# ALL INDIA POWER ENGINEER FEDERATION & ORS v. SASAN POWER LTD. & ORS. ETC

- **Citation:** [2016] 9 S.C.R. 901
- **Court:** Supreme Court of India
- **Decided:** 2016-12-08
- **Case number:** Civil Appeal Nos. 5881-5882 of2016
- **Bench:** Kurian Joseph, R.F. Nariman
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/all-india-power-engineer-federation-ors-v-sasan-power-ltd-ors-etc-31395
- **Pages:** 52

## Headnote

ELECTRICITY ACT, 2003:
ss. 61 to 63 -
Commercial Operation Date (COD) -
Determination of- Procurement of power from generating companies
- Sasan Power Ltd. was incorporated as a special purpose vehicle
by Power Finance corporation the nodal agency for procuring
power - Power Purchase Agreement (PPA) dated 7.8.2007 executed
between Sasan Power Ltd. and procurers of generation and sale of
electricity - Article 6 r/w Schedule 5 provided for preconditions to
be satisfied for declaration of 'COD' namely readiness to commence
commercial operations - This happens only when the pe1formance
test by operating the gene1·ating unit at 98% of the contracted
capacity as existing on the effective date on a continuous running
basis for 72 hours is certified by an independent engineer by giving
a final test certificate to the said effect - The date for commissioning
the first unit was fixed under the PPA as 7.5.2013 - However, under
Schedule 11 thereof. this date was preponed to 27.11.2012 - As
Sasan kept postponing this date, the commissioning tests for
generating Unit No.3 commenced from 20.3.2013 - Various emails
were exchanged from 27.3.2013 to 30.3.2013 between Sasan and
WRLDC, a statutory authority under the Act of 2003 - It was the
case of Sasan that though they were ready to deliver electricity on
31.3.2013 at 95% of the contracted capacity of 620 MW of the
unit, they could not do so as WRLDC did not give them the necessary
green signal to go ahead - They relied heavily upon the independent
engineer's test certificate dated 30.3.2013 to show that a COD took
place on the following day - Petition was filed by WRLDC before
the CER Commission challenging the veracity of certificate issued
by the independent engineer - Commission arrived at the conclusion
that COD had not been achieved on 31.3.2013 but had only been
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achieved tater on 16.8.2013 - Appellate Tribunal set aside the
finding of Commission holding that though COD had not been
achieved on 31.3.2013 in accordance with the PPA but that the
procurers under the PPA had waived their right to demand
performance at 95% and that the pe1formance of unit no.3 which
was only roughly 17% of its contracted capacity was accepted by
all the procurers and that, therefore, there was a waiver of this
essential condition which would then entitle the generator to treat
31.3.2013 as the-date on which commercial operation of unit no.3
commenced - Challenged - Held: A perusal of the emails exchanged
between the parties show that the parties did not intend to amend
any of the provisions of the PPA - The two emails sent by the lead
procurer to Sasan read together do not amount to waiver of the
right mentioned in clause 6.3.1 - There is no .such clear intention
that can be spelled out on a reading of the two emails - All that can
be spelled out is that the first email of 31.3.2013 categorically stated
that the test result is not as per Article 6.3.1, and is not acceptable
- The last sentence of this very email then refers to clause 6.3.4 and
to a de-rated capacity of 101.38 MW - Thereafter, email of 2..1.2013
expands on the said last sentence of the earlier email by referring
to Article 6.3.4 and Article 11 proviso - This is akin to a 'without
prejudice' acceptance of de-rated power, being a non-acceptance
of the test certificate dated 30.3.2013 coupled with a desperate
attempt to somef10w get whatever power is available - But this does
not amount to a clear and unequivocal intention to relinquish a
known right - There is no waiver - Appellate Tribunal is wholly
incorrect in accepting the case of waiver and is equally incorrect
in absolving the, independent engineer for the test cer.tificate given
by him on 30.3.2013.
ss. 61 to 63 - Electricity tariff- Variation in - Effect on public
interest - Held: The moment electricity tariff gets affected, the
consumer interest comes in and public interest gets affected - Under
s.61, the appro

## Text

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[2016] 9 S.C.R. 901
ALL INDIA POWER ENGINEER
FEDERATION & ORS.
v.
SASAN POWER LTD. & ORS. ETC.
(Civil Appeal Nos. 5881-5882 of2016)
DECEMBER 08, 2016
[KURIAN JOSEPH AND R.F. NARIMAN, JJ.]
