# SOUTHERN POWER DISTRIBUTION POWER COMPANY LIMITED OF ANDHRA PRADESH (APSPDCL) & ANR v. M/S HINDUJA NATIONAL POWER CORPORATION LIMITED & ANR

- **Citation:** [2022] 8 S.C.R. 198
- **Court:** Supreme Court of India
- **Decided:** 2022-02-02
- **Case number:** Civil Appeal No. 1844 of 2020
- **Bench:** L. Nageswara Rao, B. R. Gavai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/southern-power-distribution-power-company-limited-of-andhra-pradesh-apspdcl-anr-36408
- **Pages:** 44

## Headnote

Electricity Act, 2003 - ss. 61, 62, 64 and 86 - Power Purchase
Agreement(PPA) - Appellants-distribution companies (DISCOMS)
were to purchase 100% power generated by respondent no.1HNPCL - O.P. No.21 of 2015 filed by HNPCL for determination of
capital cost and O.P. No.19 of 2016 filed by appellants-DISCOMS
for approval of PPA - However, on 4th January, 2018, appellantsDISCOMS filed IAs before the State Electricity Regulatory
Commission for withdrawal of O.P. No.19 of 2016 and disposal of
O.P. No.21 of 2015 - State Commission allowed withdrawal of O.P.
No.19 of 2016 filed by appellants-DISCOMS and consequentially
dismissed O.P. No.21 of 2015 filed by HNPCL - Appeal of respondent
no.1-HNPCL allowed by Appellate Tribunal for Electricity (APTEL)
which directed the State Electricity Regulatory Commission to dispose
of O.P. No.21 of 2015 and O.P. No.19 of 2016 on merits -
Correctness of - Held: APTEL rightly held that, on account of the
assurance given by the State of Andhra Pradesh/APDISCOMS,
HNPCL had altered its position and as such, it was not permissible
for the appellants-DISCOMS to withdraw O.P. No.19 of 2016 -
Conduct of appellants-DISCOMS would disentitle them to withdraw
the application - Argument, that on account of increase of the capital
cost of the project, the appellants-DISCOMS would be required to
purchase power at much higher rate, also does not hold water since
the State Electricity Regulatory Commission would only approve
the cost as it would feel appropriate, as guided by the provisions u/
s.61 of the Act of 2003 and the Regulations; and merely because,
the cost of the project is estimated by HNPCL at a particular amount,
the State Commission is not bound to accept the same - Further,
perusal of s.64 of the Act of 2003 would reveal that even a
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Generating Company is entitled to make an application for
determination of tariff u/s.62 of the Act of 2003 - As such, the State
Commission was wholly unjustified in dismissing O.P. No.21 of 2015
filed by HNPCL - For reasons unknown, appellants-DISCOMS took
a decision to resile from their earlier stand, due to which, not only
the huge investment made by HNPCL would go in waste, but also
valuable resources of the public including thousands of acres of
land would go in waste - Appellants-DISCOMS, which are
instrumentalities of the State, could not be permitted to change their
decision at their whims and fancies and, particularly, when it was
adversarial to the public interest and public good - The record
clearly showed that the change in decision was arbitrary, irrational
and unreasonable - IAs filed by appellants-DISCOMS, were acts,
affecting public interest and public good, without there being any
rational or reasonable basis for the same - Conduct of appellantsDISCOMS, deprecated - In any event, the impugned judgment of
APTEL cannot be said to be prejudicial to the interests of any of the
parties - What was done by APTEL was only to direct the State
Electricity Regulatory Commission to dispose of the said two O.Ps
on merits - Appeal dismissed with costs, quantified at Rs.5,00,000/
- - State Electricity Regulatory Commission to decide the said two
O.Ps, expeditiously, within six months.
Constitution of India - Arts.12 and 14 - Public Authority -
State - Instrumentalities of the State - Held: Every action of a State
is required to be guided by the touch-stone of non-arbitrariness,
reasonableness and rationality - Every action of a State is equally
required to be guided by public interest - Every holder of a public
office is a trustee, whose highest duty is to the people of the country
- The Public Authority is therefore required to exercise the powers
only for the public good.
Dismissing the appeal, the Court
HELD: 1. The Appellate Tribunal for Electricity (APTEL)
rightly held that, on account of the assurance given by the State
of Andhra Pradesh/APDISCOMS, HNPCL had altered its position
and as such, it was not permissible for the appellants-DISCOMS
to w

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SUPREME COURT REPORTS
[2022] 8 S.C.R.
[2022] 8 S.C.R. 198
198
SOUTHERN POWER DISTRIBUTION POWER COMPANY
LIMITED OF ANDHRA PRADESH (APSPDCL) & ANR.
v.
M/S HINDUJA NATIONAL POWER CORPORATION LIMITED
& ANR
(Civil Appeal No. 1844 of 2020)
FEBRUARY 02, 2022
[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]
Electricity Act, 2003 - ss. 61, 62, 64 and 86 - Power Purchase
Agreement(PPA) - Appellants-distribution companies (DISCOMS)
were to purchase 100% power generated by respondent no.1HNPCL - O.P. No.21 of 2015 filed by HNPCL for determination of
capital cost and O.P. No.19 of 2016 filed by appellants-DISCOMS
for approval of PPA - However, on 4th January, 2018, appellantsDISCOMS filed IAs before the State Electricity Regulatory
Commission for withdrawal of O.P. No.19 of 2016 and disposal of
O.P. No.21 of 2015 - State Commission allowed withdrawal of O.P.
