# THE TATA POWER COMPANY LIMITED TRANSMISSION v. MAHARASHTRA ELECTRICITY REGULATORY COMMISSION AND ORS

- **Citation:** [2022] 19 S.C.R. 620
- **Court:** Supreme Court of India
- **Decided:** 2022-11-23
- **Case number:** Civil Appeal No. 1933 of 2022
- **Bench:** Dr. Dhananjaya Y Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-tata-power-company-limited-transmission-v-maharashtra-electricity-36001
- **Pages:** 91

## Headnote

A. S. BOPANNA AND J. B. PARDIWALA, JJ.]
Electricity Act, 2003 - ss.61-63, 86, 125, 181 - Maharashtra
Electricity Regulatory Commission (MERC) issued an order granting
Adani Electricity Mumbai Infra Limited (AEMIL) the transmission
licence to develop the Aarey-Kudus transmission project based on
High Voltage Direct Current (HVDC) technology where tariff was
to be determined through the Regulated Tariff Mechanism (RTM)
approach u/s.62 - Order challenged by appellant before Appellate
Tribunal for Electricity (APTEL) - Appeal dismissed by APTEL -
Held: Provisions of the Electricity Act 2003 do not prescribe one
dominant method to determine tariff - ss.62 and 63 stipulate the
modalities of tariff determination - The non-obstante clause in s.63
cannot be interpreted to mean that s.63 would take precedence over
s.62 at the stage of choosing the modality to determine tariff - The
criteria or guidelines for the determination of the modality of tariff
determination ought to be notified by the Appropriate State
Commission either through regulations u/s. 181 of the Act or
guidelines u/s. 61 of the Act - In the present case, MERC has neither
framed regulations nor notified guidelines prescribing the criteria
or guidelines for choosing the modalities to determine tariff - Thus,
MERC shall determine the tariff by exercising its general regulatory
powers u/s. 86(1)(a) of the Act - MERC while exercising its general
regulatory powers u/s.86(1)(a) shall be guided by the National Tariff
Policy 2016, which shall be a material consideration - Further,
MERC and APTEL have arrived at concurrent findings that the
1000MW HVDC Aarey-Kudus project is an 'existing project' for
the purpose of the applicability of the GoM's GR 2019 - Supreme
Court deciding a statutory appeal u/s.125 of the Act cannot interfere
with the concurrent findings on a question of fact - Nonetheless,
even on an independent assessment of the facts, the HVDC project
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is an existing project - The Electricity Act, 2003 or the policy
framework did not make it binding upon MERC to allot the HVDC
project only through the Tariff Based Competitive Bidding (TBCB)
route - Therefore, the Regulatory Commission's decision to grant
the HVDC project u/s. 62 was within a reasonable exercise of its
powers.
Electricity Act, 2003 - ss.61, 181 - Framing of necessary
regulations by Regulatory Commissions to put into effect the
principles prescribed under the Act - All State Regulatory
Commissions directed to frame Regulations u/s.181 of the Act on
the terms and conditions for determination of tariff - Appropriate
Commission shall be guided by the principles prescribed in s.61,
which also includes the National Electricity Policy (NEP) and
National Tariff Policy (NTP) - The Commissions while being guided
by the principles contained in sec.61 shall effectuate a balance
that would create a sustainable model of electricity regulation in
the States - The Regulatory Commission shall curate to the specific
needs of the State while framing these regulations - Further, the
regulations framed must be in consonance with the objective of the
Electricity Act 2003, which is to enhance the investment of private
stakeholders in the electricity regulatory sector so as to create a
sustainable and effective system of tariff determination that is cost
efficient so that such benefits percolate to the end consumers.
Dismissing the appeal, the Court
HELD: 1. The Appropriate Commission is not mandated
to adopt the tariff determined through the bidding process
irrespective of the fulfilment of the statutory requirements. The
Commission can reject the tariff determined through the bid if
the tariff process is not (i) transparent; and (ii) in accordance
with the guidelines issued by the Central Government. Thus, if
the Commission does not adopt the tariff determined through
bidding, and if the decision is challenged, the bidding process
can be reviewed substantively (on the ground of transparency)
and procedural

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 [2022] 19 S.C.R. 620
620
THE TATA POWER COMPANY LIMITED TRANSMISSION
v.
MAHARASHTRA ELECTRICITY REGULATORY
COMMISSION AND ORS.
