TRANSMISSION CORPN. OF A.P. LTD & Anr. v. SAi RENEWABLE POVVER PVT. LTD & Ors.

Judgment

8 S.C.R. 636 A B TRANSMISSION CORPN. OF A.P. LTD. & ANR. v. SAi RENEWABLE POVVER PVT. LTD. & ORS. (Civil Appeal No. 2926 of 2006 etc.) JULY 8, 2010 [DR. B.S. CHAUHAN AND SWATANTER KUMAR, JJ.] c E of the Regulatory Commission - Held: Electricity - Promotion of generation of grid quality power from non-conventional sources -- Guidelines issued by Central Government indicating the purchase price of such electricity - State Government granting uniform incentives to all the projects based on renewable sources of energy - Order reviewing the tariff and imposing restriction on sale to third party - Non-conventional energy developers/generators D accepted and acted upon the order by entering into Power Purchase Agreements - Thereafter State Electricity Regulatory Commission determining the purchase price for procurement of such electricity and also imposing restriction with regard to sale thereof to third party- Propriety of the order It is within the power and jurisdiction of the Regulatory Commission to determine the 'purchase price' and to impose restriction on sale to third party - The Commission was not estopped from altering the purchase rates or imposing restriction on the sale - The incentives initially provided by the authorities under the guidelines issued by the Central Government and the Power Purchase Agreements were not for indefinite period, but were subject to review - The contracts entered into by the parties provided for review and the restriction for sale to third party - Parties are bound by contractual obligation and such G obligation cannot be frustrated by aid of promissory estoppel - Agreements cannot be said to be result of duress - Duress not proved, so as to render the contract voidable - Conditions of a contract cannot be altered/avoided on presumptions or F H 636 TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 637 POWER PVT. LTD. assumptions - Determination of tariff is a function assigned A legislatively to Regulatory Commission - Supreme Court in exercise of powers under Article 136 of the Constitution would not sit as an appellate authority over the formation of opinion and determination of tariff by the specialized bodies - Matters remanded to the Regulatory Commission to fix/determine the B tariff for purchase of electricity - Electricity Regulatory Commission Act, 1998 - s. 17 - Andhra Pradesh Electricity Reform Act, 1998 - s. 11 - Electricity Act, 2003 - ss. 61 and 62 r/w. s. 86(1)(a) and (b) - Contract - Promissory Estoppel - Constitution of India, 1950 - Article 136. c Administrative Law: Principle of promissory estoppel - Nature and applicability of - Discussed. Principle of legitimate expectation - Applicability of Judicial Review - Scope of, in policy matters. Maxim - 'Al/egans contraria non est audiendus' - Applicability of. Words and Phrases - 'Tariff' and 'Purchase price' - Meaning of D E Ministry of Non-Conventional Energy Sources of Central Government wrote letter dated 7.9.1993 to F different States informing that under new strategy and action plan of the Ministry, special emphasis would be given to generation of grici quality power from non conventional sources. Guidelines drawn up by the Ministry were also enclosed with the letter, whereby a G minimum buy back price of Rs. 2.25 per unit was proposed. The transmission of electricity was required to be undertaken by State Electricity Board. In furtherance of the decision of the Central H 638 SUPREME COURT REPORTS (2010] 8 S.C.R. A Government and the Guidelines, State of Andhra Pradesh issued two different Government Orders dated 18.11.1997 and 22.11.1998 granting uniform incentives to all the projects based on renewable sources of energy. The Power Purchase Agreement (PPA) between the appellant- s Corporation (APTRANSCO) and non-conventional power project developers were executed. The A.P. Regulatory Commission passed an order on 20.6.2001 determining the tariff as well as defining other rights and obligations between the parties including that the generators of c electricity were not permitted to make sale in favour of third party. After passing of this order, developers entered into PPAs and confirmed the acceptance and implementation of the order dated 20.6.2001. The PPAs as well as the order dated 20.6.2001 specifically provided for review/revision of purchase price. The order dated 20.6.2001 was never challenged. 0 F Thereafter, pursuant to suo motu proceedings, Andhra Pradesh Electricity Regulatory Commission (which was constituted under Andhra Pradesh Electricity E Reform Act, 1998) by its order dated 20.3.2004 fixed the energy purchase rates at base unit price of Rs. 2.25 as on 1.4.1994 and the escalation index of 5% p.a .. Thus, the base price as on 1.4.2004 was 3.37 per kwh. The tariff was frozen for five years. The Regulatory Commission also restricted the sale, procurement and distribution of electricity by the developers to any other party except APTRANSCO. This order was further clarified by order dated 7.7.2004. The developers filed appeals against both the orders. The Appellate Tribunal for Electricity held that G there was some element of duress in execution of the PPAs; that the PPA being a statutory document, the Regulatory Commission had no authority to interfere with the same; that the Regulatory Commission had neither the power nor the jurisdiction to compel the developers H TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 639 POWER PVT. LTD. to sell the power generated by them to APTRANSCO and/ A or DISCOM. The instant appeals were filed against the orders of the appellate tribunal. The questions, broadly, for consideration before the Supreme Court pertained to the issues as under: (i) Jurisdiction of the Regulatory Commission for fixation of tariff and sale of generated electricity to third party; (ii) Correctness of tariff fixation; (iii) Applicability of principle of estoppel and the extent of its applicability; (iv) Applicability of plea of duress; (v) Effect of order dated 20.6.2001 in view of its having attained finality and for the same not being questioned in the instant proceedings. 8 c D Disposing of the appeals and remanding the matters E to Andhra Pradesh Electricity Regulatory Commission, the Court HELD: 1.1. The Andhra Pradesh Electricity Regulatory Commission has the jurisdiction to determine F tariff which takes within its ambit the 'purchase price' for procurement of the electricity generated by the non conventional energy developers/ generators, in the facts and circumstances of the instant cases. (Para 52] [717- 8] G