No.19 of 2016 filed by appellants-DISCOMS and consequentially
dismissed O.P. No.21 of 2015 filed by HNPCL - Appeal of respondent
no.1-HNPCL allowed by Appellate Tribunal for Electricity (APTEL)
which directed the State Electricity Regulatory Commission to dispose
of O.P. No.21 of 2015 and O.P. No.19 of 2016 on merits -
Correctness of - Held: APTEL rightly held that, on account of the
assurance given by the State of Andhra Pradesh/APDISCOMS,
HNPCL had altered its position and as such, it was not permissible
for the appellants-DISCOMS to withdraw O.P. No.19 of 2016 -
Conduct of appellants-DISCOMS would disentitle them to withdraw
the application - Argument, that on account of increase of the capital
cost of the project, the appellants-DISCOMS would be required to
purchase power at much higher rate, also does not hold water since
the State Electricity Regulatory Commission would only approve
the cost as it would feel appropriate, as guided by the provisions u/
s.61 of the Act of 2003 and the Regulations; and merely because,
the cost of the project is estimated by HNPCL at a particular amount,
the State Commission is not bound to accept the same - Further,
perusal of s.64 of the Act of 2003 would reveal that even a
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Generating Company is entitled to make an application for
determination of tariff u/s.62 of the Act of 2003 - As such, the State
Commission was wholly unjustified in dismissing O.P. No.21 of 2015
filed by HNPCL - For reasons unknown, appellants-DISCOMS took
a decision to resile from their earlier stand, due to which, not only
the huge investment made by HNPCL would go in waste, but also
valuable resources of the public including thousands of acres of
land would go in waste - Appellants-DISCOMS, which are
instrumentalities of the State, could not be permitted to change their
decision at their whims and fancies and, particularly, when it was
adversarial to the public interest and public good - The record
clearly showed that the change in decision was arbitrary, irrational
and unreasonable - IAs filed by appellants-DISCOMS, were acts,
affecting public interest and public good, without there being any
rational or reasonable basis for the same - Conduct of appellantsDISCOMS, deprecated - In any event, the impugned judgment of
APTEL cannot be said to be prejudicial to the interests of any of the
parties - What was done by APTEL was only to direct the State
Electricity Regulatory Commission to dispose of the said two O.Ps
on merits - Appeal dismissed with costs, quantified at Rs.5,00,000/
- - State Electricity Regulatory Commission to decide the said two
O.Ps, expeditiously, within six months.
Constitution of India - Arts.12 and 14 - Public Authority -
State - Instrumentalities of the State - Held: Every action of a State
is required to be guided by the touch-stone of non-arbitrariness,
reasonableness and rationality - Every action of a State is equally
required to be guided by public interest - Every holder of a public
office is a trustee, whose highest duty is to the people of the country
- The Public Authority is therefore required to exercise the powers
only for the public good.
Dismissing the appeal, the Court
HELD: 1. The Appellate Tribunal for Electricity (APTEL)
rightly held that, on account of the assurance given by the State
of Andhra Pradesh/APDISCOMS, HNPCL had altered its position
and as such, it was not permissible for the appellants-DISCOMS
to withdraw O.P. No.19 of 2016. The grounds, which are sought
to be urged in I.A. No.1 of 2018 in O.P. No.19 of 2016 and I.A.
No.2 of 2018 in O.P. No.21 of 2015, were very much available
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when the appellants-DISCOMS had entered into MoA on 17th
May, 2013 and the Continuation Agreement dated 28th April,
2016. [Para 79][226-C-E]
2. In any case, the conduct of the appellants-DISCOMS, in
the present case, would disentitle them to withdraw the
application. [Para 87][230--C-D]
3. Another argument, that on account of increase of the
capital cost of the project, the appellants-DISCOMS would be
required to purchase power at much higher rate, also does not
hold water. The State Electricity Regulatory Commission while
determining the tariff would be guided by various factors as are
required to be taken into consideration in view of the provisions
of Section 61 of the Electricity Act, 2003. In any event, the
appellants-DISCOMS have themselves reserved their right to
contest the correctness of the cost on every component at an
appropriate stage before the State Commission. Merely because,
the cost of the project is estimated by HNPCL at a particular
amount, the State Commission is not bound to accept the same.