(Civil Appeal No. 1933 of 2022)
NOVEMBER 23, 2022
[DR. DHANANJAYA Y CHANDRACHUD, CJI,
A. S. BOPANNA AND J. B. PARDIWALA, JJ.]
Electricity Act, 2003 - ss.61-63, 86, 125, 181 - Maharashtra
Electricity Regulatory Commission (MERC) issued an order granting
Adani Electricity Mumbai Infra Limited (AEMIL) the transmission
licence to develop the Aarey-Kudus transmission project based on
High Voltage Direct Current (HVDC) technology where tariff was
to be determined through the Regulated Tariff Mechanism (RTM)
approach u/s.62 - Order challenged by appellant before Appellate
Tribunal for Electricity (APTEL) - Appeal dismissed by APTEL -
Held: Provisions of the Electricity Act 2003 do not prescribe one
dominant method to determine tariff - ss.62 and 63 stipulate the
modalities of tariff determination - The non-obstante clause in s.63
cannot be interpreted to mean that s.63 would take precedence over
s.62 at the stage of choosing the modality to determine tariff - The
criteria or guidelines for the determination of the modality of tariff
determination ought to be notified by the Appropriate State
Commission either through regulations u/s. 181 of the Act or
guidelines u/s. 61 of the Act - In the present case, MERC has neither
framed regulations nor notified guidelines prescribing the criteria
or guidelines for choosing the modalities to determine tariff - Thus,
MERC shall determine the tariff by exercising its general regulatory
powers u/s. 86(1)(a) of the Act - MERC while exercising its general
regulatory powers u/s.86(1)(a) shall be guided by the National Tariff
Policy 2016, which shall be a material consideration - Further,
MERC and APTEL have arrived at concurrent findings that the
1000MW HVDC Aarey-Kudus project is an 'existing project' for
the purpose of the applicability of the GoM's GR 2019 - Supreme
Court deciding a statutory appeal u/s.125 of the Act cannot interfere
with the concurrent findings on a question of fact - Nonetheless,
even on an independent assessment of the facts, the HVDC project
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is an existing project - The Electricity Act, 2003 or the policy
framework did not make it binding upon MERC to allot the HVDC
project only through the Tariff Based Competitive Bidding (TBCB)
route - Therefore, the Regulatory Commission's decision to grant
the HVDC project u/s. 62 was within a reasonable exercise of its
powers.
Electricity Act, 2003 - ss.61, 181 - Framing of necessary
regulations by Regulatory Commissions to put into effect the
principles prescribed under the Act - All State Regulatory
Commissions directed to frame Regulations u/s.181 of the Act on
the terms and conditions for determination of tariff - Appropriate
Commission shall be guided by the principles prescribed in s.61,
which also includes the National Electricity Policy (NEP) and
National Tariff Policy (NTP) - The Commissions while being guided
by the principles contained in sec.61 shall effectuate a balance
that would create a sustainable model of electricity regulation in
the States - The Regulatory Commission shall curate to the specific
needs of the State while framing these regulations - Further, the
regulations framed must be in consonance with the objective of the
Electricity Act 2003, which is to enhance the investment of private
stakeholders in the electricity regulatory sector so as to create a
sustainable and effective system of tariff determination that is cost
efficient so that such benefits percolate to the end consumers.
Dismissing the appeal, the Court
HELD: 1. The Appropriate Commission is not mandated
to adopt the tariff determined through the bidding process
irrespective of the fulfilment of the statutory requirements. The
Commission can reject the tariff determined through the bid if
the tariff process is not (i) transparent; and (ii) in accordance
with the guidelines issued by the Central Government. Thus, if
the Commission does not adopt the tariff determined through
bidding, and if the decision is challenged, the bidding process
can be reviewed substantively (on the ground of transparency)
and procedurally (on the ground of compliance with Central
Government guidelines) to determine if the Commission could
have exercised its discretion to determine the tariff under Section
62 while rejecting the tariff determined under Section 63.
Therefore, Section 63 can only be invoked after the tariff has
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been determined through bidding. The terms and conditions
notified by the Appropriate Commission under Section 61 will
have to be referred for the purpose of choosing the modality of
tariff determination that the Commission should undertake. In
view of the above discussion, the argument of the appellant that
a reading of Section 61, 62 and 63 indicates that the TBCB route
is the dominant route of tariff determination does not hold merit.