ELECTRICITY ACT, 2003:
ss. 61 to 63 -
Commercial Operation Date (COD) -
Determination of- Procurement of power from generating companies
- Sasan Power Ltd. was incorporated as a special purpose vehicle
by Power Finance corporation the nodal agency for procuring
power - Power Purchase Agreement (PPA) dated 7.8.2007 executed
between Sasan Power Ltd. and procurers of generation and sale of
electricity - Article 6 r/w Schedule 5 provided for preconditions to
be satisfied for declaration of 'COD' namely readiness to commence
commercial operations - This happens only when the pe1formance
test by operating the gene1·ating unit at 98% of the contracted
capacity as existing on the effective date on a continuous running
basis for 72 hours is certified by an independent engineer by giving
a final test certificate to the said effect - The date for commissioning
the first unit was fixed under the PPA as 7.5.2013 - However, under
Schedule 11 thereof. this date was preponed to 27.11.2012 - As
Sasan kept postponing this date, the commissioning tests for
generating Unit No.3 commenced from 20.3.2013 - Various emails
were exchanged from 27.3.2013 to 30.3.2013 between Sasan and
WRLDC, a statutory authority under the Act of 2003 - It was the
case of Sasan that though they were ready to deliver electricity on
31.3.2013 at 95% of the contracted capacity of 620 MW of the
unit, they could not do so as WRLDC did not give them the necessary
green signal to go ahead - They relied heavily upon the independent
engineer's test certificate dated 30.3.2013 to show that a COD took
place on the following day - Petition was filed by WRLDC before
the CER Commission challenging the veracity of certificate issued
by the independent engineer - Commission arrived at the conclusion
that COD had not been achieved on 31.3.2013 but had only been
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achieved tater on 16.8.2013 - Appellate Tribunal set aside the
finding of Commission holding that though COD had not been
achieved on 31.3.2013 in accordance with the PPA but that the
procurers under the PPA had waived their right to demand
performance at 95% and that the pe1formance of unit no.3 which
was only roughly 17% of its contracted capacity was accepted by
all the procurers and that, therefore, there was a waiver of this
essential condition which would then entitle the generator to treat
31.3.2013 as the-date on which commercial operation of unit no.3
commenced - Challenged - Held: A perusal of the emails exchanged
between the parties show that the parties did not intend to amend
any of the provisions of the PPA - The two emails sent by the lead
procurer to Sasan read together do not amount to waiver of the
right mentioned in clause 6.3.1 - There is no .such clear intention
that can be spelled out on a reading of the two emails - All that can
be spelled out is that the first email of 31.3.2013 categorically stated
that the test result is not as per Article 6.3.1, and is not acceptable
- The last sentence of this very email then refers to clause 6.3.4 and
to a de-rated capacity of 101.38 MW - Thereafter, email of 2..1.2013
expands on the said last sentence of the earlier email by referring
to Article 6.3.4 and Article 11 proviso - This is akin to a 'without
prejudice' acceptance of de-rated power, being a non-acceptance
of the test certificate dated 30.3.2013 coupled with a desperate
attempt to somef10w get whatever power is available - But this does
not amount to a clear and unequivocal intention to relinquish a
known right - There is no waiver - Appellate Tribunal is wholly
incorrect in accepting the case of waiver and is equally incorrect
in absolving the, independent engineer for the test cer.tificate given
by him on 30.3.2013.
ss. 61 to 63 - Electricity tariff- Variation in - Effect on public
interest - Held: The moment electricity tariff gets affected, the
consumer interest comes in and public interest gets affected - Under
s.61, the appropriate commission, when ·it specifies terms and
conditions for determination of tariff, is to be guided inter alia by
the safeguarding of the consumer interest and the recovery of the
cost of electricity in a reasonable manner.
WAIVER:
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Waiver of right - Held: Waiver is an intentional relinquishment
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
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of a known right - Waiver must be ~pelled out with crystal clarity
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for there must be a clear intention to give up a known right -
Therefore, unless there is a clear intention to relinquish a right that
is fully known to a party, a party cannot be said to waive it.
Waiver of provision of contract if any element of public interest
is involved - Held: Such waiver will not be given effect to if it is
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contrary to such public interest - If there is any element of public
interest involved, the court steps in to thwart any waiver which may
be contrary to such public interest - Judicial review - Electricity
Act, 2003.
Contract Act, 1872: s.63 -Applicability of- Held: If on facts
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there is a waiver of a provision of the PPA by one of the parties to
the PPA, then s.63 of the Contract Act will operate in order to give
effect to such waiver - Waiver.
Allowing the appeals, t11e Co.urt
HELD: 1. Waiver is an intentional relinquishment of a known
right, and, therefore, unless there is a clear intention to relinquish
a right that is fully known to a party, a party cannot be said to
waive it. It is also clear that if any element of public interest is
involved and a waiver takes place by one of the parties to an
agreement, such waiver will not be given effect to if it is contrary
to such public interest. [Para 20][935-G-H; 936-A]
Jagad Bandhu Chatterjee v. Nilima Rani (1969) 3 SCC
445; P. Dasa Muni Reddy v. P. Appa Rao (1974) 2 SCC .
725 : 1975 (2) SCR 32; Lachoo Mal v. Radhey Shyam
(1971) 1 sec 619; Jndira Bai V. Nand Kishore, (1990)
4 SCC 668; Krishna Bahadur v. Puma Theatre, (2004)
8 sec 229 - relied on.
