# GUJARAT URJA VIKAS NIGAM LIMITED & ORS v. RENEW WIND ENERGY (RAJKOT) PRIVATE LIMITED & ORS

- **Citation:** [2023] 7 S.C.R. 670
- **Court:** Supreme Court of India
- **Decided:** 2023-04-13
- **Case number:** Civil Appeal Nos. 3480-3481 of 2020
- **Bench:** Sanjay Kishan Kaul, S. Ravindra Bhat, M.M. Sundresh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gujarat-urja-vikas-nigam-limited-ors-v-renew-wind-energy-rajkot-private-limited-37491
- **Pages:** 49

## Headnote

Electricity Act, 2003 - Central Electricity Regulatory
Commission (Terms and Conditions for Recognition and issuance
of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010 - Power Purchase Agreement (PPA) in terms of
the REC Regulations 2010 was entered into between the parties, on
29.03.2012, within the control period stipulated in the tariff order
of 2010 - On 10.07.2013, Central Commission amended the REC
Regulations 2010 ('Second Amendment'), Explanation to Regulation
5 was amended - The pre-existing clause that the power would be
"at a price not exceeding pooled cost of the power purchase" was
altered to "at the pooled cost of power purchase" - It was clarified
that PPAs executed prior to this amendment at a tariff lower than
APCC would not be affected - Respondents filed petition before
the State Commission arguing that the terms of the PPA had to be
changed in view of the change in the REC Regulations - Allowed -
Appellant filed appeal before APTEL, rejected - Review petition
also dismissed - Held: There was never any provision which
mandated prior approval by the State Commission, of PPAs entered
into by parties, in exercise of their free choice, in relation to
renewable energy sources - Findings of APTEL requiring approval
of the State Commission, unsustainable - Further, it is a matter of
record, that for the period between 29.03.2012 and 10.07.2013
and indeed, after the Second Amendment, no difficulty was
experienced in the pricing mechanism agreed by the parties under
the PPA - It was on 10.12.2013 that the respondent wind power
developer approached the State Commission for re-determination
of tariff - This was an opportunistic attempt to derive advantage
from the change, brought about by the Second Amendment, and
seek to have it applied to an existing contract, which cannot be
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countenanced - Thus, the reasoning of APTEL and the State
Commission cannot be upheld - PPAs entered into voluntarily by
the parties exercising equal bargaining power, before the Second
Amendment were not affected by its terms - Findings to the contrary
in the impugned order set aside - Furthermore, APTEL in the most
cavalier fashion virtually rubber stamped the State Commission's
findings on coercion, in regard to the entering into the PPA by the
parties - There was no evidence or any pleadings beyond a bare
allegation of coercion against the appellant - Findings regarding
coercion are wholly untenable and therefore, set aside - Gujarat
Electricity Regulatory Commission (Procurement of Energy from
Renewable Sources) Regulations, 2010 - Regulation 4(1), 9(1).
Electricity Act, 2003- Central Electricity Regulatory
Commission (Terms and Conditions for Recognition and issuance
of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010 - Objective of - Discussed.
Electricity Act, 2003 - s.64 - Tariff Orders u/s.64 - Held: Are
quasi-judicial in nature and ipso facto binding on the parties unless
amended or modified through law.
Electricity - Power Purchase Agreements, if statutory contracts
- Held: Power Purchase Agreements are essentially not statutory
contract showever, certain terms contained in those contracts are
regulated by law, i.e. applicable regulations, under the Act - The
PPA between a generating company or, as in the instant case, a
wind generator, and a distribution licensee, such as the appellant,
is the outcome of a carefully considered decision, whereby the
parties after due deliberations and negotiations agree on terms
based on existing law and regulations.
Pleadings - Standard of - Allegation of coercion/duress/fraud
- Findings on, not to be rendered casually by APTEL - Held: It is
incomprehensible how an allegation of coercion w.r.t entering into
the PPA by the parties could have been entertained and incorporated
as a finding, given that the respondents are established companies
who enter into negotiations and have the support of experts,
including legal a

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[2023] 7 S.C.R.
 [2023] 7 S.C.R. 670
670
GUJARAT URJA VIKAS NIGAM LIMITED & ORS.
v.
RENEW WIND ENERGY (RAJKOT) PRIVATE LIMITED
& ORS.
(Civil Appeal Nos. 3480-3481 of 2020)
APRIL 13, 2023
[SANJAY KISHAN KAUL, S. RAVINDRA BHAT AND
M.M. SUNDRESH, JJ.]