[Para 77][677-F-H; 678-A-B]
2.1 The value of TBCB Guidelines prescribed under Section
63
 Section 63 of the Act does not prescribe bidding as the
dominant route of tariff determination. The Guidelines framed by
the Central Government under Section 63 prescribe the
mechanism and procedure for bidding. The Guidelines framed
under Section 63 of the Act cannot be used to determine whether
the RTM route or the TBCB route ought to be followed. [Para
78][678-B-C]
2.2 On 13 April 2006, the MoP framed the TBCB Guidelines
under Section 63 of the Act. Clause 2.2 of the Guidelines states
that it shall apply for the procurement of transmission services
through competitive bidding according to the mechanism
described in the notification. [Para 79][678-D]
2.3 A reading of the clauses indicates that the TBCB
Guidelines shall apply for (i) procurement of transmission
services, which would include HVDC links; and (ii) selecting the
transmission provider for a new transmission line. The TBCB
Guidelines also advert to the appointment of a Bid Process
Coordinator who would be responsible for coordinating the bid
process for procurement of required transmission services. The
TBCB Guidelines prescribe the procedure for conducting bids
for procurement of, among other services, transmission services.
Clause 3.3 states that for the procurement of transmission
services required for intra-state transmission, the State
Government may notify the organisation or the State Public Sector
Undertaking to be the Bid Process Coordinator. A reading of
clauses 2.2 and 2.4 does not indicate that that the tariff for all
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new transmission projects shall be determined by competitive
bidding. It notifies the procedural mechanism for competitive
bidding. As observed earlier, the reference in Section 63 to the
Guidelines framed by the Central Government is made to the
limited extent of determining whether the procedure of bidding
was in accordance to the Guidelines framed thereunder, which is
the TBCB Guidelines. [Para 80][678-G-H; 679-A-C]
3.1 General Regulatory Power of the Appropriate
Commission
In the case of intra-state transmission of electricity, the
State Commission would be bound by the guidelines issued under
Section 63. In addition to the guidelines under Section 63 of the
Act, the State Commission shall also be bound by the regulations
framed by it under Section 181(zd) read with Section 61 while it
discharges its function of determining the tariff under Section 86
of the Act. However, if the guidelines issued under Section 63 or
the regulations framed under Section 181(zd) of the Act have not
been notified or if the guidelines do not deal with a given situation,
then the Commission shall exercise its general regulatory power
under Section 86(1)(a) of the Act to regulate tariff. [Para 85][681E-F]
3.2 The TBCB Guidelines issued by the Central
Government under Section 63 of the Act prescribe the mechanism
of the bidding process and do not lay down the criteria or
guidelines for choosing between the alternative routes under
Section 62 and 63 of the Act. MERC has neither notified any
Regulations under Section 181 nor has it notified the terms and
conditions under Section 61 of the Act. That being the case, the
Commission could choose the modality of tariff determination by
taking recourse to the general regulatory power under Section
86. [Para 87][683-G-H; 684-A]
4.1 The nature of NTP- binding or a material consideration
Even in the absence of guidelines under Section 61 or
Regulations under Section 181 (zd), the Commission does not
possess unbridled power or discretion while choosing the
modality to determine tariff. Sub-Sections (3) and (4) of Section
86 provide that the State Commission while discharging its
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functions must ensure transparency and 'shall be guided' by the
NTP and NEP. [Para 88][684-B-C]
4.2 Both NTP 2006 and NTP 2016 as a general rule prescribe
competitive bidding for determination of tariff for all 'new
projects'. There are two prominent differences between NTP 2006
and NTP 2016. Firstly, the projects owned or controlled by the
Government were exempted from bidding under NTP 2006.
However, according to NTP 2016, the tariff for government owned
projects is also to be determined by bidding, unless otherwise
specified. Secondly, NTP 2016 introduced the threshold limit rule.
State Commissions are required to notify the threshold limit. If
the cost of the project exceeds the threshold limit, then the
Commission is mandated to follow the bidding process for the
determination of tariff. NTP 2016, by providing that state owned
projects are not exempted from the TBCB process, has
implemented the object of the Act, which is to create a fine balance
between promoting competition and protecting the interests of
the consumers. NTP 2006 was formulated with the objective of
enhancing the participation of private players in the generation,
transmission and distribution of electricity. The Central
Government adopted a policy decision to introduce the bidding
process for the determination of the tariff for all new transmission
projects in 2006 but excluded its application to State projects.
