Case BriefsTribunals/Commissions/Regulatory Bodies

Central Electricity Regulatory Commission (CERC): A coram of Justice P.K. Pujari (Chairperson), M.K. Iyer (Member) and I.S. Jha (Member) disposed of a petition filed under Section 63 of the Electricity Act, 2003 seeking adoption of tariff for 1000 MW (Tranche-II) Wind Power Projects connected to the Inter-State Transmission System (ISTS) and selected through competitive bidding process as per the Guidelines issued by the Ministry of New and Renewable Energy (MNRE).

In terms of the above guidelines issued by the MNRE, the petitioner was designated as the nodal agency for setting up of the above Power Projects. The petitioner had issued the RfS document along with draft PPA and PSA documents and floated the same on the portal of Telecommunication Consultant India Limited. The successful bidders were selected by way of e-reverse auction of nine technically qualified bidders and the final tariff was arrived at after the completion of the same.

The petitioner had submitted that the projects will help the Buying Utilities in meeting their RPO requirements and provide power at very economical rates. The petitioner had also submitted that the tariff determined under the reverse auction process and even with the tariff margin discovered in the competitive bid process is lesser than the procurement cost of conventional power and thus, would be beneficial for the Buying Utilities and the consumer at large. The petitioner had prayed for adopting the trading margin of Rs. 0.07/kWh.

 The Commission was to examine if the process as per the provisions of the Guidelines has been followed in the present case for arriving at the lowest tariff and for the selection of the successful bidder. It was to also see whether to allow for the adoption of the tariff for the wind power plants under Section 63 of the Act.

 The Commission concluded that selection of the successful bidders and the tariff of the Project had been carried out by the petitioner through a transparent process of competitive bidding in accordance with Guidelines issued by MNRE. Accordingly, in terms of Section 63 of the Act, the Commission adopted the tariff for the Projects as agreed to by the successful bidders which should remain valid throughout the period of PSAs and PPAs.

With respect to the Trading margin, this Commission held that the Act read with the Central Electricity Regulatory Commission (Fixation of Trade Margin) Regulations, 2010 gives freedom and choice to the contracting parties to mutually agree on the Trading Margin for any kind of long term trading transaction. Accordingly, the Commission cannot adopt any Trading Margin for long term transactions under the Trading Margin Regulations. [Solar Energy Corporation of India Ltd. v. Ministry of New and Renewable Energy, 2019 SCC OnLine CERC 215, decided on 03-12-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Electricity Regulatory Commission (CERC): The coram of P.K Pujari (Chairperson) and Dr M.K. Iyer (Member) allowed a petition filed by a successful bidder seeking an extension of time for implementation of project awarded to him.

In the instant case, a special purpose vehicle (SPV) was created in the name of petitioner company (DMTCL) for the implementation of a scheme for transmission of electricity in the eastern region. Accordingly, a Transmission Service Agreement (TSA) was entered into between the petitioner and Long Term Transmission Customers (LTTCs) who were beneficiaries under the said agreement.

The instant petition was filed under Sections 61, 63 and 79 of the Electricity Act, 2003 seeking an extension of the scheduled date of commercial operation (COD) and increase in transmission charges, due to change in law and certain unforeseen events. Respondent objected to the petition contending that as per the Transmission Service Agreement (TSA), petitioner was required to notify the change in law and force majeure events if it wished to claim any relief for the same. Since no such notice was ever served, no relief could be claimed.

The Commission noted that as per TSA, the affected party was mandatorily required to give notice to the other party of any event of force majeure as soon as reasonably practicable, but not later than seven days of the commencement of force majeure event. Petitioner had issued appropriate intimation to LTTCs under Articles 11 and 12 of TSA qua the ‘force majeure’ and ‘change in law’ events as soon as it became aware of the same. The occurrence and impact of these events were also intimated through petitioner’s monthly progress reports.

Petitioner’s claim in respect of unexpected expenditure incurred on account of obtaining forest clearance and an increase in taxes and duties was allowed holding that it was a ‘change in law’. However, new ROW compensation guidelines did not qualify as ‘change in law’ because, in a competitive bidding project, such contingent expenditure is expected to be factored in. Further, demonetization was also not a ‘change in law’ as it did not constitute any enactment, adoption, promulgation, amendment, modification or repeal of any law.

The Commission refrained from making any observations on merits regarding force majuere events such as prohibition on sand mining in Bihar due to NGT order, flooding of Gandak river, kidnapping of project staff, manhandling of officials, delay in railway crossing work due to public agitations, delay due to Assembly Elections in Bihar, delay due to supply of material, etc. However, it was held that the petitioner was prevented from discharging its obligations under TSA on account of delay in grant of forest clearance, and such delay was covered under force majeure.