Electricity Act, 2003 - Central Electricity Regulatory
Commission (Terms and Conditions for Recognition and issuance
of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010 - Power Purchase Agreement (PPA) in terms of
the REC Regulations 2010 was entered into between the parties, on
29.03.2012, within the control period stipulated in the tariff order
of 2010 - On 10.07.2013, Central Commission amended the REC
Regulations 2010 ('Second Amendment'), Explanation to Regulation
5 was amended - The pre-existing clause that the power would be
"at a price not exceeding pooled cost of the power purchase" was
altered to "at the pooled cost of power purchase" - It was clarified
that PPAs executed prior to this amendment at a tariff lower than
APCC would not be affected - Respondents filed petition before
the State Commission arguing that the terms of the PPA had to be
changed in view of the change in the REC Regulations - Allowed -
Appellant filed appeal before APTEL, rejected - Review petition
also dismissed - Held: There was never any provision which
mandated prior approval by the State Commission, of PPAs entered
into by parties, in exercise of their free choice, in relation to
renewable energy sources - Findings of APTEL requiring approval
of the State Commission, unsustainable - Further, it is a matter of
record, that for the period between 29.03.2012 and 10.07.2013
and indeed, after the Second Amendment, no difficulty was
experienced in the pricing mechanism agreed by the parties under
the PPA - It was on 10.12.2013 that the respondent wind power
developer approached the State Commission for re-determination
of tariff - This was an opportunistic attempt to derive advantage
from the change, brought about by the Second Amendment, and
seek to have it applied to an existing contract, which cannot be
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countenanced - Thus, the reasoning of APTEL and the State
Commission cannot be upheld - PPAs entered into voluntarily by
the parties exercising equal bargaining power, before the Second
Amendment were not affected by its terms - Findings to the contrary
in the impugned order set aside - Furthermore, APTEL in the most
cavalier fashion virtually rubber stamped the State Commission's
findings on coercion, in regard to the entering into the PPA by the
parties - There was no evidence or any pleadings beyond a bare
allegation of coercion against the appellant - Findings regarding
coercion are wholly untenable and therefore, set aside - Gujarat
Electricity Regulatory Commission (Procurement of Energy from
Renewable Sources) Regulations, 2010 - Regulation 4(1), 9(1).
Electricity Act, 2003- Central Electricity Regulatory
Commission (Terms and Conditions for Recognition and issuance
of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010 - Objective of - Discussed.
Electricity Act, 2003 - s.64 - Tariff Orders u/s.64 - Held: Are
quasi-judicial in nature and ipso facto binding on the parties unless
amended or modified through law.
Electricity - Power Purchase Agreements, if statutory contracts
- Held: Power Purchase Agreements are essentially not statutory
contract showever, certain terms contained in those contracts are
regulated by law, i.e. applicable regulations, under the Act - The
PPA between a generating company or, as in the instant case, a
wind generator, and a distribution licensee, such as the appellant,
is the outcome of a carefully considered decision, whereby the
parties after due deliberations and negotiations agree on terms
based on existing law and regulations.
Pleadings - Standard of - Allegation of coercion/duress/fraud
- Findings on, not to be rendered casually by APTEL - Held: It is
incomprehensible how an allegation of coercion w.r.t entering into
the PPA by the parties could have been entertained and incorporated
as a finding, given that the respondents are established companies
who enter into negotiations and have the support of experts,
including legal advisers, when contracts are finalized - Casual
approach of APTEL in not reasoning how such findings could be
rendered cannot be countenanced - As a judicial tribunal, dealing
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
ENERGY (RAJKOT) PVT. LTD.
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with contracts and bargains, which are entered into by parties with
equal bargaining power, APTEL is not expected to casually render
findings of coercion, or fraud, without proper pleadings or proof,
or without probing into evidence - Electricity Act, 2003.
Allowing the appeals, the Court
HELD: 1. Did the PPA in the present case, require prior
approval of the state commission
RWE and the other respondents urge that the PPA was
unenforceable because it was not approved by the State
Commission. The argument is unmerited and insubstantial. From
a reading of the State Commission's regulations (Renewable
Sources Regulations) relating to procurement of energy from
Renewable Sources, it is evident that there was never any
provision, which mandated prior approval by the state commission,
of PPAs entered into, by parties, in exercise of their free choice,
in relation to renewable energy sources. As a matter of fact, in
the case of renewable power, the state commission had approved
a model PPA. Further, the tariff terms and conditions to the extent
decided are by the Central Commission and not by the State
Commission. These are incorporated in the model PPA. Neither
the commission, nor the contesting respondents, during the
hearings in the present appeals, were able to point out any
provision in the PPA in the present case, which conflicted with
any provision of the model PPA, or any express regulation.