The State Commission would only approve the cost as it would
feel appropriate, as guided by the provisions under Section 61 of
the Act of 2003 and the Regulations. In that view of the matter,
the argument in this regard also, is without substance. [Para
88][230-D-H]
4. In any event, the State Commission totally erred in
dismissing O.P. No.21 of 2015 filed by HNPCL. Perusal of Section
64 of the Act of 2003 would reveal that even a Generating
Company is entitled to make an application for determination of
tariff under Section 62 of the Act of 2003. As such, irrespective
of the question, as to whether an application for withdrawal of
O.P. No.19 of 2016 filed by the appellants-DISCOMS could have
been entertained, the State Commission was wholly unjustified
in dismissing O.P.No.21 of 2015 filed by HNPCL. In any case, in
the facts of the present case and, particularly, taking into
consideration the conduct of the appellants-DISCOMS, the
APTEL rightly held that the appellants- DISCOMS could not
have been permitted to withdraw O.P. No.19 of 2016. [Para
99][230-A-C]
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5. The appellants-DISCOMS are instrumentalities of the
State and as such, a State within the meaning of Article 12 of the
Constitution of India. Every action of a State is required to be
guided by the touch-stone of non-arbitrariness, reasonableness
and rationality. Every action of a State is equally required to be
guided by public interest. Every holder of a public office is a
trustee, whose highest duty is to the people of the country. The
Public Authority is therefore required to exercise the powers
only for the public good. [Para 100][234-C-E]
6. The determination of the capital cost of the project and
the rate of tariff at which the power has to be purchased would
always be subject to regulatory control of the State Commission.
What has been done by the APTEL is only directing the State
Commission to determine the same. [Para 104][237-F-G]
7. The record would clearly reveal that from the year 2012
onwards till 4th January, 2018, it was the consistent stand of the
State of Andhra Pradesh as well as the APDISCOMS that it would
be purchasing 100% power generated from the project of HNPCL.
Not only an application being O.P. No.21 of 2015 was filed by
HNPCL for determination of capital cost, but also O.P. No.19 of
2016 was filed by the appellants-DISCOMS for grant of approval
to the Continuation Agreement dated 28th April, 2016 with the
Amended and Restated PPA of 1998. The matters were heard
finally on 15th May, 2017 and closed for orders. For some
unknown reasons, exclusively within the knowledge of the
appellants-DISCOMS, things turned topsy-turvy between 15th
May, 2017 and 4th January, 2018, on which date, the appellants -
DISCOMS did a somersault and filed applications for withdrawal
of O.P. No.19 of 2016 and disposal of O.P. No.21 of 2015. Every
decision of the State is required to be guided by public interest
and the power is to be exercised for public good. For reasons
unknown, the appellants- DISCOMS took a decision to resile
from their earlier stand, due to which, not only the huge
investment made by HNPCL would go in waste, but also valuable
resources of the public including thousands of acres of land would
go in waste. The reasons /grounds, which are sought to be given
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.
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in I.A. No. 1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018
in O.P. No.21 of 2015, filed on 4th January, 2018, were very much
available between 2011 till 15th May, 2017. It is not as if
something new has emerged between 15th May, 2017 and 4th
January, 2018, which would have entitled the appellantsDISCOMS to resile from their earlier stand. The appellantsDISCOMS could not be permitted to change the decision at their
whims and fancies and, particularly, when it is adversarial to the
public interest and public good. The record would clearly show
that the change in decision is arbitrary, irrational and
unreasonable. [Para 105][237-G-H; 238-A-E]
8. I.A. No.1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of
2018 in O.P. No.21 of 2015 filed by the appellants-DISCOMS,
are acts, which have been done wrongfully and wilfully without
reasonable and probable cause. The act is one, affecting public
interest and public good, without there being any rational or
reasonable basis for the same. [Para 107][239-D-E]
9. In any case, the impugned judgment of APTEL cannot
be said to be of such a nature, which can be said to be prejudicial
to the interests of any of the parties. What has been done by the
APTEL is only to direct the State Commission to dispose of O.P.
No.21 of 2015 filed for determination of capital cost and O.P. No.19
of 2016 filed for approval of Amended and Restated PPA
(Continuation Agreement) on merits. On remand, the State
Commission would be bound to take into consideration all the
relevant factors and the contentions to be raised by both the
parties before deciding the said O.Ps. [Para 109][239-F-G]
Hulas Rai Baij Nath v. Firm K.B. Bass and Co. [1967] 3
SCR 886 - distinguished.
Arjun Singh v. Mohindra Kumar AIR 1964 SC 993 :
[1964] 5 SCR 946; Tata Power Company Limited v.
Reliance Energy Limited and others (2009) 16 SCC 659
: [2009] 9 SCR 625; Kumari Shrilekha Vidyarthi and
others v. State of U.P. and others (1991) 1 SCC 212 :
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[1990] 1 Suppl. SCR 625; Food Corporation of India
v. M/s Kamdhenu Cattle Feed Industries (1993) 1 SCC
71 : [1992] 2 Suppl. SCR 322; Indian Oil Corporation
Limited and others v. Shashi Prabha Shukla and another
(2018) 12 SCC 85 : [2017] 13 SCR 268 and Kalabharati
Advertising v. Hemant Vimalnath Narichania and others
(2010) 9 SCC 437 : [2010] 10 SCR 971 - referred to.
Boal Quay Wharfingers Ltd. v. King's Lynn Conservancy
Board (1971) 1 WLR 1558 [Court of Appeal, England]
- referred to.
Case Law Reference
[1967] 3 SCR 886
distinguished
Para 33
[1964] 5 SCR 946
referred to
Para 41 (i)
[2009] 9 SCR 625
referred to
Para 89
[1990] 1 Suppl. SCR 625
referred to
Para 101
[1992] 2 Suppl. SCR 322
referred to
Para 102
[2017] 13 SCR 268
referred to
Para 103
[2010] 10 SCR 971
referred to
Para 106
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1844
of 2020.