2. Under Section 62 of the Act, the appropriate commission
is to determine such tariff in accordance with the principles
contained in Section 61. The present case, however, is covered
by Section 63, which begins with a 11011 obstm1te clause stating
that notwithstanding anything ci;mtained in Section 62, the
appropriate commission shall adopt the tariff if such tariff has
been determined through a transparent process of bidding in
accordance with the guidelines issued by t)le Central
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Government. A perusal of the CERC tariff adoption order dated
17.10.2007 makes it clear that the tariff is adopted by the
Commission only because the competitive bidding process which
has been undertaken is in accordance with the guidelines so
issued. All this would make it clear that even if a waiver is claimed
of some of the provisions of the PPA, such waiver, if it affects
tariffs that are ultimately payable by the consumer, would
necessarily affect public interest and would have to pass muster
of the Commission under Sections 61 to 63 of the Electricity Act.
This is for the reason that what is adopted by the Commission
under Section 63 is only a tariff obtained by competitive bidding
in conformity with guidelines issned. If at any subsequent point
of time such tariff is increased, which increase is outside the four
corners of the PPA, even in cases covered by Section 63, the
legislative intent and the language of Sections 61 and 62 make it
clear that the Commission alone can accept such amended tariff
as it would impact consumer interest and therefore public
interest. If COD is declared on 31.3.2013, the very tariff laid
down in Schedule 11 becomes applicable, but for year one being
treated as one day and year two commencing from 1.4.2013. The
substance of the matter is that a consumer would have to pay
substantially more by way of tariff under the PPA if year one is
gobbled up in one day, as year two's tariff is one paisa more than
year one and year three's tariff is substantially more than year
two. In short, instead of getting two years or part thereof
exceeding one year at a substantially lower tariff, the consumer
now gets only one year and one day at the lower tariff rates. This
may also by itself not lead to the parties having to go to the
Commission as this is envisaged by the PPA. But if a waiver is to
be accepted on the facts of this case, it would clearly impact the
public interest, in that consumers would have to pay substantially
more for electricity consumed by them. This being the case, on
facts it may not be necessary to go to the Commission as had
Sasao in fact met the parameters of Schedule 5 on 30'" March,
then as per Schedule 11, year one would in fact have been only
for one day. However, any waiver of the requirement of Schedule
5 would definitely impact the generation of electricity at the
mandated percentage of contracted capacity as also the amounts
payable by ronsumers, and would therefore affect the public
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
SASAN POWER LTD. & ORS. ETC.
interest. [Paras 25, 29, 30 and 31][937-E-F; 939-C-H; 940-A-C)
3. Article 6 deals with synchronization, commissioning, and
commercial operations. In the first step to be taken by the seller,
the unit producing electricity has to be synchronized to the grid
system. It is only after synchronization takes place that the unit
is to be commissioned. At the commissioning stage, the
parameters mentioned in Schedule 5 are to be met. The most
important parameter mentioned _in Schedule 5, when the
performance test is to be taken for the purpose of commissioning,
is that a unit shall be deemed to have passed such test only if it
operates continuously for 72 consecutive hours at or about 95%
of its contracted capacity as existing on the effective date and
within the electrical system limits and functional specifications.
Further, as a part of the performance test, the seller must
demonstrate that the unit meets functional specifications for
ramping rate separately mentioned in Schedule 4 of the PPA. It
is only when such test is passed that a unit can be said to be
commissioned under the PPA. This then is to be certified by the
independent engineer jointly appointed by the parties under
Article 6.3.1, in the form of a final test certificate, which states -
that (a) the commission tests have been carried out in accordance
with Schedule 5 and are acceptable to him, and (b) the result of
the performance test shows that the unit's tested capacity is not
less than 95% of the contracted demand as existing on the
effective date. [Para 32][940-F-H; 941-A-C)
4. If the Schedule 5 parameters are not met, it is incumbent
on the independent engineer to then state reasons for the nonissuance of the final test certificate. Once this is done, under
Article 6.3.2, the seller may retake the relevant test within a
reasonable period after the end of the previous test so as to
comply with the basic requirements of Schedule 5. It is only
after this that a unit can be said to be a "commissioned unit" as
defined, which means that it is a unit in respect of which COD
has occurred. COD or commercial operation date is also
separately defined as meaning, in relation to a unit, the date one
day after the date when each of the procurers receives a final
test certificate of the independent engineer as per Article 6.3.1.
It is thus clear that the scheme of Article 6 is that a unit cannot
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be said to have a commercial operation date unless and until it is
first synchronized with the grid and commi.ssioned after meeting
the parameters mentioned in Schedule 5 of the PPA. Article 6.3.3
refers to performance tests of a unit during the period of the
PPA. If under Article 6.3.3 after COD has been achieved in a
unit, an increased tested capacity over and above that provided
in 6.3.1 (b) is achieved in a subsequent performance test, certain
consequences follow. Equally, if after COD has been obtained in
a unit, and the most recent performance test mentioned during
the working of the PPA has been conducted, and it is found that
in such test a figure less than contracted capacity is achieved,
the unit shall be de-rated with certain consequences which are
mentioned in Article 6.3.4 read with Article 8.2.2.