Furthermore, it was not established how in the absence of any
reference to the Multi Year Tariff Regulations, they were
applicable to PPAs relating to renewable energy sources. In the
absence of specific norms prescribing prior approval of PPAs like
in the case of provisions of Regulation 21 of the Maharashtra
Electricity Regulatory Commission (Multi Year Tariff)
Regulations, 2019; Regulation 45 of the Delhi Electricity
Regulatory Commission Comprehensive (Conduct of Business)
Regulations 2001 and Regulation 36 of the Andhra Pradesh
Electricity Regulatory Commission (Distribution Licensee)
Regulations, 2013, the respondent's arguments on this aspect
cannot be accepted. In these circumstances, the findings of
APTEL, not based on any stipulated obligations under provisions
of the state regulations, requiring approval of the state
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commission, for its operation, cannot be sustained. [Paras 4548][699-F-G; 700-B-F]
2. Whether change in the REC Regulations obliged revision
of the PPA in this case
Section 61 of the Act enacts the basis for tariff
determination. On the other hand, Section 62 is concerned with
the fixation of various other charges and tariffs. Section 64 lists
the manner and procedure for tariff determination by the
Commission. Section 86 lists the functions of the Commission
and reiterates the determination of tariffs to be a prominent task
of the commission. Tariff determination no doubt, comprehends
the exercise of regulatory function, including purchase, sourcing,
procurement of electricity from generators, by distribution and
other licensees, and their sales. This part involves generating
companies entering into PPA(s) with procuring entities or
licensees. Tariff fixation is a statutory function. Yet, by virtue of
Section 42, it is subject to open access determination of the price
of power, and subject to Section 63 wherever it involves open
bidding. In the facts of this case, the PPA incorporated a tariff
between the respondents and Gujarat Urja constituted the tariff
fixed by the State Regulatory Commission in the exercise of its
statutory powers. The issue and sale of RECs, constituted an
important part of that bargain, between the two parties, based on
the assessment of their commercial interest. The important
feature of the REC Mechanism is that in it, WPDs (i.e.
respondents) had to sell power to distribution licensees at a
mutually agreed price, not exceeding the Average Power Purchase
Cost ('APPC') of the DISCOMs, (such as Gujarat Urja). The
WPDs were entitled to the additional benefit of Renewable Energy
Certificates issued to it which could be traded in Power Exchange
for a price. The consideration payable to WPDs consisted of firstly,
a mutually agreed power Component and secondly a green
component through RECs traded in the Exchange. The
alternative to the WPDs was to sell to licensees at a preferential
tariff, determined by the state commission. In the latter event,
WPDs were not entitled to the additional benefit of the green
component, which was the tradable RECs the sale of which would
have led to increased revenues. The respondent WPDs chose
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the REC mechanism, while entering into PPAs in these cases,
with Gujarat Urja. The PPAs entered by WPDs provided for the
fixed tariff of 2.64/kWh for the entire term (25 years), as mutually
agreed (Article 5.2 of PPA). WPDs were entitled to and were
trading RECs in the power exchange, deriving extra monetary
benefits: which, at the relevant period was 1.50/kWh (floor
price at the time of signing of PPA). The Preferential Tariff
determined by the state commission, for WPDs not opting for
the REC Mechanism was
 3.56/kWh. The WPDs were not
entitled to any additional REC benefits, had they adopted the
preferential tariff route. Regulation 9 of the REC Regulations
2010 prescribes the price determination mechanism for RECs in
the power exchange. Proviso to Regulation 9 (1) of the REC
Regulations 2010 empowers the central commission, in
consultation with the Central Agency and the Forum of
Regulators, to provide the floor price and forbearance price
separately for solar and non-solar certificates. This provision is
important because it enables regulatory intervention in the public
interest: if the price went below a certain limit, the floor price
was to be prescribed, to take care of the interests of generatorslike the respondents; if the price went too high, a forbearance
price could be fixed, to take care of the interests of the consumers
and distributors. By Regulation 9 (2) of the REC Regulations
2010, the Central Commission, was to be guided, in determining
the floor and forbearance price, by diverse factors, such as (a)
variation in cost of generation of different renewable energy
technologies falling under solar and non-solar category, across
states in the country; (b) variation in the Pooled Cost of Purchase
across States in the country; (c) Expected electricity generation
for non-renewable energy sources [including (i) expected
renewable energy capacity under preferential tariff (ii) expected
renewable energy under mechanism of certificates] (d) Renewable
purchase obligation targets set by various State Commissions.
By virtue of Explanation to Regulation 5 (1) of the REC
Regulations, "the weighted average pooled price at which the
distribution licensee has purchased the electricity including cost of
self-generation, if any, in the previous year from all the energy
suppliers long-term and short-term, but excluding those based on
renewable energy sources, as the case may be." An important factor
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which cannot be lost sight of is that all the respondent's WPDs
were registered, under the REC Regulations, based on the state
commission's tariff order, of 2010. It is undisputed, that to register
under the REC Regulations 2010, an entity (such as WPDs) had
to be (a) accredited, with a State Agency [(defined by Regulation
2 (n) of the REC Regulations as an agency "designated by the
State Commission to act as the agency for accreditation and
recommending the renewable energy projects for registration") and
an entity "not having any power purchase agreement for the
capacity related to such generation to sell electricity at a preferential
tariff determined by the Appropriate Commission]. Furthermore,
the state commission, in its tariff order, dated 30.01.2010 (which
was operative for three years, with the control period beginning
from 10.08.2009) while determining the preferential tariff, had
observed that it would apply for 25 years. In the present case,
the PPA was entered into by the parties on 29.03.2102, within the
control period stipulated in the tariff order of 2010. The change in
the REC Regulations 2010, whereby the Explanation to
Regulation 5 was amended resulted in a change. The pre-existing
clause that the power would be "at a price not exceeding pooled
cost of the power purchase" was altered to "at the pooled cost of
power purchase". This change, was through the Second
Amendment (to the REC Regulations), carried out on 10.07.2013.