From the Judgment and Order dated 07.01.2020 of the Appellate
Tribunal for Electricity at New Delhi in Appeal No. 41 of 2018.
C. S. Vaidyanathan, Sr. Adv., Mahfooz Ahsan Nazki, Polanki
Gowtham, Ms. Rajeswari Mukherjee, Advs. for the Appellants.
Dr. Abhishek M. Singhvi, M. G. Ramachandran, Sr. Advs., Atul
Sharma, Abhishek Sharma, Ms. Harshita Agarwal, Shubham Arya, Ms.
L. Nidhiram Sharma, Alok Tripathi, Advs. for the Respondents.
The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. The present appeal filed by the appellants - Distribution
Companies (hereinafter referred to as "the appellants - DISCOMS")
challenges the judgment and order dated 7th January, 2020, passed by
the Appellate Tribunal for Electricity, New Delhi (hereinafter referred
to as "the APTEL") in Appeal No. 41 of 2018, thereby allowing the
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.
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appeal filed by the respondent No.1 - M/s Hinduja National Power
Corporation Limited (hereinafter referred to as "HNPCL"). By the
impugned judgment and order, the APTEL has directed the Andhra
Pradesh Electricity Regulatory Commission (hereinafter referred to as
"the State Commission") to dispose of O.P. No.21 of 2015 filed by
HNPCL for determination of capital cost and O.P. No.19 of 2016 filed
by the appellants - DISCOMS for approval of amended and restated
Power Purchase Agreement (hereinafter referred to as "PPA")
(Continuation Agreement) on merits.
2. The facts, in brief, giving rise to the present appeal are as
under:
3. The erstwhile Andhra Pradesh State Electricity Board
(hereinafter referred to as "APSEB") entered into a Memorandum of
Understanding (hereinafter referred to as "MoU") with HNPCL on 17th
July, 1992. As per the said MoU, APSEB transferred all the licenses,
approvals, clearance and permits, fuel linkage, water required for
establishment of the power project at Visakhapatnam in the erstwhile
State of Andhra Pradesh, to HNPCL to generate and supply the electricity
to APSEB.
4. An initial PPA was entered into between APSEB and HNPCL
on 9th December, 1994. On 25th July, 1996, the Central Electricity
Regulatory Commission (CERC) granted a Techno Economic Clearance
for the power project for an estimated cost of Rs.4628.11 crores (Rs.
4.45 crores per MW).
5. Owing to certain change in conditions, the parties agreed to
amend the initial PPA. Accordingly, an Amended and Restated PPA
dated 15th April, 1998, was entered into between APSEB and HNPCL.
Between the years 1998 and 2007, the Amended and Restated PPA, for
sale of power by HNPCL to APSEB, was not implemented. Subsequently,
in the year 2007, HNPCL approached the Government of Andhra
Pradesh to revive the power project mainly structuring it as a merchant
plant, offering 25% of the power generated to the State and balance
75% power to third parties. However, it appears that there were
negotiations between the parties, and the State Government had offered
to purchase 100% power generated from the plant of HNPCL and that
HNPCL had agreed to it. The same would be clearly evident from the
material placed on record, to which we will be referring hereinafter.
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6. The material placed on record would reveal that in the year
2011-2012, the Central Power Distribution Company of Andhra Pradesh
Limited (hereinafter referred to as "APCPDCL") for and on behalf of
four Distribution Companies of Andhra Pradesh (hereinafter referred to
as "APDISCOMS") had initiated the process for procurement of power
under Case-1 long term bidding route, to meet the base load requirements
of APDISCOMS from the years 2014-2015 onwards. In the said bidding
process, HNPCL participated and had successfully emerged as the second
lowest bidder (L-2 bidder). After the completion of the bidding process,
APCPDCL had filed O.P. No.55 of 2013 before the State Commission
for approval of the tariffs emerged in the said bidding process. However,
the State Level Expert Committee for evaluation of Case-1 bidding
(hereinafter to as "Bid Evaluation Committee") in its meeting dated 28th
September, 2012, had noted that, the State Government had informed
that the entire capacity of HNPCL was encumbered to the State of
A.P./APDISCOMS and was not available for consideration under the
tender. Accordingly, the Bid Evaluation Committee had discarded HNPCL
from the bidding process.
7. In the meanwhile, there was a correspondence between
HNPCL and the State Government in the year 2012, with regard to the
steps to be taken for the development of the project and requesting
State support for scheduled commissioning of the project. In this regard,
HNPCL addressed a letter dated 6th August, 2012 to the then Hon'ble
Chief Minister of the erstwhile State of Andhra Pradesh, thereby
conveying its intention to develop the project and seeking State's support.
Vide communication dated 26th December, 2012, the State Government
addressed a letter to HNPCL accepting its proposal and agreeing to
purchase 100% power from the project of HNPCL as per the Amended
and Restated PPA. Vide communication dated 14th January, 2013,
HNPCL agreed to supply 100% power to the State-Distribution
Companies at the tariff to be determined by the State Commission.