The scheme
of Article 6 therefore read as a whole appears to be that COD
cannot be achieved until the parameters mentioned in Schedule
5 are achieved and there is a final test certificate to that effect.
The subsequent clauses, Article 6.3.3 and Article 6.3.4 only kick
in after COD is obtained in a unit, leading to either increased
capacity or to de-rated capacity with consequences which follow
under the PPA.[Paras 33, 34l[941-C-H; 942-A)
5. The examination of meetings, emails, and letters between
the parties showed that the first important meeting of 27.2.2013
was Chaired by the Managing Director of the lead procurer. It
was attended by all the other procurers, and officials of Sasan.
What is emphasized on behalf of Sasan is that the revised COD
of the Sasan units was accepted by all the procurers under article
4.5.1 of the PPA to be - (first unit) by 31.3.2013. The procurers
asked Sasao for the estimated date for synchronization and COD
of the first unit. Sasan indicated that synchronization is expected
in the first week of March, 2013, and the COD before 31.3.2013.
What is important about this meeting is that the procurers were
no doubt interested in getting electricity from Sasan as soon as
possible, but obviously only in accordance with article 6.3.1 read
with the 5'" Schedule. This would only mean that the ·meeting
would disclose that the anxiety of the procurers to get eledricity
· at cheap rates would be in accordance with the PPA and not against
it. In other words, if a final test certificate had been given to the
effect that 95% of contracted capacity could have been delivered
by Unit No.3 on or before 31.3~2013, the procurers were anxious
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
SASAN POWER LTD. & ORS. ETC.
to avail of it, and not otherwise.[Para 35][942-B-E]
6. The examination of performance of Sasan for the period
1" April to l61h August, 2013 shows that various tests were
undertaken, but 95% of contract capacity for a continuous period
of 72 hours had only been achieved in June even according to
Sasan. It is apparent from the certificate issued on 30.3.2013
that the tested capacity of the Unit was found to be only 101.38
MW as against 95% of 620 MW i.e. 587 MW. It was also stated
that since the unit was operating below 50% of the rated load
due to grid restriction, the unit could not demonstrate ramping
rate above 50% of rated load in accordance with the Schedule 4
of the PPA. If the tested capacity is 101.38 MW as against the
required 95% i.e. 587 MW, the test could not have been carried
out in accordance with article 6 read with schedule 5, and that
despite the fact that ramping up and down could not be achieved,
functional specifications stipulated in Schedule 4 of the PPA were
said to have been met. CERC rightly castigated this certificate.
What article 6.3.1 requires is first and foremost a final test
certificate of the Independent Engineer. The certificate dated
· 30.3.2013 given by the Independent Engineer is not a final test
certificate. Indeed, it is only in August that a final test certificate
was given in accordance with Article 6.3.1 of the PPA by the very
same independent engineer. Obviously the commissioning tests
could not have been carried out in accordance with Schedule 5,
which requires in clause 1.1 (i)(d) that the seller shall perform,
in respect of each unit, a performance test, by which such unit
shall be deemed to have passed only if it operates continuously
for 72 consecutive hours, at or above 95% of its contracted
c,apacity as existing on the effective date. Also, part of the same
schedule requires that as a part of the performance test, the seller
shall demonstrate that the unit meets the functional specifications
for ramping rate as mentioned in Schedule 4, which was again
conspicuous by its absence. According to the Independent
Engineer, " ... the Unit 3 is certified to have achieved Commercial
Operation, with a tested capacity 101.3~ MW" after carrying out
the commissioning test in accordance with Article 6 and Schedule
5 of the PPA. In his certificate, he has stated that on witnessing
the performance test from 27.03.2013 to 30.03.2013, the tested
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capacity of the Unit is 101.38 MW. However, it is clearly recorded
that Unit was operated beyond 100 MW only from the morning of
28.03.2013.
In the chart on the performance test, the
Independent Engineer has noted that 101.38 MW is operated
only from 06.00 a.m. on 28.03.2013. Under Article 6 read with
Schedule 5 .•. "Unit shall be deemed to have passed if it
operates continuously for 72 consecutive hours at or above 95%
of its contracted capacity as existing on the Effective Date." Even
according to thl' lmlq1l'ndcnt Engineer, 101.38 MW was injected
only at 06.00 a.m. on 28.03.2013. Such a tested capacity of 101.38
MW for 72 hours continuously could therefore have been certified
only at 06.00 a.m. on 31.03.2013. If that be so, the COD would
have been only one day after the date when the test certificate of
the Independent Engineer has been received by the procurers.