It is a matter of record, that for the period between 29.03.2102
and 10.07.2013 - and indeed, after the Second Amendment, no
difficulty was experienced in the pricing mechanism agreed by
the parties, under the PPA. It was on 10.12.2013 that the
respondent WPD approached the state commission for redetermination of tariff. Clearly, this was an opportunistic attempt
to derive advantage from the change, brought about by the Second
Amendment, and seek to have it applied to an existing contract,
which cannot be countenanced. In view of these reasons, it is
held that the reasoning of APTEL, and the State Commission
cannot be upheld. [Paras 55-59][707-G; 708-A-H; 709-B-H; 710A-B, E-G]
Transmission Corporation of Andhra Pradesh Ltd v Sai
Renewable Power Private Limited (2010) 8 SCR 636;
Gujarat Urja v. Solar Power Company India Pvt. Ltd.
[2017] 14 SCR 115; Bangalore Electricity Supply Co.
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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SUPREME COURT REPORTS
[2023] 7 S.C.R.
Ltd. vs. Konark Power Projects Ltd. & Ors. (2016) 13
SCC 515 - referred to.
3. Applicability of the Second Amendment to pre-existing
contracts- the general law
In the present case, the PPAs were entered into in the
exercise of equal bargaining power, after due negotiation by the
parties, and within the framework of existing regulations: both
central and state. Therefore, unless any later amendment
expressly overrides existing contracts, the terms of such
agreements bind the parties. Thus, agreements such as the PPAs
in the present case, entered into, voluntarily by the parties, before
the Second Amendment, were not affected, by its terms. The
findings to the contrary in the impugned order, are set aside.
[Paras 63, 66][714-C; 715-G; 716-A]
PTC India Ltd. v. CERC [2010] 3 SCR 609 -
distinguished.
Purbanchal Cables & Conductors (P) Ltd. v. Assam State
Electricity Board & Ors. [2012] 6 SCR 905;
Commissioner of Income Tax v Vatika Township (P) Ltd.
[2014] 12 SCR 1037 - relied on.
4. Were the respondents coerced into entering into PPAs
APTEL, in the most cavalier fashion, virtually rubber
stamped the State Commission's findings on coercion, in regard
to the entering into the PPA by the parties. There was no shred
of evidence, nor any particularity of pleadings, beyond a bare
allegation of coercion, alleged against Gujarat Urja. It is
incomprehensible how such an allegation could have been
entertained and incorporated as a finding, given that the
respondents are established companies, who enter into
negotiations and have the support of experts, including legal
advisers, when contracts are finalized. The findings regarding
coercion are, therefore, wholly untenable. The casual approach
of APTEL, in not reasoning how such findings could be rendered,
cannot be countenanced. As a judicial tribunal, dealing with
contracts and bargains, which are entered into by parties with
equal bargaining power, APTEL is not expected to casually render
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findings of coercion, or fraud, without proper pleadings or proof,
or without probing into evidence. The findings of coercion are
therefore, set aside. [Para 71][717-F-G; 718-A-B]
Shanti Budhiya Vesta Patel &Ors. v. Nirmala
Jayprakash Tiwari & Ors. [2010] 4 SCR 958;
BishundeoNarain v. Seogeni Rai [1951] 1 SCR 548;
New Indian Assurance Co. Ltd v. Genus Power
Infrastructure Ltd [2014] 12 SCR 360 - relied on.
Gujarat Urja Vikas Nigam Limited v. EMCO Limited
[2016] 1 SCR 857; Gujarat Urja Vikas Nigam Limited
v. ACME Solar Technologies (Gujarat) Pvt Ltd & Others
[2017] 16 SCC 498; Central Bank of India v. Hartford
Fire Insurance Co. Ltd AIR 1965 SC 1288; Her
Highness Maharani Shantidevi P Gaikwad v. Savjibai
Haribai Patel & Ors 2001 (5) SCC 101: [2001] 2 SCR
590; Hindustan Zinc Ltd. v. Rajasthan Electricity
Regulatory Commission [2015] 7 SCR 1104; Gujarat
Urja Vikas Nigam Ltd. v. Tarini Infrastructure Ltd.