1.2. The Tribunal was not correct in holding that since no independent notification was issued u/s. 17 of the Regulatory Commission Act, 1998, therefore, the A.P. Electricity Regulatory Commission could not exercise the H 640 SUPREME COURT REPORTS [2010] 8 S.C.R. B A powers vested in the Regulatory Commission under that Act. The Regulatory Commission was constituted under the Andhra Pradesh Electricity Reform Act, 1998 and an appropriate notification in that behalf was issued. The Electricity Regulatory Commission Act, 1998 stood repealed by the Electricity Act, 2003. The Electricity Act, 2003 specifically recognized and accepted Commissions constituted under the enactments specified in the Schedule to the Act as appropriate Commission. In entry 3 of the said Schedule, Reform Act, 1998 has c been specifically noticed. Thus, the Regulatory Commission constituted under the Reform Act, 1998 became the appropriate Ccmmission under the Electricity Act, 2003 as well. [Para 3] [665-F-H; 666-A-B]

1.3. Fixation of tariff is, primarily, a function to be D performed by the statutory authority in furtherance to the provisions of the relevant laws. Fixation of tariff is a statutory function as specified under thQ provisions of the Reform Act, 1998, Electricity Regulatory Commissions Act, 1998 and the Electricity Act, 2003. These functions E are required to be performed by the expert bodies as to whom the job is assigned under the law. The Regulatory Commission constituted by the notification dated 3.4.1999 would be the appropriate Commission under the Reform Act, 1998, Electricity Regulatory Commissions F Act, 1998 and the Electricity Act, 2003 and is required to perform the functions as contemplated u/ss. 11, 17 and 82 of the respective Acts. The functions assigned to the Regulatory Commission are wide enough to specifically impose an obligation on the Regulatory Commission to G determine the tariff. [Para 17] [678-F-H; 679-A-F]

1.4. The Regulatory Commission is vested with very vast powers and functions. Section 11 of the Reform Act, 1998 declares fixation of tariff as one of the primary functions of the Regulatory Commission in general more H TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 641 POWER PVT. LTD. particularly, to the specified consumers u/s. 26 of the A Reform Act, 1998. While under the Electricity Act, 2003, Sections 61 and 62 r/w Section 86(1)(a) and (b) deal with fixation of tariffs in relation to production, distribution and sale of generated power to the end consumer. These provisions clearly demonstrate that the Regulatory B Commission is vested with the function for determining the tariff for generation, supply, transmission and billing of electricity etc., as well as regulation of electricity purchase and procurement process of distribution licensees, including price at which electricity shall be c procured from the generating companies. With these specific powers in the statute book itself, it cannot be said that procurement of power from the generating companies will not fall within the ambit of powers and functions of the Regulatory Commission. It is a common D body performing functions, duties and exercising powers under all these three Acts. [Para 30] [694-F-H; 695-A] PTC India Ltd. v. Central Electricity Regulatory Commission (201 O) 4 sec 603, relied on. Tata Power Company Ltd. v. Reliance Energy Ltd. 2009 ' (7) SCALE 513, referred to. E