For this reason also, the test certificate is by no means in
accordance with Article 6.3.1 of the PPA read with Schedule 5
D thereof. [Paras 36, 38 and 39)[942-G; 946-D-H; 947-A-F)
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7. The two emails sent by the lead procurer to Sasao read
together would show that the lead procurer made it clear that
declaration of COD of unit 3 is not accepted by them as the test
was not performed as per Article 6.3.1. However, in its anxiety
to procure electricity, what was stated in the second email was
that the capacity of 101.38 MW was acceptable only under Article
6.3.4 of the PPA, meaning thereby that this ought to be treated
as de-rated capacity, which should be paid for as provided.
And any quantity produced over and above 101.38 MW would
be treated as infirm power under Article 11.1 proviso, and paid
for as such. Waiver is an intentional relinquishment of a known
right. Waiver must be spelled out with crystal clarity for there
must be a clear intention to give up a known right. There is no
such clear intention that can be spelled out on a reading of the
two emails. The first email categorically stated that the test result
is not as per Article 6.3.1, and.is not acceptable. The last sentence
G of this very email then refers to clause 6.3.4 and to a de-rated
capacity of 101.38 MW. Thereafter, the email of 2"d April, 2013
expands on the said last sentence of the earlier email by referring
to Article 6.3.4 and Article 11 proviso. This is akin to a 'without
prejudice' acceptance of de-rated power, being a non-acceptance
H of the test certificate dated 30.3.2013 coupled with a desperate
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
909
SASAN POWER LTD.
attempt to somehow get whatever power is available. But this
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does not amount to a clear and unequivocal intention to relinquish
a known right. There is no waiver and the Appellate Tribunal in
coming to an opposite conclusion, is clearly erroneous. [Paras
42, 43 and 46][949-E, F; 950-C-F; 951-CJ
Commissioner of Customs, Bombay v. Virgo Steels
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Bombay (2002) 4 SCC 316 - Distinguished.
Juggilal Kamlapat v. N. V. Internationale Crediet-EnHandels Vereeninging 'Rotterdam AIR 1955 Cal 65;
Official Assignee of Bombay v. Madho/al Sindhu ILR
1948 (2) Born 1 - referred to.
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Case Law Reference
AIR 1955 Cal 65
referred to
Para 14
ILR 1948 (2) Born 1
referred to
Para 16
(1969) 3 sec 445
relied on
Para 18
1975 (2) SCR 32
relied on
Para 19
(1971) 1 sec 619
relied on
Para 21
(1990) 4 sec 668
relied on
Para22
(2004) 8 sec 229
relied on
Para 23
(2002) 4 sec 316
distinguished
Para 31
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 58815882 of2016.
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From the Judgment and Order dated 31.03.2016 of the Appellate
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Tribunal for Electricity, New Delhi in Appeal Nos. 233 and 266of2014
WITH
C. A. Nos. 5239-5240, 5246, 5342-5343, 5879, 5355, 5365, 5367,
5956 of2016.
Jayant Bhushan, Kapil Sibal, J. J. Bhatt, Chetan Sharma, Sanjay
Sen, Sr. Advs., Purushaindra Kaurav, AAG., M. G. Ramachandran,
K. V. Mohan, Ms. Ranj itha Ramachandran, Ms. Poorva Saigal,
Ms. Anushree Bardhan, Shubham Arya, Nikunj Dayal, Pramod Dayal,
Ms. Paya! Dayal, Anand Ganesan, Ms. Swapna Seshadri, Rajiv Kr.
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Shrivastava, Ms. Gargi Shrivastava, Rakesh K. Sharma, Ms. Anuradha
Mishra, G. Umapathy, Aditya Singh, Alok Shankar, Vikas Upadhyay,
$akya Singh Choudhuri, Avijit Lala, Anand Shrivastava, Alok Shankar,
Kush Chaturvedi, Mahesh Agarwal, Ms. Sadapurua Mukharjee, Navjot
Singh, E. C. Agrawala, Rishabh Parikh, Saurabh Mishra, Dhan Raj,
Matrugupta Mishra, Shikha Ohri, Hemant Singh, Ms. Divya Roy, Ms.
Swapna Seshadri, Sitesh Mukherjee, Gautam Chawla, Ms. Akansha Tyagi,
Sandeep Devashish Das, Rahul Dhawan, Ms. Udita Singh, Advs. for
the appearing parties.
The Judgment of the Court was delivered by
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R.F. NARIMAN, J. I. These appeals have been argued over
a number of days, but ultimately the points raised in them lie within a
narrow compass.