[2016] 5 SCR 990; Union of India v. Indusind Bank
Ltd. [2016] 11 SCR 700; Kerala State Electricity Board
& Anr v. Principal Sir Syed Institute for Technical
Studies [2020] 7 SCR 885; Gujarat Urja Vikas Nigam
Limited v. Solar Semi-Conductors Power Limited
Company (India) Private Limited [2017] 14 SCR 115 -
referred to.
Case Law Reference
[2020] 7 SCR 885
referred to
para 4
[2017] 14 SCR 115
referred to
para 15
[2010] 8 SCR 636
referred to
para 23
[2016] 1 SCR 857
referred to
para 23
[2017] 16 SCC 498
referred to
para 23
[2001] 2 SCR 590
referred to
para 25
[2010] 3 SCR 609
distinguished
para 33
[2015] 7 SCR 1104
referred to
para 41
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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[2017] 14 SCR 115
referred to
para 52
[2016] 5 SCR 990
referred to
para 52
(2016) 13 SCC 515
referred to
para 54
[2012] 6 SCR 905
relied on
para 64
[2014] 12 SCR 1037
relied on
para 65
[2016] 11 SCR 700
referred to
para 65
[2010] 4 SCR 958
relied on
para 69
[1951] 1 SCR 548
relied on
para 69
[2014] 12 SCR 360
relied on
para 70
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.34803481 of 2020.
From the Judgment and Order dated 06.12.2018 in AN No.209 of
2015 and dated 24.07.2020 in RP No.3 of 2019 of the Appellate Tribunal
for Electricity at New Delhi.
C. A. Sundaram, M. G. Ramachandran, Sr. Advs., Ms. Hemantika
Wahi, Anand Ganesan, Ms. Swapna Sesadri, Ms. Jesal Wahi, Ms. Srishti
Khindaria, Advs. for the Appellants.
Shyam Divan, Basava P. Patil, Dhruv Mehta, Sr. Advs., Venkatesh,
Ms. Kanika Chugh, Nitin Saluja, Siddharth Joshi, Suhael Buttan, Punyam
Bhvtani, Ms. Nishtha Kumar, Apoorva Misra, Shri Venkatesh, Vishal
Gupta, Ms. Suparna Srivastava, Tushar Mathur, Nikilesh Ramachandran,
Advs. for the Respondents.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. The current civil appeals,1 under Section 125 of the Electricity
Act, 2003, (hereafter, "the Act") challenge orders of the Appellate
Tribunal for Electricity (hereafter, "APTEL"), dated 06.12.2018 ("first
impugned order")2 and order dated 24.07.2020 ("second impugned
order")3. The APTEL had, by those orders, rejected the appeals preferred
by the present appellant, and the review petition, as well. Resultantly,
1 Civil Appeals Nos. 3480 and 3481 of 2020
2 in Appeal No 209/2015
3 in Review Petition No 03/2019
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the order of the Gujarat Electricity Regulatory Commission (hereafter
"the State Commission"), dated 01.07.20154 was affirmed.
2. The first appellant - Gujarat Urja Vikas Nigam Limited
(hereafter "Gujarat Urja") had approached this court previously
challenging the order of APTEL, which was disposed of by this court5
granting liberty to it, to seek review/rectification. Gujarat Urja then
preferred a review petition, which was rejected by APTEL, by the second
impugned order. When this appeal was taken up for hearing, on
14.10.2020, this court had issued notice and stayed the impugned order
of APTEL.
Background
3. Gujarat Urja procures power in bulk on behalf of distribution
licensees in the state of Gujarat; it is an authorized licensee within the
meaning of the term under the Act. The second, third, fourth and fifth
appellants are distribution licensees in the State of Gujarat. The first
respondent, Renew Wind Energy (Rajkot) Pvt Ltd (hereafter "RWE")
is a wind generator which had set up 25.2 MW Wind Turbine Generators
at District Rajkot, Gujarat under the Renewable Energy Certification
scheme notified by the Central Electricity Regulatory Commission
(hereafter, "Central Commission"). The second respondent is the Wind
Independent Power Producers Association (hereafter "Association").
The Respondent No 3, Gujarat Electricity Regulatory Commission
(hereinafter "the State Commission") is the regulatory commission under
the Act, for the State of Gujarat. The fourth respondent, Wish Wind
Infrastructure LLP ("Wish Wind" hereafter) is a wind generator.
4. By Section 86 of the Act6 , State Commissions discharge several
functions- which include the determination of tariff "for generation,
4 in petition No 1363/2013
5 Civil Appeal No 1253/2019 by order dated 15.02.2019
6 The relevant extract of Section 86 is as follows:
 "86. Functions of State Commission.-(1) The State Commission shall discharge
the following functions, namely:-
 (a) determine the tariff for generation, supply, transmission and wheeling of
electricity, wholesale, bulk or retail, as the case may be, within the State:
 ......