1.5. All the Power Purchase Agreements (PPAs) entered into by the generating companies with the F appropriate body, as well as the orders issued by the State in GO Ms. Nos. 93 and 112, in turn, had provided for review of tariff and the conditions. The Tribunal appears to have fallen in error of law in coming to the conclusion that the Regulatory Commission had no powers either in law or otherwise of reviewing the tariff G and so called incentives. From various provisions and the documents on record it is clear that the Regulatory Commission is vested with the power to revise tariff and conditions in relation to procurement of power from generating companies. It is also clear from the record that H 642 SUPREME COURT REPORTS [2010] 8 S.C.R. A in terms of the contract between the parties, the APTRANSCO had reserved the right to revise tariff etc. with the approval of the Regulatory Commission. [Para 33) [698-D-G] C 8

1.6. The Tribunal has taken a narrower view of the jurisdiction vested in the Regulatory Commission which is discharging its statutory functions under all the three Acts in accordance with law. The power available to the Government to issue policy directions has two restrictions. Firstly, the policy direction has to be on the matters related to electricity in the State including overall planning and coordination. Secondly, all such policy directions have to be issued by the State Government in consonance with the object sought to be achieved by this Act and accordingly shall not adversely affect or interfere D with the functions and powers of the Regulatory Commission including, but not limited to, determination of the structure of tariff for supply of electricity to the the Regulatory consumers. Commission to frame regulations under Section 54 also intend that regulations are to be framed with an object to ensure proper performance of its functions under the Act. Both the State and the Regulatory Commission are supposed to exercise their respective powers only for the purposes of furthering the cause of the Reform Act. The F Commission discharging its statutory functions within the ambit of Sections 11, 12 and 26 of the Reform Act, 1998 as well as Sections 61, 62 and 86(1 )(b) of the Electricity Act, 2003 renders advisory functions to the State. [Para 46] [711-G-H; 712-A-D] Powers vested E G

1.7. It is not correct to say that the Regulatory Commission acted in contradiction or conflict with the State policy. The State was certainly not intending to provide incentives and concessions with assurance of buy-back to enable the Non-Conventional Energy H developers/generators to sell generated powers to third TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 643 POWER PVT. LTD. It must be kept in mind that the policy of the A parties. Government of India as well as the State of Andhra Pradesh was for encouraging the developers/generators of Non-conventional Energy to generate electricity for the benefit of public at large with buy back of power being one of the basic features of this policy. Such parameters B are subject to change in larger public interest. All these issues, in fact, loose much significance because of the fact that parties have, by and large, entered into the field of contract simpliciter and their rights are controlled by the contracts executed between them. There is no c challenge to ,these contracts and, therefore, it may be hardly permissible for the Court to go behind these contracts and permit questioning of the statutory jurisdiction vested in the Regulatory Commission. [Para 46] [712-F-H; 713-A-B] D

1.8. After creation of the Regulatory Commissions under the provisions of the Electricity Regulatory Commission Act, 1998, the Commission has clear power and jurisdiction to fix tariff. The Court should not adopt an interpretation which should neither be strict nor E narrower so as to oust the jurisdiction of the Regulatory Commission, as it would defeat the very object of enacting the said Act. [Para 47] [713-C-D]

1.9. The basic policy of both the Central as well as F the State Government was to encourage private sector participation in generation, transmission and distribution of electricity on the one hand and to further the objective of distancing the regulatory responsibilities of the Regulatory Commission from the Government and of G harmonizing and rationalizing the provisions of the existing laws relating to electricity in India, on the other hand. The object and reasons of Electricity Act, 2003 as well as the Reform Act, 1998 are definite indicators of such legislative intent. The objects and reasons clearly H 644 SUPREME COURT REPORTS [2010] 8 S.C.R. B A postulated the need for introduction of private sector into the field of generation and distribution of energy in the State. Efficiency in performance and economic utilization of resources to ensure satisfactory supply to the public at large is the paramount concern of the State as well as the Regulatory Commission. The policy decisions of these constituents are to be in conformity with the object of the Act. Thus, it is necessary that the Regulatory Commission, in view of this object, take practical decisions which would heli- in ensuring existence of c these units rather than their extinguishment as alleged. [Para 51] [716-A-G] D E

1.10. The restriction with regard to third party sales was not only creation of a directive issued or approval granted by the Regulatory Commission, but was actually in furtherance of the contract entered into between the parties. Rights and liabilities arising from a binding contract cannot be escaped on the basis of some presumptions or inferences in relation to the facts leading to the execution of the contract between the parties. The jurisdiction of the Regulatory Commission, in the facts of the case, arises not only from the statutory provisions under the different Acts but also in terms of the contract executed between the parties which has binding force. [Para 49] [714-G-H; 715-A-B] F