2. On 19.1.2005, the Central Government, in exercise of powers
under Section 63 of the Electricity Act, 2003 issued guidelines for a
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tariff based competitive bid process to be initiated by distribution licensees
/procurers for procurement of power from generating companies. The
electricity to be procured by such procurers is for the purpose of
distribution and retail supply to consumers generally. On I 0.2.2006, in
pursuance of these guidelines, procurers in different States, namely,
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appellants I to 3 and respondents 5 to 15 (in Civil Appeal Nos.52395240 of 2016.) nominated Power Finance Corporation Limited, a
Government of India. undertaking as the Nodal Agency to complete a
competitive bid process for development of an ultra mega power project
based on linked coalmines using super critical technology ofunits of 660
mega watts (MW) each, plus or minus 20%, in Sasan District, Singrauli,
Madhya Pradesh. On 10.2.2006, Sasan Power Limited was incorporated
as a special purpose vehicle by Power Finance Corporation in order to
. implement the aforesaid purpose. On 1.8.2007, based _on the competitive
bidding process held by Power Finance Corporation, Reliance Power
Limited, having quoted the lowest amount, was selected as th~ successful
bidder, and a letter of intent was issued to Reliance Power. Ltd. The
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quoted tariff, year by year, for a period of25 years, which was accepted
and incor.porated as Schedule 11 in the Power Purchase Agreement
dated 7 .8.2007 (PPA) had tariffs at an extremely depressed rate for the
first two years, after which the tariffs were fixed ata significantly higher
rate. On the very day that the PPA was executed between Sasan Power
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Limited and the procurers for generation and sale of electricity, 100%
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ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
SASAN POWER LTD. & ORS. ETC. [R. F. NARIMAN, J.]
911
share holding of the.special purpose vehicle was acquired by Reliance
Power Limited. The PPA contains detailed clauses with respect to
generation of po_JVer and the tariffs payable for the period of 25 years.
Apart from other provisions, we are really concerned with Article 6
read with Schedule 5 which provides for pre-conditions to be satisfied
for declaration of a generating unit as Commercial Operation Date,
"COD", namely readiness to commence commercial operations. This
happens only when a perfonnance test, by operating the generating unit
at 95% of the contracted capacity as existing on the Effective Date on
a continuous running basis for 72 hours, has been certified by an
independent engineer, by giving a final test certificate to the aforesaid
effect. The PPA also contains various other clauses which will be set
out during the course of this judgment.
3. The bone of contention in these matters is whether the COD
for Unit No.3, which was the first Unit to l;Je commissioned, had been
achieved on 31.3.2013. If it had, then under Schedule 11 to the_ PPA,
the entire first year would get exhausted in one day, i.e., 31" March
being the end of the contract year, for which tariff payable would be at
the rate of 69 paise per unit. If not, then it is only on and from the
commencement of COD that such year would begin, which, according
to the appellants before us, would only begin on 16.8.2013 when a final
test certificate in accordance with Article 6 of the PPA was given by the
independent engineer to the effect that 95% of the contracted capacity
had been achieved for a continuous period of72 hours. We are infonned
that if the COD is said to be on 31.3.2013, as has-been held by the
Appellate Tribunal, the consumers would ~ave to pay a sum of over 1• .
I 000 crores, being the differential tariffthat would apply.
4. The date for commissioning the first unit was fixed under the
PPA as 71h May, 2013. However, under Schedule 11 thereof, this date
was preponed to 27'h November, 2012. As Sasan kept postponing this
date, it appears that the commissioning tests for generating Unit No.3
commenced from 20.3.2013. Various emails were exchanged from
27.3.2013 to 30.3.2013 between Sasan and the Western Region Load
Dispatch Centre (hereinafter referred to as "the WRLDC"), a statutory
authority under the Electricity Act, 2003. It is the case of Sasan that
though they were ready to deliver electricity on 31.3.2013 at 95% of the
contracted capacity of 620 MW of the unit, they could not do so as
WRLDC did not give them the necessary green signal to go ahead.
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They relied heavily upon the independent engineer's test certificate dated
30.3.2013 to show that a COD took place on the following day, which
we will consider in some detail later. At this stage, suffice it to say that
a petition was filed by WRLDC before the Central Electricity Regulatory
Commission (CERC) on 25.4.2013, in which it was prayed:-
" I. Kindly look into the veracity of the certificate issued by
the Independent Engineer in view of deliberate suppression
and misrepresentation of the facts and issue suitable
directions to respondent no.2 to desist from such act.
2. Kindly look into the matter of Respondent No. I including
into intentional mis-declaration of parameters related to
commercial mechanism in vogue and has purported to
declare the part (de-rated) capacity of I 01.3 8 MW as
commercial on
the grounds
of load restriction by
WRLDC and issued suitable directions in the matter.
3. Issue specific guidelines with respect to declaration of
COD of the generators who are not governed by the CERC
(Terms and Conditions of Tari ft) Regulations, 2009 to be in
line with CERC regulations so that the same can be
implemented in a dispute free manner and eliminate any
possibility of gaming by generator.
4. Hon 'ble Commission may give any further directions as
deemed fit in the circumstances of the case."
5. This petition was allowed by the CERC by its order dated
8.8.2014, by which it first set out five issues as follows:-
F
(a) Whether the petition filed by WRLDC is maintainable?
(b) Whether the Certificate issued by IE is in accordance
with the PPA and if not, whether IE has made deliberate
suppression or misrepresentation of facts while issuing the
certificate?
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( c) Whether COD of the station as declared by SPL is in
accordance with the PPA?
(d) Whether the Respondent No.I has indulged in misdeclaration of parameters relating to commercial mechanism
in vogue?