 (b) regulate electricity purchase and procurement process of distribution licensees
including the price at which electricity shall be procured from the generating companies
or licensees or from other sources through agreements for purchase of power for
distribution and supply within the State;
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
ENERGY (RAJKOT) PVT. LTD. [S. RAVINDRA BHAT, J.]
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supply, transmission and wheeling of electricity, wholesale, bulk or
retail, as the case may be, within the State". The tariff determination
process should accord with Sections 62 and 64 of the Act. Section 62,
requires "the Appropriate Commission" (in this case, the State
Commission) to determine tariffs in accordance with the provisions of
the Act for - among other purposes, retail supply of electricity. The
State Commissions are also empowered to frame regulations, under
Section 181 of the Act. That power includes the formulation of the "terms
and conditions for determination of tariff Under Section
61".7Additionally, the tariff order can be modified or imposed with
conditions under Section 64(3). The State Commission is guided by the
principles specified in Section 61 of the Act while formulation of the
tariff regulations. This court has held that state commissions as expert
bodies have to strike a balance between various competing concerns
and interests while framing such regulations.8 The Gujarat State
Commission, for a Multi-Year period (also called the "control period"),
frames Regulations for determination of tariff. The state commission
then determines the Multi-Year Tariff Order based on the data available.
Furthermore, Section 64 (6) prescribes that tariff orders "shall continue
to be in force for such period as may be specified in the Tariff
Order unless amended or revoked". If any party is aggrieved by any
 (c) facilitate intra-State transmission and wheeling of electricity;
 .....
 (e) promote co-generation and generation of electricity from renewable sources of
energy by providing suitable measures for connectivity with the grid and sale of electricity
to any person, and also specify, for purchase of electricity from such sources, a percentage
of the total consumption of electricity in the area of a distribution licensee;
 .... [..]"
7 Clause 181(2)(zd) of the Act.
8 Kerala State Electricity Board & Anr v. Principal Sir Syed Institute for Technical
Studies, 2020 7 SCR 885:
 7. [..] "While fixing tariff, the Commission cannot show undue preference to any
consumer of electricity. The Commission, however, is vested with the power to prescribe
differential rates according to the consumers' load factor, power factor, voltage, total
consumption of electricity during any specified period of time at which supply is required.
So far as fixing different rates for these two categories of the educational institutions,
these factors did not come into play. The other permissible differentiating factors
are geographical position of any area, the nature of supply and the purpose for which
the supply is required. As regards this set of differentiating factors, the tariff advantage
for government run and aided educational institutions do not appear to be based on
geographical position or nature of supply. The Commission however has justified the
classification of the aforesaid two sets of tariffs on the basis of purpose for which supply
is required by the consumers."
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conditions of a given Tariff Order, it can seek its amendment or revocation.
Orders are also appealable under Section 111 to APTEL, and thereafter
to this court under Section 125 of the Act. Tariff Orders under Section
64 of the Act are quasi-judicial in nature and ipso facto binding on the
parties unless amended or modified through law.
5. On 29.01.2010, the Central Electricity Regulatory Commission
(Terms and Conditions for Recognition and issuance of Renewable
Energy Certificate for Renewable Energy Generation) Regulations, 2010
(hereafter "REC Regulations 2010") were framed by the Central
Commission for the development of a power market for non-conventional
sources of energy by the issuance of tradable and saleable credit
certificates (hereafter "RECs"). Regulation 5 of the said REC
Regulations 2010 provides for the required eligibility for the renewable
generators for participating in the RE Certificates:
"5. Eligibility and Registration for Certificates:
(1) A generating company engaged in generation of electricity
from renewable energy sources shall be eligible to apply for
registration for issuance of and dealing in Certificates if it
fulfills the following conditions:
a. it has obtained accreditation from the State Agency;
b. it does not have any power purchase agreement for the
capacity related to such generation to sell electricity at a
preferential tariff determined by the Appropriate Commission;
and
c. it sells the electricity generated either
(i) to the distribution licensee of the area in which the eligible
entity is located, at a price not exceeding the pooled cost of
power purchase of such distribution licensee, or
(ii) to any other licensee or to an open access consumer at a
mutually agreed price, or through power exchange at market
determined price.
Explanation. - for the purpose of these regulations 'Pooled
Cost of Purchase' means the weighted average pooled price
at which the distribution licensee has purchased the electricity
including cost of self generation, if any, in the previous year
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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from all the energy suppliers long-term and short-term, but
excluding those based on renewable energy sources, as the
case may be."
6. The objective of the REC Regulations 2010 was to separate
the physical electrical component and the environmental (renewable)
component of the energy for issuance of RECs. This was an alternate
mechanism developed for the sale of renewable energy at a preferential
tariff to any licensee or directly to any consumer. The REC Regulations
2010 aimed at selling the renewable component through the RE
Certificates containing promotional benefits of renewable energy while
the physical electrical component was sold as any other conventional
electricity. The REC Regulations 2010 also provided that generators
based on the REC mechanism had the option to sell physical energy to
the distribution licensee at a "price not exceeding the Average Pooled
Power Purchase Cost" (hereinafter as "APPC") of the distribution
licensee9. This was to ensure that generators did not benefit twice over,
by selling RECs and also selling physical energy at higher promotional
tariffs or taking concessional benefits from the concerned distribution
licensee.