1.11. However, the grievance of the respondents that enforcement of the purchase price at the rate determined by the Regulatory Commission along with complete prohibition on the right of the Non-conventional Energy G Generator/Developers to sell generated power to the third parties would compel them to shut down their projects, is a matter of concern, even for the State Government. All these projects, admittedly, were established furtherance of the scheme and the guidelines provided H by the Central Government which, in turn, were adopted TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 645 POWER PVT. LTD. with some modification by the State Government. The A State Electricity Board implemented the said scheme and initially had permitted sale of generated electricity to third parties, however, subsequently and after formation of the Regulatory Commission which, in turn, took over the functions of the State Electricity Board, the incentives B were modified and certain restrictions were placed. The reasons for these restrictions have been stated in the affidavit filed on behalf of the appellants which is not a matter to be examined by this Court in exercise of its extra-ordinary jurisdiction. These matters, essentially, c must be examined by expert ~odies particularly, when such bodies are constituted ~nder the provisions of a special statute. [Paras 49 and 50] [715-B-C-E-H]

2.1. It is not correct to say that the developers have legitimate right to expect that the incentives as provided D to them in furtherance of the letters and orders of the Central as well as the State Government were to be continued indefinitely and the authorities concerned were estopped from altering the rates and I or imposing the condition of no sale to third parties. For the principle E of estoppel to be attracted, there has to be a definite and unambiguous representation to a party which then should act thereupon and then alone the consequences in law can follow. The Tribunal has erred in law in treating the inter-se letters and guidelines between the F Government of India, State Government and the Commission/the State Electricity Board as unequivocal commitments to the respondent/purchasers/generators/ developers so as to bind the State for all times to come. In the instant cases, the policy guidelines issued by the G Central Government were the proposals sent to the State Government, which the State Government accepted to consider, amend or alter as per their needs and conditions and then make efforts to achieve the objects of encouraging non-conventional energy generators and H ' 646 SUPREME COURT REPORTS [2010) 8 S.C.R. , . A purchasers to enter into this field. These are the matters, which will squarely fall within the competence of the Regulatory Commission/the State Electricity Board at the relevant points of time. Besides that, there was no definite and clear promi5-~ made by the authorities to the s developers that would invoke t\e principle of promissory estoppel:"Undoubtedly, to encourage participation in the field of generation of energy through non-conventional methods, some incentives were provided but these incentives ,u_nder the guidelines as well as under the c PPAs signed between the parties from time to time were subject to review. In any case, the matter was completely put at rest by the order of 20th June, 2001 and the PPAs voluntarily signed by the parties at that time, which had also provided such stipulations. If such stipulations were not acceptable to the parties they ought to have raised objections at that time or at least within a reasonable time thereafter. The agreements have not only been signed by the parties but they have been fully acted upon for a substantial period. [Para 36] [702-F-H; 703-A-F] 0 E

2.2. The principle of promissory estoppel, even if, it was applicable as such, the Government can still show that equity lies in favour of the Government and can discharge the heavy burden placed on it. In such circumstances, the principle of promissory estoppel F would not be enforced against the Government as it is primarily a principle of equity. [Para 37] [703-H; 704-A-B]

2.3. It is a settled canon of law that doctrine of promissory estoppel is not really based on principle of G estoppel but is a doctrine evolved by equity in order to prevent injustice. There is no reason why it should be given only a limited application by way of defence. It can also be the basis of a cause of action. Once the ingredients of promissory estoppel are satisfied then it could be enforced against the authorities including the H TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 647 POWER PVT. LTD. State with very few extra ordinary exceptions to such A enforcement. [Para 37] [704-A-B]

2.4. Even if it is assumed that there was a kind of unequivocal promise or representation respondents, the reviews have taken place only after the period specified under the guidelines and/or in the PPAs was over. This is a matter which, primarily, falls in the rea!m of contract and the parties would be governed by the agreements that they have signed. Once these agreements are signed and are enforceable in law then the contractual obligations cannot be frustrated by the aid C of promissory estoppel. [Para 37] [704-D-F] 8

2.5. If the Promise is made in regard to a present or existing facts, the principle of estoppel can be enforced against the Government. But a promise in relation to a D future transaction or act may not fall within the ambit of promissory estoppel. [Para 38] [705-G]