However, the distinction between State and private parties for
the purpose of tariff determination through bidding was removed
in NTP 2016. This transition between NTP 2006 and NTP 2016
depicts the intention of the Government to rationalise the tariff
policy and to transfer the benefits of the rationalised tariff to the
consumers. According to NTP 2016, the tariff for all new electricity
transmission projects that cost above the threshold amount
notified by the State Commission shall be determined through
bidding. However, the MERC had not notified the threshold limit
as on the date when it passed the order granting transmission
licence to AEML-T. MERC notified the Maharashtra Electricity
Regulatory Commission (Multi Year Tariff) Regulations 2019
under Section 181 of the Act. The MERC MYT Regulations does
not provide the guidelines or the criteria for the choosing the
modality of tariff determination. The guidelines for choosing the
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modalities are sought to be introduced by the Maharashtra
Electricity Regulatory Commission (Multi Year Tariff) (First
Amendment) Regulations 2022. MERC circulated the draft of
the MERC MYT Amendment Regulations on 19 August 2022
for comments, suggestions and objections. [Paras 90-92][684-GH; 685-A-G]
4.3 When the application seeking licence for the HVDC
Kudus- Aarey transmission project was filed, and when it was
granted by MERC, the threshold limit as required to be provided
by NTP 2016 was not notified by MERC. Thus, the question is
whether in the absence of any notification of the threshold by
MERC, would MERC still be mandated to determine tariff for
the transmission project through the TBCB route in view of NTP
2016. Merely because the threshold limit is not notified, it would
not mean that MERC only had to determine tariff through the
RTM route. It is open to MERC to determine the tariff through
either the Section 63 or the Section 62 route. When MERC is
exercising its general regulatory power under Section 86 to
determine tariff, the NTP is a material consideration. Thus, the
absence of a threshold limit would not affect the power that MERC
holds to determine tariff (and its modalities). Since MERC has
the power to regulate and determine tariff for the intra-state
transmission of electricity, the guidelines and regulations issued
by MERC, if any, must be analysed to determine if MERC was
mandated to choose one of the two routes for the determination
of tariff or whether it could exercise its discretion to choose the
modality. [Paras 93, 100][687-D; 691-H; 692-A-C]
Energy Watchdog v. Central Electricity Regulatory
Commission (2017) 14 SCC 80 : [2017] 3 SCR 153;
PTC India Ltd. v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609;
Reliance Infrastructure Limited v. State of Maharashtra
(2019) 3 SCC 352 : [2019] 1 SCR 886 - referred to.
5.1 The New - Old Conundrum
The 1000MW Aarey-Kudus HVDC project by AEMIL is
an 'existing' or an 'old' project with reference to the
GoM
GR
for
the
following
reasons:
Firstly,
the
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GR does not provide or explain the meaning of the phrase 'new'
projects. Hence, MERC has the discretion to formulate its
understanding of the phrase 'new' projects so long as it is
reasonable and does not rely on factors extraneous to the decision
making process. In view of the decisions of this Court discussed
above and the provisions of the Act, MERC has the power to
regulate tariff determination. MERC has not defined the phrase
'new' projects through the regulations. In this situation, MERC
has the discretion to interpret the phrase 'new' projects which it
did in the course of its judgment granting AEMIL the transmission
license. MERC held that generally the cancellation of approval
would amount to the closure of the project, unless the peculiar
nature of the facts leads to an alternative conclusion (as in this
case); Secondly, on applying the facts to the interpretation of the
phrase 'new' project, MERC observed that the HVDC KudusAarey project is not a new project. APTEL, on appeal, upheld
the observations of MERC that it is an 'existing project'. The
appeal against the judgment of APTEL before this Court under
Section 125 of the Act can only be on the grounds mentioned in
Section 100 of CPC. Section 100 of the Code of Civil Procedure
1908 stipulates that a second appeal shall lie only if the court (in
this case the Supreme Court) is satisfied that the case involves a
substantial question of law. It is settled law that concurrent
findings of fact recorded by the fora below (MERC and APTEL)
cannot be interfered with by this Court. [Para 106-106.2][695-FH; 696-A-C, F-G]
DSR (Steel) Pvt. Ltd. v. State of Rajasthan (2012) 6 SCC
782 : [2012] 5 SCR 583 - referred to.
5.2 On 12 November 2007, MSETCL issued a
communication to CEA setting out the steps proposed to meet
the growing demand of power for Mumbai's load centres. The
communication stated that TPC had proposed the setting up of
overhead lines and underground cables while REL had proposed
connections to Aarey by using the HVDC (VSC based) technology.