8. The HNPCL vide communication dated 16th May, 2013,
addressed to the appellants - DISCOMS, inter alia, provided therein
the details with regard to the estimated capital cost of the power project
to the tune of Rs.6098 crores as against Rs.5545 crores that was given
in June, 2010. The appellants - DISCOMS vide communication dated
17th May, 2013, expressed their reservations about the capital cost
furnished by HNPCL and reserved their rights to contest the same before
the State Commission.
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9. On the same day, i.e., 17th May, 2013, a Memorandum of
Agreement (hereinafter referred to as "MoA") was entered into between
the APDISCOMS and HNPCL, thereby deciding to continue the
Amended and Restated PPA dated 15th April, 1998, on the terms and
conditions set out therein. In pursuance of the aforesaid MoA, a Fuel
Supply Agreement ("FSA" for short) dated 26th August, 2013, came to
be entered between HNPCL and Mahanadi Coalfield Limited for coal
supply for the said project.
10. On 12th March, 2014, a petition being O.P. No.21 of 2015,
came to be filed by HNPCL before the State Commission for
determination of capital cost for the project and for determination of the
tariff for such generation and sale of electricity by HNPCL to
APDISCOMS.
11. Thereafter, on 2nd June, 2014, the Andhra Pradesh State
Reorganisation Act, 2014, (hereinafter referred to as "Reorganisation
Act") came into effect vide which the erstwhile State of Andhra Pradesh
was bifurcated into two States, i.e., the State of Andhra Pradesh and the
State of Telangana.
12. On 28th July, 2015, HNPCL filed an Addendum Application in
O.P. No.21 of 2015, thereby enhancing the capital cost of the project to
Rs.8,087 crore. This capital cost was disputed by the APDISCOMS.
13. On 11th January, 2016, the first unit of the Power project (520
MW) was declared Commercial Operation Date (COD) by HNPCL.
Vide interim order dated 1st March, 2016, the State Commission fixed
the provisional tariff at the rate of Rs.3.61 per unit for supply of electricity
by HNPCL to the APDISCOMS.
14. On 30th March, 2016, HNPCL filed I.A. No.5 of 2016 in O.P.
No.21 of 2015, for payment of variable charges and fixed charges at
Rs.1.80 per unit and Rs.2.16 per unit aggregating to Rs.3.96 per unit at
80% availability.
15. On 28th April, 2016, distinct Power Distribution Corporations
were created including the appellants - DISCOMS i.e. Southern Power
Distribution Power Company Limited of Andhra Pradesh ("APSPDCL")
and Eastern Power Distribution Company of Andhra Pradesh
("APEPDCL"). These corporations succeeded the APSEB, which had
entered into the Amended and Restated PPA dated 15th April, 1998 with
HNPCL. As such, the Continuation Agreement to the Amended and
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Restated PPA was entered into between the appellants - DISCOMS
and HNPCL on 28th April, 2016.
16. On 11th May, 2016, the appellants - DISCOMS filed a petition
being O.P. No.19 of 2016 before the State Commission for approval of
the Continuation Agreement dated 28th April, 2016, read with the
Amended and Restated PPA dated 15th April, 1998.
17. The State Government vide order dated 1st June, 2016,
accorded approval for purchase of 100% power from HNPCL.
18. On 3rd July, 2016, the second unit of the HNPCL (520 MW)
came to be declared COD by HNPCL.
19. Vide order dated 6th August, 2016, the State Commission redetermined the provisional tariff at the rate of Rs.3.82 per unit, payable
by the appellants - DISCOMS for the power supplied by HNPCL.
20. On 15th May, 2017, the State Commission after hearing the
parties on merits, reserved the judgment in both the petitions, i.e., in O.P.
No.19 of 2016 and O.P. No.21 of 2015.
21. It is further to be noted that in the appeal arising out of
interlocutory proceedings, the APTEL vide order dated 1st June, 2017,
directed the State Commission to dispose of O.P. No.19 of 2016 and
O.P. No.21 of 2015 on or before 14th August, 2017. The said period
came to be extended from time to time, the last of such extension was
granted till 31st January, 2018, vide order dated 10th January, 2018.
22. Thereafter, on 4th January, 2018, the appellants - DISCOMS
filed two Interlocutory Applications, viz., (i) I.A. No.1 of 2018 in O.P.
No.19 of 2016 for withdrawal of O.P. No.19 of 2016 together with initial
PPA; and (ii) I.A. No.2 of 2018 in O.P. No.21 of 2015 for disposal of
O.P. No.21 of 2015.
23. Vide order dated 31st January, 2018, the State Commission
allowed withdrawal of O.P. No.19 of 2016 filed by the appellants -
DISCOMS seeking approval of PPA and consequentially dismissed O.P.
No.21 of 2015 filed by HNPCL seeking determination of tariff.
24. Aggrieved by the same, an appeal being Appeal No.41 of
2018, came to be filed by HNPCL before the APTEL. The said appeal
came to be admitted by the APTEL vide order dated 26th February,
2018. The APTEL vide order dated 16th March, 2018, passed in I.A.
No.211 of 2018 in the said appeal, as an ad hoc arrangement, directed
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.
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the parties to maintain status quo as prevalent prior to 31st January, 2018.
This was without prejudice to the rights and contentions of the parties in
the main appeal, i.e., Appeal No.41 of 2018.
