which is provided in Article 13.2(a) and (b). We are of the view that what the parties contemplated under Article 13.2 was that change in law must be viewed through the specific provisions of clauses (a) and (b). In other words, a change in law may occur during the period of construction. Then it is to be treated as falling under Article 13.2(a). A change in law may occur during the period of its operation. It would then appear to be dealt with under clause (b). If a change in law takes place during the period of construction then its impact is to be measured with reference to the capital cost of the project. The word 'capital cost' understandably has been defined in PPA. A formula has been engrafted. The formula contemplates that for every increase/decrease of each Rs.50 crores in the capital cost as a result of the change in law, the increase/decrease in the nonescalable capacity charges is to....
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....on is only payable to either party only with effect from the date on which the total increase/decrease exceeds the amount stated therein. 13. A reading of Article 13 as a whole, therefore, leads to the position that subject to restitutionary principles contained in Article 13.2, the adjustment in monthly tariff payment, in the facts of the present case, has to be from the date of the withdrawal of exemption which was done by administrative orders dated 6-4-2015 and 162-2016. The present case, therefore, falls within Article 13.4.1(i). This being the case, it is clear that the adjustment in monthly tariff payment has to be effected from the date on which the exemptions given were withdrawn. This being the case, monthly invoices to be raised by the seller after such change in tariff are to appropriately reflect the changed tariff. On the facts of the present case, it is clear that the respondents were entitled to adjustment in their monthly tariff payment from the date on which the exemption notifications became effective. This being the case, the restitutionary principle contained in Article 13.2 would kick in for the simple reason that it is only after the order dated 4-5-2017 [....
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.... a non obstante clause, but it is a non obstante clause covering only Section 62. Secondly, unlike Section 62 read with Sections 61 and 64, the appropriate Commission does not "determine" tariff but only "adopts" tariff already determined under Section 63. Thirdly, such "adoption" is only if such tariff has been determined through a transparent process of bidding, and, fourthly, this transparent process of bidding must be in accordance with the guidelines issued by the Central Government. What has been argued before us is that Section 63 is a standalone provision and has to be construed on its own terms, and that, therefore, in the case of transparent bidding nothing can be looked at except the bid itself which must accord with guidelines issued by the Central Government. One thing is immediately clear, that the appropriate Commission does not act as a mere post office under Section 63. It must adopt the tariff which has been determined through a transparent process of bidding, but this can only be done in accordance with the guidelines issued by the Central Government. Guidelines have been issued under this section on 19-1-2005, which guidelines have been amended from time to time....
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....mission is bound by those guidelines and must exercise its regulatory functions, albeit under Section 79(1)(b), only in accordance with those guidelines. As has been stated above, it is only in a situation where there are no guidelines framed at all or where the guidelines do not deal with a given situation that the Commission's general regulatory powers under Section 79(1)(b) can then be used." (87) It is true that as far as the said case is concerned, the case arose from claims which were made under the PPA on the basis that there were changes in law apart from the argument that a case of Force Majeure was made out. It is not a case which actually on facts involved the Court dealing with a case arising from the fixation of tariff under Section 63. In fact, it arose after a PPA was approved and the rates were fixed already under Section 63. However, if we notice the contents of para 19 and 20, the principle which the first respondent seeks to canvas before us does not appear to emerge. The argument of the first respondent is that even de hors the terms of the contract, there is general regulatory power available under Section 79 of the Act. There is an overarching authority ....
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.... which varies the written contract cannot be located in the power to regulate. The power cannot, at any rate, be exercised in the teeth of express provisions of the contract. (92) We notice this for the reason that the first respondent has a case that what is provided in Article 13.2(a) (since we are dealing with the case of alleged change in law during the construction period) does not do justice to the parties or that it is incapable of producing a fair result and therefore, the Tribunal would necessarily be clothed with power bearing in mind its regulatory nature. In a matter where the parties have entered into a contract with express provisions, we are unable to agree with the first respondent that the Tribunal would have power to disregard the express provisions of the contract on the score that as it turns out that with passage of time and even change in circumstances, it is found that the contract cannot be worked except at a loss for the contractor. (93) We may, at this juncture, also notice an argument which has been raised by Shri Amit Kapur, learned counsel for the first respondent, when queried as to what would be the position if a claim of the nature were canvassed i....