7. Under the REC Regulations 2010, distribution licensees were
not obliged to purchase the physical component of electricity from
renewable energy generators set up under the REC mechanism since
such REC based generators had alternative options with regard to the
physical component of electricity, namely, (i) sale of electricity power
exchanges (ii) wheeling of power for sale to third parties at mutually
agreed rates or (iii) wheeling of power for their own consumption. In the
case of the sale of the physical component of electricity, the price for
the electrical component could not exceed average pooled cost of the
distribution licensees. The regulations also provided that the generators
(of renewable energy) were not eligible for any benefits including banking
facilities, exemption from payment of cross subsidy surcharge etc.
amongst other things. The stated promotional benefits were applicable
only in terms of trading and selling of the RE Certificates.
8. The REC Regulations 2010 provided for floor price and
forbearance price i.e. minimum price and maximum price respectively
at which RECs could be traded in the power exchange. Those prices
9 Regulation 5(1)(c) of REC Regulations 2010.
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i.e. floor price and the forbearance prices were to be determined by the
central commission for the entire country.
9. In the present case, the State Commission by its order10
determined the tariff for procurement of power by distribution licensees
from wind energy generators and also ruled on other commercial issues
for wind energy generators set up under a preferential tariff mechanism.
The order provided for a preferential levelized tariff of 3.56 per kWh
for the supply of energy to the distribution licensee for meeting it's
Renewable Power Purchase Obligation (RPO). The "control period" of
the Order [dated 30.1.2010] was for the period 11.08.2009 to
10.08.201211. The order, inter alia, also provided the following
promotional benefits for wind generators set up for third party sale under
a preferential mechanism:
(a) Exemption from cross subsidy charges for the sale of wind
energy to open access users in the State.
(b) Payment for excess (over and above that set off against
monthly consumption in the 15 minutes time block) would be
treated as a sale to the distribution licensee concerned at a rate of
85% of the preferential tariff determined by commission for such
renewable energy sources.
10. On 17.04.2010, the State Commission notified Gujarat Electricity
Regulatory Commission (Procurement of Energy from Renewable
Sources) Regulations, 2010 (hereafter "State Regulations"). The State
Regulations provided for the percentage of total consumption that
distribution licensees were to purchase from RPOs and further
recognized that RPO could be fulfilled by the purchase of such RECs.
Further, obligated entities could fulfil their renewable purchase obligation
through two sources:
10 Dated 30.01.2010 in Order No 1/2010
11 The relevant provision of the Order reads as follows:
 "2.2 Control period The Commission had, vide its Order No.2 of 2006 dated
11th August,2006, determined the Wind Energy Tariff for a period of three years, i.e.
upto 10th August,2009. The draft for the present order was published on 17.05.2009
and it was proposed to be effective from 1st July, 2009.However, some of the objectors
suggested that the present order be made effective from the end of previous control
period. Since the previous control period expired on 10th August, 2009, the Commission
decides that the control period for this order will be 3 (three) years w.e.f. 11th August,
2009."
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(a) Purchase of renewable energy directly (at preferential tariff
determined by State Commission); and
(b) Purchase of RECs at a market price between Floor Price and
Forbearance price determined by Central Commission
11. A Power Purchase Agreement (hereafter "PPA") in terms of
the REC Regulations 2010, was entered into between the Gujarat Urja
and the wind power developers (hereafter, "WPDs") including respondent
RWE on 29.03.2012. The agreement provided for a ceiling on tariff at
2.64 per unit for 25 years. In addition to the tariff, WPDs were eligible
for the issue of RECs for each unit of electricity generated and supplied
by them to the appellants. The alternate route available for the WPDs
(such as RWE, Wish Wind etc.) at the time of entering into the PPA was
to sell electricity at a promotional tariff of 3.56 per unit - as determined
by the State Commission. By choosing the option, the WPDs were
ensured tariff at 2.64 per unit plus tradable RECs whose price was
determined on the basis of the "weighted average pooled price"12.
Distribution licensees were enabled to adjust such quantum of power
purchased towards RPO specified under Section 86(1)(e) of the Act.
Thus, the interests of both segments of the industry were taken care of.
12. The State Commission by its order dated 08.08.201213
determined the tariff at which the power could be procured by the
distribution licensees and others from wind power projects commissioned
in the control period from 11.08.2012 to 31.03.2016.