25. It is also to be noted that the order dated 16th March, 2018,
passed by the APTEL in I.A. No.211 of 2018 in Appeal No.41 of 2018,
came to be challenged by the appellants - DISCOMS before the High
Court of Andhra Pradesh by filing Writ Petition being Writ Petition
No.10814 of 2018. Another writ petition being Writ Petition No.13689 of
2018 came to be filed by the appellants - DISCOMS challenging the
order of the APTEL dated 26th February, 2018, admitting the appeal
filed by HNPCL. The said writ petitions came to be dismissed by the
High Court of Andhra Pradesh vide order dated 2nd May, 2018.
26. In the meantime, on 16th April, 2018, HNPCL had filed an
Execution Petition being Execution Petition No.3 of 2018 before the
APTEL seeking execution of the order dated 16th March, 2018, passed
by the APTEL in I.A. No.211 of 2018 in Appeal No.41 of 2018. Certain
directions were passed by the APTEL in the said Execution Petition
vide order dated 31st May, 2018.
27. The appellants - DISCOMS had also challenged the order
dated 16th March, 2018, passed by the APTEL, by way of Civil Appeal
No.5772 of 2018 before this Court. This Court vide order dated 4th June,
2018, refused to interfere with the said order, since it was an interim
order. However, this Court directed the appeal to be decided expeditiously
without taking into consideration the observations, in the order impugned
before it, as conclusive.
28. Vide impugned judgment and order dated 7th January, 2020,
the APTEL allowed the appeal filed by HNPCL and directed the State
Commission to dispose of O.P. No.21 of 2015 and O.P. No.19 of 2016.
Being aggrieved thereby, the appellants - DISCOMS have approached
this Court by way of the present appeal.
29. On 14th July, 2020, this Court passed the following order in the
present appeal:
The appeal is admitted.
Until further orders, the impugned order passed by the
Appellate Tribunal for Electricity New Delhi in Appeal No. 41/
2019 shall remain stayed.
List for hearing after four weeks."
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30. An application being I.A. No.67061 of 2020 for modification
of the said order dated 14th July, 2020, came to be filed by HNPCL. This
Court vide order dated 21st August, 2020, modified the order as under:
"Heard.
By order dated 14.07.2020, we directed the stay of
impugned order passed by the Appellate Tribunal for Electricity,
New Delhi, in Appeal No.41/2019.
We clarify that there shall be no stay of the order dated
16.03.2018 passed by the Appellate Tribunal for Electricity, New
Delhi, providing for interim measure. Order accordingly.
The instant interlocutory application stands disposed of
accordingly"
31. It appears from the record that during the intervening period,
certain Interlocutory Applications have been filed from both the sides,
wherein, the appellants - DISCOMS are seeking vacation of the interim
order dated 21st August, 2020, whereas HNPCL is seeking implementation
of the order dated 21st August, 2020. The record would show that the
matter has been adjourned from time to time and was finally heard by
this Court on 20th January, 2022.
32. We have heard Shri C.S. Vaidyanathan, learned Senior Counsel
appearing on behalf of the appellants - DISCOMS and Dr. Abhishek
Manu Singhvi and Shri M.G. Ramachandran, learned Senior Counsel
appearing on behalf of HNPCL.
33. Shri C.S. Vaidyanathan, learned Senior Counsel appearing on
behalf of the appellants - DISCOMS, submitted that the APTEL has
grossly erred in holding that the appellants - DISCOMS were not entitled
to apply for withdrawal of O.P. No.19 of 2016, filed for grant of approval
of the PPA. It is submitted that unless there was prohibition in law, the
appellants were very much within their right to apply for withdrawal of
the O.P. filed by them. In this regard, Shri Vaidyanathan relied on the
following authorities:
(i)
Boal Quay Wharfingers Ltd. v. King's Lynn Conservancy
Board1 and
(ii)
Hulas Rai Baij Nath v. Firm K.B. Bass and Co.2
1 (1971) 1 WLR 1558 [Court of Appeal, England)
2 (1967) 3 SCR 886
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
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34. Shri Vaidyanathan further submitted that the PPA was not a
valid document until it was approved by the State Commission under
Section 86(1)(b) of The Electricity Act, 2003 (hereinafter referred to as
"the Act of 2003"). He further submitted that under Section 21 of The
Andhra Pradesh Electricity Reform Act, 1998 (hereinafter referred to
as "the Reform Act"), any agreement relating to generating, transmitting,
distribution or supply of energy without the previous consent in writing
of the Commission was void ab initio. He submitted that by the impugned
judgment, the APTEL has, in effect, granted HNPCL a decree of specific
performance of a contract, which is void ab initio. He further submitted
that MoA dated 17th May, 2013 and the Continuation Agreement dated
28th April, 2016 were themselves contrary to the National Tariff Policy
issued under Section 3 of the Act of 2003 and Regulation 5.2(b) of the
Andhra Pradesh Electricity Regulatory Commission (Terms and
conditions for determination of tariff for supply of electricity by a
generating company to a distribution licensee and purchase of electricity
by distribution licensees) Regulation, 2008 (Regulation No.1 of 2008)
(hereinafter referred to as 'the Tariff Regulations') issued by the State
Commission. As such, the direction by the APTEL, to continue to get
the electricity supply from HNPCL, being contrary to the statutory
provision, would not be tenable in law.