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....ntral Commission broadly into two categories - mandatory functions and advisory functions. Tariff regulation, licensing (including inter-State trading licensing), adjudication upon disputes involving generating companies or transmission licensees fall under the head "mandatory functions" whereas advising the Central Government on formulation of National Electricity Policy and tariff policy would fall under the head "advisory functions". In this sense, the Central Commission is the decision-making authority. Such decisionmaking under Section 79(1) is not dependent upon making of regulations under Section 178 by the Central Commission. Therefore, functions of the Central Commission enumerated in Section 79 are separate and distinct from functions of the Central Commission under Section 178. The former are administrative/adjudicatory functions whereas the latter are legislative. 55. To regulate is an exercise which is different from making of the regulations. However, making of a regulation under Section 178 is not a precondition to the Central Commission taking any steps/measures under Section 79(1). As stated, if there is a regulation, then the measure under Section 79(1) has to ....
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....ion 178 became necessary because a regulation made under Section 178 has the effect of interfering and overriding the existing contractual relationship between the regulated entities. A regulation under Section 178 is in the nature of a subordinate legislation. Such subordinate legislation can even override the existing contracts including power purchase agreements which have got to be aligned with the regulations under Section 178 and which could not have been done across the board by an order of the Central Commission under Section 79(1)(j)." (96) While it may be open as indicated therein for a regulation to extricate a party from its contractual obligations, in the course of its adjudicatory power it may not be open to the Commission by using the nomenclature regulation to usurp this power to disregard the terms of the contract. (97) Another argument which has been raised on behalf of the first respondent is that the guidelines were framed on 19.01.2005. Clauses 4.7 and 5.17 came to be, however, modified before the PPA was entered into and even prior to the RFP and therefore, the PPA and Article 17.3 therein has been cast in the widest terms. (98) We have already perused Art....
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....following clauses 1.2.12: "1.2.12 Different parts of this Agreement are to be taken as mutually explanatory and supplementary to each other and if there is any inconsistency between or among the parts of this Agreement, they shall be interpreted in a harmonious manner so as to give effect to each part." (Emphasis supplied) (102) An argument was raised by Shri Amit Kapur that the contract in the case calls for the application of the principle of contra proferentem rule. (103) We are of the view that the principle of contra proferentem is ordinarily utilised in contracts of insurance and standard form contracts. (104) The principle of contra proferentem apparently in substance is that in case of any doubt in its terms, the doubt should be resolved against the party who drafted the contract. We would not think in the facts of this case that the first respondent has been able to plant any serious doubt in regard to the clauses with which we are concerned with on a true understanding of the same. (105) The second complaint- The Office Memorandum dated 17.06.2011. As far as the question relating to the OM dated 17.06.2011 providing the premise for change in law claim is conce....
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....re the bid deadline. The OM which is the premise for the argument has been issued by the Director no doubt with the approval of the Joint Secretary in the Ministry of Power. It reads as follows: "No. 12/20/2009-UMPP Government of India Ministry of Power Shram Shakti Bhawan, Rafi marg, New Delhi, the 17th June, 2011 OFFICE MEMORANDUM Sub: 3960 MW Sasan Ultra Mega Power Project, Distt. Singrauli - Exemption from Custom Duty under project Import - reg. The undersigned is directed to refer to Govt. of Madhya Pradesh's letter No. 4468/13/2011/01 dated 24.05.2011 on the subject mentioned above and to say that under Mega Power Policy, the Custom/Excise Duty exemption is given in respect of power equipment only. This issues with the approval of JS (Thermal), Ministry of Power (A.A. Tazir) Director Shri Mohd. Suleman Secretary (Energy) Govt. of Madhya Pradesh, Bhopal" (109) It is the contention of the first respondent that when it imported the goods it had to pay customs duty on the same and it constituted a change in law as the OM issued by the Joint Secretary placing the interpretation constituted a change in interpretation. (110) In other words, in contra....