In view of the above, COD was extended and the petitioner’s claims were partly allowed.[Darbhanga-Motihari Transmission Co. Ltd. v. Bihar State Power Transmission Co. Ltd., 2019 SCC OnLine CERC 21, Order dated 29-03-2019]

Case BriefsHigh Courts

Jharkhand High Court: A Single Judge bench comprising of Chandrashekhar, J. allowed a civil writ petition challenging legality of provisional assessment order passed by the respondent under Section 135 of the Electricity Act, 2003.

Brief facts of the case were that an electricity breakdown in the petitioner’s premises was rectified by the respondent’s officials and a report was prepared recording slight damage in meter chambering unit. However, at this stage, the report stated that the meter reading was correct and there was proper sealing; no evidence of electricity theft was found. An inspection was carried out by the respondents a few months later in the appellant’s premises, and on the basis of an inspection report, a case was lodged under Sections 379, 420 and 353 of the Penal Code, 1860 and under Sections 135, 137 and 138 of the Electricity Act. A provisional assessment order was passed by the respondent under Section 135 of the Electricity Act directing the petitioners to pay Rs 3,23,71,524. The said order was challenged by the petitioner as being devoid of jurisdiction and illegal in the present writ petition.

Relying on the judgment of Hon’ble Apex Court in Sanwarmal Kejriwal v Vishwa Co-operative Housing Society Ltd., (1990) 2 SCC 288, the court observed that challenge to an assessment order on the ground of lack of jurisdiction must be grounded in lack of jurisdictional facts and the same rests on the averments taken in the plaint or claim application. As such, the jurisdictional facts in the inspection report would be the facts that connect the consumer to the theft of electricity and the subjective satisfaction of the authorized officer in relation to the same must be reflected in the inspection report.

After a comprehensive analysis of Section 135(1-A) of the Act, the court observed that a provisional assessment order can be sustained only if the inspection report records a finding on the theft of electricity and evidence in support thereof.

It was also observed that Electricity Act is a special statute created to discourage electricity thefts and loss accruing to the Electricity Boards as a result thereto. It is for this reason that the provisions of the Act have been couched in a wide manner to include every incidence of unauthorized use of electricity within its ambit. The Act provides for drastic measures such as – disconnection of electricity; lodging of F.I.R.; provisional assessment order; consumer does not have an opportunity to object to the assessment order; no appeal lies against the said order, and electricity supply is resumed only on payment of assessed amount.

The Court relied on State v Brijesh Singh, (2017) 10 SCC 779 to opine that in such a scenario, the Act must be given a wholesome interpretation to achieve a fine balance between literal and purposive construction. Thus, in view of wide amplitude of the provisions of the Act, there must be a strict compliance of the procedural aspects.

It was held that the theft of electricity must be apparent and visible on a bare reading of the inspection report. If a strenuous exercise is required to infer the theft, then the matter shall be investigated and decided in trial; but before completion of such trial, the authorized officer cannot raise a presumption of theft clothing himself with jurisdiction to pass a provisional assessment order.

On the strength of aforesaid, it was opined that the inspection report in the present case did not record satisfaction of the authorized officer and also, there was no mens rea. As such, the provisional assessment order was quashed for being illegal and void and the respondent was directed to resume the supply of electricity to the petitioner on payment of Rs 25 lakhs adjustable against its future bills. [Himadri Steel Pvt. Ltd. v Jharkhand Urja Vikas Nigam Limited,2018 SCC OnLine Jhar 1184, Order dated 05-09-2018]

Case BriefsSupreme Court

Supreme Court: Deciding whether under the Electricity Act, 2003 it is mandatory to have a judicial mind presiding the Central and State Regulatory Commissions and whether the expression “may” should be read as “shall”, the bench of J. Chelameswar and S.K. Kaul, JJ held that Section 84(2) of the said Act is only an enabling provision to appoint a High Court Judge as a Chairperson of the State Commission of the said Act and it is not mandatory to do so. It was further held:

“It is mandatory that there should be a person of law as a Member of the Commission, which requires a person, who is, or has been holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law, who has the requisite qualifications to have been appointed as a Judge of the High Court or a District Judge.”

The Court noticed that the State Commission, though defined as a ‘Commission’ has all the ‘trappings of the Court and that:

“Once it has the ‘trappings of the Court’ and performs judicial functions, albeit limited ones in the context of the overall functioning of the Commission, still while performing such judicial functions which may be of far reaching effect, the presence of a member having knowledge of law would become necessary. The absence of a member having knowledge of law would make the composition of the State Commission such as would make it incapable of performing the functions under Section 86(1)(f) of the said Act.”