35. Shri Vaidyanathan submitted that the present project does not
fall under any of the categories mentioned in Regulation 5.2 of the Tariff
Regulations, which aspect has not been taken into consideration by the
APTEL.
36. Shri Vaidyanathan further submitted that the finding of the
APTEL, that HNPCL had made huge investments on the basis of the
assurance given by the appellants - DISCOMS that they will purchase
100% power from it, is itself erroneous. He submitted that the initial
project of HNPCL was lying in cold storage from 1996 to 2007. He
submitted that in the year 2007, HNPCL had attempted to revive the
project as a Merchant-power plant. He submitted that the project of
HNPCL had also attained financial closure in the year 2010. He further
submitted that before the acceptance of the proposal of HNPCL by the
State Government, HNPCL had already completed upto 93% of the
project. It is therefore, submitted that the finding that huge investments
made by HNPCL were on the basis of the representation by the State
Government is totally erroneous. In any case, he submits, that the
appellants - DISCOMS are independent authorities and not bound by
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the decision of the State. He submitted that under the scheme of the Act
of 2003, the appellants - DISCOMS cannot purchase the power without
the prior approval of the State Commission. He submits that the State
has no role to play in the said matter. It is submitted that, in any case, the
appellants - DISCOMS could not be bound by the representation made
by the State Government.
37. Shri Vaidyanathan further submits that since the re-initiation
of the project in the year 2007 by HNPCL is as a Merchant-power
plant, it can very well sell the power to the third parties in the market.
He submitted that however, the appellants - DISCOMS cannot be
compelled to purchase the power from HNPCL, which will be at a very
high price. He submitted that the capital cost of the project, which was
initially estimated at Rs.4628.11 crores has now gone up to Rs.8087
crores, which will have a direct effect on the purchase price of the
electricity by the appellants - DISCOMS. He therefore submits that if
the appellants - DISCOMS are directed to purchase the electricity at
such a high price, the loss would be ultimately to the consumers and as
such, the direction given by the APTEL is also against the public interest.
38. Per contra, Dr. Abhishek Manu Singhvi and Shri M.G.
Ramachandran, learned Senior Counsel appearing on behalf of HNPCL
submitted that the order passed by the APTEL is such, which does not
at all harm the appellants - DISCOMS. Dr. Singhvi submitted that by
the impugned order, the APTEL has only directed the State Commission
to dispose of O.P. No.21 of 2015 filed by HNPCL for determination of
capital cost and O.P. No.19 of 2016 filed by the appellants - DISCOMS
for approval of Amended and Restated PPA on merits.
39. Dr. Singhvi submits that the APTEL has given sound and
elaborate reasons and as such, no interference is warranted in the present
appeal.
40. Shri M.G. Ramachandran, learned Senior Counsel, submitted
that when withdrawal of an application is sought, which has the effect
of frustrating the contract and defeating the defendant's right, the
appellants cannot be said to have the right to withdraw the proceedings.
He relied on the following authorities in support of this proposition.
(i)
Madhu Jajoo v. State of Rajasthan3
(ii)
Kiran Girhotra & Ors. v. Raj Kumar & Ors.4
3 AIR 1999 Raj 1
4 (2009) 164 DLT 483
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
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(iii)
M. Radhakrisna Murthy v. Government of A.P. & Ors.5
(iv)
Smt. Ajita Debi v. Musst. Hossenara Begum6
(v)
Mathuralal v. Chiranji Lal7
(vi)
The Registrar, Manonmaniam Sundaranar University
v. Suhura Beevi8
41. Shri Ramachandran has further submitted that a right of
withdrawal is not an absolute right and that once the judgment is reserved
there cannot be any further application seeking withdrawal. In support
of this proposition, he relied on the following authorities:
(i)
Arjun Singh v. Mohindra Kumar9
(ii)
Bharati Behera v. Jhili Prava Behera10
(iii)
Rabia Bi Qasim v. Countrywide Consumer Financial
Services Limited11
(iv)
Pujya Sindhi Panchayat v. Prof. C.L. Mishra12
(v)
Yash Mehra v. Arundhati Mehra13
(vi)
Dharani Sugars and Chemicals Limited v. TMN
Engineering Industry14
42. Dr. Singhvi, learned Senior Counsel, further submitted that, as
a matter of fact, HNPCL desired to start the project as a Merchantpower plant. It is however, on the insistence of the State of Andhra
Pradesh that HNPCL was compelled to supply 100% of power
generated to the State. He further submitted that it is evident from the
record that HNPCL had participated in the competitive bidding process
conducted by the APCPDCL. It was the decision of the Bid Evaluation
5 (2001) 3 ALD 330 (DB)
6 AIR 1977 Cal 59
7 AIR 1962 Raj 109
8 AIR 1995 Mad 42
9 AIR 1964 SC 993
10 W.P. No.26254 of 2013 decided by Orissa High Court on 18.04.2014
11 ILR 2004 KAR 2215
12 AIR 2002 Rajasthan 274 (DB)
13 (2006) 132 DLT 166
14 CRP PD No.3309 to 3312 of 2011 and MP No.1 of 2011 decided by the Madras High
Court on 30.08.2017
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Committee, to not consider the bid submitted by HNPCL on the premise
that the entire generation capacity of HNPCL's project was already
encumbered to the State of Andhra Pradesh under the Amended and
Restated PPA of 1998. He further submitted that not only this but the
entire communication placed on record would show that it was the State
Government, which had expressed its interest to purchase 100% power
from HNPCL's project as per the Amended and Restated PPA dated
15th April, 1998.