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....a single State, irrespective of size, would not come under this category". In the policy which has been recast in 1998, it was decided that inter-state and inter-regional mega power projects were to be set up both in the public and private sectors. The re-organization of the public sector corporations was also envisaged by the policy. The policy contemplates the beneficiary States constituting Regulatory Commissions with powers to fix tariff. Paragraph 5 of the guidelines is important. It says "the import of capital equipment would be free of custom duty for these projects". In order to ensure that domestic bidders were not adversely affected, certain safeguards were spelt out." 7.2 Entry/ Sl.No. 288A of Ch. 98.01 inserted by Notification No. 63/1999 substantially gives effect to the 1995 policy read with revised policy of 1998. The same concept of mega power project is to be found in that Entry. The Entry reads: SL. No. Chapter/ heading/sub-head no. Description of goods Standard Rate Additional Duty rate Condition No. 288A 9801 Goods required for setting up of any Mega Power Project specified in List33, if such Mega Power Project is a. an interstate thermal power pla....
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....rnment as reflected in the Union budget speech of 203-04. The following extract from the budged speech is relevant: "Simultaneous to the emphasis on improvement in power distribution, our attention on capacity addition remains. The Government had earlier, in 1999, notified 18 power projected as mega projects, conferring upon them various duty and licensing benefits. The Government now proposes to liberalise the mega power project policy further by extending all these benefits to any power project that fulfills the conditions already prescribed for mega power projects". Pursuant to the above policy, Notification No. 26/2003-Cus. Was issued amending the notification no. 21/2002-Cus. Entry 400 as amended reads: 400 9801 Goods required for setting up of any Mega Power Project that is to say - a. an inter-state thermal power plant of a capacity of 1000MW or more; or b. an inter-State hydel power plant of a capacity of 500MW or more......... as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power" Nil Nil 86 "7.7 The amended notification no. 21 of 2002 is almost in the same language as it stands now (vide pa....
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....y in column (3), the following entry shall be substituted,namely:- "Goods required for setting up of any Mega Power Project, so certified by an officer not below the rank of Joint Secretary to the Government of India in the Ministry of Power, that is to say- (a) an inter-state thermal power plant of a capacit of 700MW or more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura,or (b) an inter-state thermal power plant of a capacity of 1000MW or more, located in States other than those specified in clause(a) above; or (c) an inter-state hydel power plant of a capacity of 350MW or more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura,or (d) an inter-state hydel power plant of a capacity of 500MW or more, located in States other than those specified in Clause(C) above", (II) in the Annexure, in Condition No.86, for sub-clauses (ii) and (iii) of clause(A), the following shall be substituted, namely:- "(ii) the power purchasing State undertakes, in principle, privatize distribution in all cities, in that State, ....
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....for exemption. The appellants have a case that, in fact, the Joint Secretary was essentially following the Advance Ruling. While it is true that the Advance Ruling may not bind the first respondent as it is not a party, and the respondent could not have sought a ruling under the law, it is undoubtedly an aspect which otherwise adds strength to the case of the appellants. There may be cases where placing the notification holding the field before the cut off date side by side to the subsequent notification or an interpretation issued after the said cut off date, the Commission or a Tribunal could find that there is change in law, which added to the cost to the seller. On the other hand, when the case of the first respondent involves interpretation of the terms of the notification then particularly when two views are fairly competing for acceptance before the body, at best, we would think that the Tribunal has hazarded taking a perilous route in venturing to find that the OM issued by the Joint Secretary constituted the change in law. Though reliance has been placed on the judgment of this Court reported in Manohar Lal Sharma v. Principal Secretary & Ors. (2014) 9 SCC 516 and Manohar ....