13. On 11.07.2013, Central Commission amended the REC
Regulations 2010 (hereafter "Second Amendment") and replaced "at a
price not exceeding pooled cost of the power purchase "with" at
the pooled cost of power purchase"14 along with the relevant statement
12 See Explanation to Regulation 5 of the REC Regulations 2010 which defines average
pooled price as follows:
 "the weighted average pooled price at which the distribution licensee has purchased
the electricity including cost of self-generation, if any, in the previous year from all the
energy suppliers long-term and short-term, but excluding those based on renewable
energy sources, as the case may be."
13 in Order No. 2/2012
14 The relevant amendment to Regulation 5 (c), reads as follows:
 "(2) In sub-clause (c) of clause (1) of Regulation 5 of the Principal Regulations, the
words "at price not exceeding the pooled cost of the power purchase of such distribution
licensee" shall be substituted with the words "at the pooled cost of power purchase of
such distribution licensee as determined by the Appropriate Commission"."
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of reasons for the said amendment. It was clarified in the amendment
that PPAs already executed prior to this amendment at a tariff lower
than APCC would not be affected. The first two respondents were
aggrieved by the order of the Central Commission. They filed a petition15
before the State Commission arguing that the terms of the PPA had to
be changed in view of the change in the REC regulations. This petition
was allowed by the State Commission directing that the order of the
Central Commission was general and was therefore applicable to all
similarly situated wind power generators. Aggrieved by the order of the
State Commission, Gujarat Urja had preferred an appeal16 before
APTEL. This appeal was rejected by APTEL by order dated 06.12.2018.
The appellants preferred review petition against APTEL's order rejecting
their appeal against State Commission's order; that too was dismissed
by APTEL vide order dated 24.07.2020.
Arguments of the Appellant
14. The learned senior counsel for the appellant, Mr. C.A.
Sundaram submitted that governing regulations for the PPAs in question
were the CERC Regulations 2010. Therefore, the State Commission
had no jurisdiction to decide the tariff contrary to the agreement. Further,
counsel argued that Central Commission itself has clarified by the Second
Amendment that in respect of PPAs entered into prior to 11.07.2013,
tariffs mutually agreed upon between the parties would be valid for the
entire duration of the PPA (i.e. 25 years) and they could not be substituted
or re-determined by the State Commission. It was further argued that
had the appellants known about the APPC on year-on-year basis at the
time of signing the agreement, they would not have adopted the REC
mechanism but instead would have availed a different method whereby
prices were fixed and appellants would have been entitled to RPO benefits
as well.
15. Reliance was placed on this court's judgment in Gujarat Urja
Vikas Nigam Limited v. Solar Semi-Conductors Power Limited
Company (India) Private Limited17 to argue that if the State Commission
re-determines the tariff amongst the parties, then the aggrieved party
cannot be compelled to continue the said agreement or enter into a new
agreement on such increased tariff.
15 Petition No. 1363 of 2013
16 Appeal No. 209/2015
17 (2017) 14 SCR 115
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16. The appellants further submitted that State Commission had
no jurisdiction to reopen the PPA as the same was entered into in terms
of the REC Regulations 2010 that was framed by the Central Commission
and was within its exclusive jurisdiction. Moreover, it was argued that
the appellants would fail in their duty towards their consumers if they
cannot negotiate for a lower tariff or if they agree to purchase power at
a higher tariff despite the availability of power at a lower tariff. In such
an event, the higher cost of procurement of power so imposed would be
ultimately passed on to the consumers which would be contrary to a
specified public interest, under the Act.
17. The learned senior counsel argued that the definition of the
"APPC" cannot be relied upon in the present case18 and the PPA in
question provided for a tariff. There was consequently no bar in any law
or regulations for the parties to agree to such tariff and in fact, REC
Regulations 2010 itself recognized that the PPA can be "at a price not
exceeding the pooled purchase cost". Likewise, for the sale of such
power to customers or the licensees, reference is made to "mutually
agreed price" and therefore reference to "mutually agreed price"
can mean that price can also be a fixed price and need not mean that it
has to be dynamic and varying every year.
18. It was argued that the interpretation placed by APTEL is not
founded on any express provision in the regulations, or anything arising
out of necessary implication. The change in regulations, unless made
specifically operable for a prior period, cannot be construed to be
retrospective. Thus, contracts concluded prior to the entered into prior
to the amendment [in 2013] cannot be governed by amended provisions.
Doing so would not only be contrary to the express terms of the amended
regulations but would also be contrary to the terms of the PPA which do
not accommodate or provide for such change in regulations.
19. The appellants further urged that the PPA was consciously
entered into by the respondents on 29.03.2012, which was before the
18 APPC as clause 1.1 of the PPA is defined as:
"Average Power Purchase Cost" means the weighted average pooled price at
which the distribution licensee has. Purchased the electricity including cost of selfgeneration, if any, in the previous year from all the energy suppliers long-term and
short-term; but excluding those based on renewable energy sources, as the case may be.
Further, for this agreement, Average Power Purchase Cost for the term of the agreement
shall be as per Article No.