43. He further submitted that on the reorganisation of the erstwhile
State of Andhra Pradesh and its bifurcation into two States, i.e., the
State of Andhra Pradesh and the State of Telangana; though the State
of Telangana had demanded 54% of the power from HNPCL's project,
the Government of Andhra Pradesh insisted HNPCL to supply 100% of
the power to the State of Andhra Pradesh. He therefore submits that
the APTEL has rightly, on appreciation of the material placed on record,
held that it was on the representation of the State Government that the
HNPCL had made huge investments for the project. He submitted that
the contention of the appellants - DISCOMS, that if the power generated
by the HNPCL is purchased by them, it will be at a very heavy cost, is
totally erroneous. He submitted that, as a matter of fact, when as per
the interim orders passed by the APTEL and this Court, the appellants -
DISCOMS could have purchased the power from HNPCL at the rate
of Rs.3.82 per unit, the appellants - DISCOMS are purchasing the power
at a much higher rate from the generators, which were ranked much
below HNPCL in the merit order. He further submits that the conduct of
the appellants - DISCOMS is totally mala fide. Whenunder the interim
orders of this Court as well as of the APTEL, they were bound to purchase
the power at much lesser price than compared to the rate at which they
are purchasing, they continued to purchase power at much higher price.
He therefore submits that such an act, apart from being violative of the
order of this Court, is contrary to the public interest.
44. Dr. Singhvi further submits that on account of mala fide attitude
of the appellants - DISCOMS, it is not only HNPCL, but also the public
at large, who are the sufferers. He submits that huge investment of
thousands of crores of rupees is lying idle. He further submits that apart
from generating employment for more than 1000 people, the generation
project, which is fully operational, would also provide electricity in the
State of Andhra Pradesh. He submitted that the contention of the
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appellants - DISCOMS that they had decided to withdraw the application
on account of huge capital cost and the power being available in excess
is also factually incorrect. He submits that recently the appellants have
entered into an MoU with SEMBCORP Energy India in December,
2021 for generation of 625 MW of electricity. He submits that insofar as
the price at which the electricity would be purchased by the appellants -
DISCOMS from the generation unit of HNPCL would be determined
by the State Commission, which will have to take into consideration
various aspects while approving the capital cost of the project as well as
while doing the exercise of determination of tariff. The learned Senior
Counsel therefore submits that no interference is warranted in the present
appeal.
45. The facts in the present case are not much in dispute. It is not
in dispute that on 17th July, 1992, an MoU came to be entered between
APSEB and HNPCL, vide which APSEB had transferred all the licences,
approvals, clearance and permits, fuel linkage, water required for the
project to HNPCL. It is also not in dispute that on 9th December, 1994,
an initial PPA came to be entered between HNPCL and APSEB. On
25th July, 1996, the CERC granted a Techno Economic Clearance for
the power project for an estimated cost of Rs.4628.11 crores (Rs.4.45
crores per MW). It is also not in dispute that APSEB and HNPCL
mutually agreed to amend 1994 PPA and accordingly, an Amended and
Restated PPA came to be executed on 15th April, 1998. It is also not in
dispute that from 1996 till 2007, the project remained in cold storage. In
the year 2007, the promoters of HNPCL approached the then Hon'ble
Chief Minister of the erstwhile State of Andhra Pradesh. It appears that
certain discussions took place between the then Hon'ble Chief Minister
of erstwhile State of Andhra Pradesh and the promoters of HNPCL.
On 5th January, 2007, Mr. G.P. Hinduja addressed a communication to
the then Hon'ble Chief Minister of the erstwhile State of Andhra Pradesh.
It will be relevant to refer to the following excerpt from the said
communication, which reads thus:
 "As per our discussion I am summarizing herein below our
proposal for your ready reference:
1.
Vizag Power project will be mainly structured as a Merchant
plant and implemented in a period manner with an initial
capacity of 1040 MW and increasing upto 400 MW in a
phased manner.
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2.
GoAP will sign a MoU with the Project Sponsors to provide:
-
Title deeds for 1122.38 acres of land against balance
payment of Rs.16.48 cr.
-
Transfer of remaining land of 1921.34 acres against
payment of an amount of Rs. 67.63 cr.
-
Infrastructure support including for construction,
power and water.
-
Recommend to GoI mega status for the project.
-
Revive the Coal supply and Transportation
Agreements.
-
Facilitate environment clearance from MOEF.
-
Sanction of all other applicable State Approvals.
3.
GoAP will have the first right of refusal, in the MoU, to
purchase 25% of the power at regulated tariff."
46. It could thus be seen that when HNPCL proposed to revive
the project in the year 2007, it was mainly structured as a Merchant
plant, wherein the Government of Andhra Pradesh was to have the first
right of refusal, to purchase 25% of the power at regulated tariff.
47.