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....has also been referred to as part of the definition of the word 'project', it is only right that we advert to the definition: "Captive Coal Mine(s) means the captive coal mines as described in Schedule 1A and associated fuel transport system up to the Power Station;" (122) 'Project Documents" again has been defined. We may also notice the definition of the words 'Prudent Utility Practices': "Project documents Mean (a) Construction Contracts; (b) Fuel mining agreements, including the Fuel Transportation Agreement, if any; c) O&M contracts; d) RFP and RFP Project Documents; and e) any other agreements designated in writing as such, from time to time, jointly by the Procurers and the Seller; "Prudent Utility Practices means the practices, methods and standards that are generally accepted internationally from time to time by electric utilities or coal mining entities for the purpose of ensuring the safe, efficient and economic design, construction, commissioning, operation and maintenance of coal mines and power generation equipment and mine of the type specified in this Agreement and which practices, methods and standards shall be adjusted as necessary, to take ac....
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....project, it is conditioned by the words 'that is to say'. We can quite safely proceed on the basis that Entry 400 in the Notification No. 21/2002 which came into effect on 01.03.2002 as amended by Notification No. 46/2008 is the Entry which must be treated as holding the field as on the cut off date. It is thereafter, no doubt, that the first respondent has invoked the change in law clause by seeking to draw inspiration from the OM issued on 17.06.2011. (127) Change in law clause is sought to be invoked apparently contending that there has been a change in interpretation by Indian Governmental Authority which has the final say in terms of the law. The question which looms large before the Court is whether there has been a change in law in terms of 'change in interpretation' placed by the Governmental authority with reference to the position obtaining under the notifications issued under the Customs Act. Even the clauses in the PPA which we have referred to maintain a distinction between a power plant and a captive mine. A power plant cannot be treated as the same as captive mine. In fact, Schedule 1A which defines the site refers to the captive mines in terms of the coal blocks wh....
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....ant as it is the customs department which has issued the exemption notification. Being the authors of the notification, they would be best placed to understand the width and purport of a notification granting exemption. They have stoutly opposed the application and laid out various grounds which, no doubt, has appealed also to the Advance Ruling Authority. This is an aspect which goes a long way to show that the view of the customs authority which in a manner of speaking can also be viewed as forming contemporanea expositio should not be ignored by this Court. (131) The first respondent also sought considerable reliance in this regard from the Mega Power Projects: Revised Policy Guidelines. The relevant portions reads as follows: "MEGA POWER PROJECTS: REVISED POLICY GUIDELINES The following conditions are required to be fulfilled by the developer for grant of mega project status:- a) an inter-state thermal power plant of a capacity of 700 MW or more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura; or b) an inter-state thermal power plant of a capacity of 1000 MW or more, located in States ot....
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....tion. He does not say that the position adumbrated in the OM represents a shift or a change from what the position was prior to the cut off date. This is apart from any material being available to show that there was an interpretation in favour of the first respondent prior to the cut off date. (135) We reiterate that no instance of exemption to goods of similar nature being imported by any person for the captive mine as part of a power project be it mega or ultra mega plant is placed before the Commission. It is one thing to say that in a popular sense and it could be urged and it may be true that the word project has been defined in the PPA as power plant and the captive coal mine, but as we have noticed this is a matter to be determined on what was intended by the author of the notification under Section 25 of the Customs Act and the matter is to be further determined with reference to the express terms of the Notification. Even more importantly, the question must fall to be decided with reference to the interpretation available prior to the cut off date and after cut off date. The communication, which is the OM dated 17.06.2011 relied upon by the first respondent appears to ha....
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....ng no change in law in regard to the water intake system. (142) In the facts of this case, we also notice that the three non-filing parties are respondents in the appeals filed by the appellants. We also cannot be unmindful of the argument of Shri P. Chidambaram and others that if the first respondent had a case that they were entitled to an exemption under the situation extant prior to the cut off date then proper remedy would be to seek refund on the basis that they have been illegally visited with customs duty. (143) In the facts of this case, we feel that the interest of justice do require that the impugned order be set aside not only as against the appellants but also as against the three non-appellants. In the nature of the litigation, we would think that the benefit of this order should be vouchsafed to the three respondents also, viz., (1) respondent No. 12(BSES Rajdhani Power Limited); (2) respondent No. 13 (BSES Yamuna Power Limited); and (3) respondent No. 15(Uttarakhand Power Corporation Limited). Apparently, these respondents have not contested the appeals. (144) As we have noticed in the beginning as a sequel to the impugned order, the Commission has passed orders ....