The bench said that in any adjudicatory function of the State Commission, it is mandatory for a member having the aforesaid legal expertise to be a member of the Bench. It further held that in case there is no member from law as a member of the Commission, the next vacancy arising in every State Commission shall be filled in by a Member of law as mentioned above.

To avoid any confusion, the Court made it clear that it’s verdict will apply prospectively and would not affect the orders already passed by the Commission from time to time. [State of Gujarat v. Utility User’s Welfare Association, 2018 SCC OnLine SC 368, deciding 12.04.2018]

Case BriefsSupreme Court

Supreme Court:  In the issue involving the Power Purchase Agreement (PPA) entered into by the Government and the Adani Enterprises, where the Power Generating Company had pleaded that the rise in price of coal consequent to change in Indonesian law would be a force majeure event which would entitle the respondents to claim compensatory tariff, the bench of P.C. Ghose and R.F. Nariman, JJ held that the change in the Indonesian Law was neither the fundamental basis of the contract dislodged nor was any frustrating event and that alternative modes of performance were available, albeit at a higher price.

The respondents had pleaded before the Appellate Tribunal for Electricity to either discharge them from the performance of the PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the same economic condition prior to occurrence of the change in law as the rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011 and that such rise in price was not within their control at all. The Tribunal had granted the relief of compensatory tariff to the respondents.

Setting aside the order of the Tribunal, the Court held that changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events under the PPA itself. Taking note of the clauses of the PPA, the Court said that nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It was, hence, held that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took.

Regarding the question as to whether the change in Indonesian Law would amount to change in law, the Court said that the change Indonesian law would not qualify as a change in law under the guidelines read with the PPA, change in Indian law certainly would. Rejecting the contention that a commercial contract is to be interpreted in a manner which gives business efficacy to such contract, that the subject matter of the PPA being “imported coal”, the expression “any law” would refer to laws governing coal that is imported from other countries, the Court said that there are many PPAs entered into with different generators. Some generators may source fuel only from India. Others, as is the case in the Adani Haryana matter, would source fuel to the extent of 70% from India and 30% from abroad, whereas other generators, as in the case of Gujarat Adani and the Coastal case, would source coal wholly from abroad. The meaning of the expression “change in law” under clause 13 of the PPA cannot depend upon whether coal is sourced in a particular PPA from outside India or within India. The meaning will have to remain the same whether coal is sourced wholly in India, partly in India and partly from outside, or wholly from outside.

The Court, hence, directed the Central Electricity Regulatory Commission to go into the matter afresh and determine what relief should be granted to those power generators who fall within clause 13 of the PPA, based on the decision of the Court. [Energy Watchdog v. Central Electricity Regulatory Commission, 2017 SCC OnLine SC 378, decided on 11.04.2017]

Case BriefsSupreme Court

Supreme Court: In an appeal preferred under Section 125 of the Electricity Act, 2003, the 3-Judge Bench of Dipak Misra, A.M. Khanwilkar and M.M. Shantanagoudar, JJ held that the Act is a special legislation within the meaning of Section 29(2) of the Limitation Act and, therefore, the prescription with regard to the limitation has to be the binding effect and hence, the delay cannot be condoned taking recourse to Article 142 of the Constitution.

In the present case, it was argued by the respondents that the appeal was barred by 71 days and hence, the Court erred in condoning the delay of 71 days in view of the language employed in Section 125 of the Act. Accepting the contention of the respondents, the Court noticed that as per Section 125 of the Act, this Court, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the period of 60 days from the date of communication of the decision or order of the appellate tribunal to him, may allow the same to be filed within a further period not exceeding 60 days. Hence, this Court has the jurisdiction to condone the delay but a limit has been fixed by the legislature, that is, 60 days. The Bench held that when the statute commands that this Court may condone the further delay not beyond 60 days, it would come within the ambit and sweep of the provisions and policy of legislation. It is equivalent to Section 3 of the Limitation Act.

The appeal was listed before the Bench on 29.1.2010 on which date this Court condoned the delay and admitted the appeal. In light of the said facts it was contended that when the delay in review was condoned by this Court, the parties should not be permitted to raise a preliminary objection. The Court, however, rejected the said contention and said that if the delay is statutorily not condonable, the delay cannot be condoned. There is no impediment to consider the preliminary objection at a later stage. [ONGC v. Gujarat Energy Transmission Corporation Ltd, 2017 SCC OnLine SC 223, decided on 01.03.2017]