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
SASAN POWER LTD. & ORS. ETC. [R. F. NARIMAN, J.]
(e) Guidelines with regard to the commercial operation of a
generating station which is not regulated by the tariff
regulations of the Commission."
6. The CERC answered issues (a), (b), (c), and (e) in the
affirmative, and issue ( d) in the negative. Ultimately the Commission
arrive.d atthe conclusion that COD had not been achieved on 31.3.2013
but had only been achieved later, on l61h August of the same year. This
finding was set aside by the Appellate Tribunal by its judgment dated
31.3.2016, in which the Appellate Tribunal found that though COD had
not been achieved on 31.3.2013 in accordance with the PPA, but that
the procurers under the PPA had waived their right to demand
performance at 95%, and that the performance of Unit No.3, which
·was only roughly 17% of its contracted capacity, was accepted by all
the procurers, and that therefore there was a waiver of this essential
condition, which would then entitle the generator to treat 31.3.2013 as
the date on which commercial operation of Unit No.3 commenced. It is·
the correctness of this judgment which has been assailed by the various
appellants before us.
7. Mr. Jayant Bhushan, learned senior counsel, Mr. Gopal Jain,
learned senior counsel, Mr: M.G. Ramachandran, learned counsel, Mr.
Purusha Indra Kavrar, learned AAG, and Mr. Alok Shankar, learned
counsel appearing for the appellants have relied heavily on Article 6.3. l
read with Schedule 5 of the PPA, and stated that this is an Article which
does not merely reflect the individual rights and liabilities of the generator
and procurers of electricity but would also sound in public interest inasmuch
as the declaration of COD would have effect on the tariff that is payable
by consumers generally. They, therefore, argued that Article 6.3 .1 cannot
be waived as a matter of law. They also argued that it cannot also be
waived as a matter of fact inasmuch as when the PPA expressly allowed
a certain provision to be waived, it expressly stated so. In this regard,
Articles 3.1.2, 4.4.2(b) 10.l(c), 10.2(c) were pointed out by them.
Referring to Article 18.3 of the PPA, it was argued that the said Article
is not a substantive provision for waiver, but only a provision dealing
with the manner in which waiver is to be exercised, and has reference
only to the aforesaid Articles. Further, even assuming that there was a
waiver, such waiver took place as late as 15.4.2013 when the last
communication from Uttarakhand Power was received. There was,
therefore, no waiver of the aforesaid condition on 31.3:2013. They also
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argued that as a matter of fact the emails exchanged between the parties
would show that the lead procurer and all the other procurers had in fact
never consented to 31.3.2013 as being the COD for the purpose of the
PPA. They also argued that really speaking any such alleged waiver
was not a waiver at all, but an amendment to the PPA which would
require the Commission's consent under Article 18.1, inasmuch as it
would affect the tariff payable by consumers. They also argued that it
is clear from a reading of a chart which showed generation from March
to August, 2013 that Sasan was not able to achieve anywhere near 95%
of contracted capacity until l 6'h August which is when the COD took
place on facts. They also pointed out.that, for example, in the month of
July, there was no supply of power at all by Sasan Power. Ultimately, it
was stated that the Independent Engineer's certificate dated 30.3.2013
was a document made only to favour Sasan, so that Sasan could swallow
one entire year of tariff in one day, so that the consumer would have to
pay the higher tariff for what is in reality the first year, but is now being
treated as the second year of generation and supply.
8. As against this, Shri Chidambaram and Shri Sibal, learned senior
counsel appearing on behalf of Sasan Power Ltd., have argued that as
against 69 and 70 paise per unit for electricity supplied under the PPA,
the procurers were in fact procuring electricity at much higher rates. It
was the procurers themselves, therefore, who kept telling Sasan to supply
power as soon as possible. For this, they relied, in particular, on the
minutes of a meeting dated 27.2.2013 between the procurers and Sasan,
in which the procurers unequivocally stated that any time upto 31.3.2013,
the power generation should begin from Unit No.3. This was because
the moment such power generation began, whether it was 69 paise or
70 paise for the second year, the aforesaid tariff was much, much lower
than what the procurers would have to pay otherwise. It was their
argument that it was only at the behest of the procurers themselves that
the COD was declared on 31.3.2013. They further argued that on a
correct reading of emails and lettc;s.exchanged between the parties, the
lead proct_Jrer and ~II other procurers had actually and unequivocally
waived the requirement of95% of contracted capacity demand.and that
the AppellateTribunal was right in this behalf. Countering the arguments
of the appellant, they referred to and relied upon Section 63 of the !ndian
Contract Act, 1872 to buttress their submission that waiver is a right
granted by the Contract Act and does not depend upon the PPA.
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
SASAN POWER LTD. & ORS. ETC. [R. F. NARIMAN, J.]
Therefore, whatever the construction of Article 18.3 of the PPA, it is clear
that the. Contract Act itself gives them this right which the procurers
themselves have exercised in accordance with law, for the very good reason
that they wanted the supply of cheap energy at any cost, even at the cost
of being at 17% instead of 95% of contracted demand. It was also their
case that they were ready to supply electricity on 31" March at 95% of the
contracted demand, but unfortunately WRLDC prevented them from doing
so, and that the independent engineer's certificate had been wrongly
castigated by CERC, as was correctly held by the Appellate Tribunal. The
independent engineer laid bare the facts correctly and therefore did not
give a false or wrong certificate as was found by CERC. They also met an
argument raised by the appellant that Haryana at least had waived its right
without prejudice to its other rights and contentions. This was met by
stating that Haryana accounted only for roughly 12% of the total electricity
demanded by all the procurers and that as per a clause in the PPA, if the
lead procurer and the other procurers constitute 65% or more, they can
bind all the other procurers.
'
9. In order to appreciate the rival submissions, it is necessary to
refer to the relevant provisions of the PPA, which reads as follows:-
"l. Definitions
The terms used in this Agreement, unless as defined below
or repugnant to the context, shall have the same meaning as
assigned to them by the Electricity Act, 2003 and the rules or
regulations framed thereunder, including those issued/framed
by Appropriate Commission (as defined hereunder), as
amended or re-enacted from time to time.
The following terms w~en used in this Agreement shall have
the ·respective meanings, as specified below:
"Commercial
Operation "Date" or
"COD"
Means, in relation to a Unit, the date
one day after the date when each of the
Procurers
receives
a
Final
Test
Certificate of the Independent Engineer
as per the provisions of Article 6.3.1
and in relation to the Power Station
shall mean the date by which such Final
Test Certificates as per Article 6.3.1 are
received by the Procurers for all the
Units;
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"Commissioning"
or
"commissioned
with
its
grammatical variations
"Commissioning Tests" or
"Commissioning Test"
"Commissioned Unit"
"Contract Year"
"Contracted Capacity"
Means, in relation to a Unit, that the
Unit or in relation to die Power Station
all the Units of the Power Station have
passed the Commissioning Tests
successfully;
Means the Tests provided in Schedule
5 herein;
Means the Unit in respect of which
co D has OCCUJTed;
Means the pe1iod beginning on the
date of this Agreement and ending on
the immediately succeeding March 3 I
and thereafter each period of I 2
mondis beginning on April I and
ending on March 31 provided that:
In
tlc
financial
year
in which
Scheduled COD of the first Unit
would have occurred, a Contract Year
shall end on tlx: date immediately
before the Scheduled COD of the first
Unit and a new Coniract Year shall
begin once again from die Scheduled
Commercial 0 pera tion Date of the
first Unit and end on immediately
succeeding March 3 I and provided
further tliat
(ii) The last Contract Year of this
Agreement shall end on the last day
of die tcmi of this Agreement;
Means (1) for the first Unit, 620.4
MW; (ii) for tlie second Unit, 620.4
MW; (iii) for the tliird Unit, 620.4
MW; (iv) for the fou1th Unit, 620.4
MW; (v) for the fifth Unit, 620.4 MW
and (vi) for the sixth Unit 620.4 MW
rated
net
capacity
at
tl-e
Interconnection Point, and in relation
to tlx: Power Station as a whole
means 3722.4 MW rated net capacity
at t:,~ I ntcrconnection Point, or such
rated capacities as may be detenni1-ed
in accordance with Article 6.3.4 or
A1ticle 8.2 of this Agreement;
ALL INDIA POWER ENGINEER FEDERATION & ORS. v.
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SASAN POWER LTD. & ORS. ETC. [R. F. NARIMAN, J.]
A
"Effective Date"
Means the date of signing of this
Agreement by last of all the Parties;
"Declared Capacity''
In relation to a Unit or the Power
Station at any time means the net
capacity of the Unit or the Power
Station at the relevant time (expressed
B
in MW at the Interconn:ction Point)
as
declared
by
the
Seller
111
accordance with the Grid Code and
dispatching procedures as per the
Availabilitv Based Tariff;
"Final Test Certificate"
Means
c
(a) A certificate of the Independent
Engineer ce11ifying and accepting the
results of a Commissioning Testis in
accordance with Article 6.3. l of this
Agreement; or
(b) A certificate of tre Independent
D
Engineer certifying the result of a
Repeat
Pe1formance
Tests
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accordance with Article 8.2. l of this
Agreement;
"Grid Code" or "I EGC"
Means any set of regulations or codes
E
issued by CERC as amended and
revised from time to time and legally
binding
on
the
Sellers'
and
Procedures' governing the operation
of the Grid System or any succeeding
set of regulations or code;
· "Independent Enginee1"
Means an independent consulting
F
engineering firm or group appointed
jointly by all the Procurers (jointly)
and the Seller, to carry out the
functions in accordance with Article
4. 7. l and Article 6, Article 12 and
"''-
A11icle 8 herein.
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"Lead Procurer"
Shall have the
meaning
scribed
thereto in Article 2.5;
"Perfo1111ance Test"
Means
the
test
carried
out
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accordance
with
Article
l.