MSETCL notified a five-year plan for 2009-10 to 2013-14
envisaging the use of the HVDC technology. The plan specifically
provided for the ongoing schemes of R-infra together with new
schemes including the HVDC based link between Nagothane and
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Aarey. Similar details were provided in relation to TPC's ongoing
and new schemes. Both TPC and R-infra were in the fray from
the inception. While TPC was primarily in the overhead
transmission line segment, R-infra had proposed the setting up
of transmission lines on the HVDC technology. The criticality of
the HVDC technology assumes importance after the grid failure
which Mumbai experienced in November 2010. The committee
chaired by a Professor of IIT recommended the HVDC
technology as a long-term solution for ensuring reliability of power
supply for Mumbai. MERC granted a transmission licence to Rinfra on 11 August 2011. R-infra submitted a DPR to MERC for
the appointment of a consultant for the transmission line from
Nagothane to Aarey on 1 February 2013. On 7 March 2013,
MSETCL confirmed that the Nagothane -Aarey project was a part
of the STU five-year plan for FY 2013-14 to 2017-18. MERC
approved the hiring of the consultant on 5 April 2013. The
application for the grant of grid connectivity for the proposed
HVDC project was allowed on 21 August 2013. When matters
were thus progressing, in November 2013 MSETCL had in a
meeting with R-Infra proposed that R-Infra can avail of
connectivity from the Kudus sub-station which was closer to the
Aarey sub-station as compared to the sub-station at Nagothane.
R-infra expressed its concern over the proposed revision on the
point of connectivity. On 10 April 2014, MERC granted an inprinciple clearance for the HVDC Scheme. In January 2015,
MSETCL proposed a revised scheme for where the 400KV
Kudus-Aarey HVAC scheme was proposed by MSETCL. On 2
May 2016, the in-principle clearance granted to the NagothaneAarey HVDC Scheme was cancelled by MERC. [Paras 106.2.1,
106.2.2][697-G-H; 698-A-H; 699-A]
5.3 However, since the HVAC scheme of MSETCL did not
take off, AEML-T submitted an application for HVDC Scheme
between Aarey to Kudus on 23 November 2018 where an
amendment to the letter issued by MERC granting grid
connectivity to the 2 x 500 HVDC (VSC based) scheme from
Nagothane to Aarey was sought. The narration of facts indicates
that AEML-T(or its predecessor in interest) has been involved
in the execution of the HVDC Scheme since the inception of the
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scheme. The cancellation of the in-principle approval accorded
to AEML-T by MERC cannot be held to terminate the project in
view of the peculiar background of this case. It is due to the
indecisiveness of MSETCL on the HVDC and HVAC
technologies that AEML-T's clearance was cancelled. The HVDC
Scheme was attributed to R-Infra or, as the case may be, AEMLT since 2009. In the electricity regulatory sector, where the State
Regulatory Commissions and STUs' have been functioning in an
ad-hoc manner running in many loops, the question of whether
the project is an old or a new project must be determined through
a holistic purview of the factual background. In view of the above
factual narration, it is evident that the HVDC Scheme is an old
project and the change in the location of the injection point from
Nagothane to Kudus would not lead to the closure of the old
project. [Paras 106.2.3, 106.2.4][699-B-F]
6. Relevance of GoM GR for MERC's Decision
The fixation of tariff falls within the independent statutory
domain of the Regulatory Commission. The State Government
has the power to issue directions to the State Commission in
matters of 'policy involving public interest' under Section 108 of
the Act. While stating that the State Government may issue
directions in matters of policy involving public interest, Section
108(2) states that if any question arises as to whether such
direction relates to matters of policy involving public interest,
the decision of the State Government on it shall be final. The
provision further states that the State Commission shall be guided
by the directions of the State Government in discharge of its
functions. Section 108 deals with "directions in matters of policy
involving public interest as the State Government may give to it
in writing." In the provision, the term 'it' refers to the State
Commission. The GoM's GR does not mention the State
Commission and has not been issued as a direction to the MERC
as envisaged in Section 108. Therefore, the HVDC Project is,
firstly, an existing project in terms of the GoM GR, and secondly,
the GoM GR has not been issued in terms of Section 108 as a
direction to the State Commission. [Paras 111, 112][701-D-E, GH; 702-A]
7.1 Relevance of GoM GR vis-à-vis MSETCL's decision
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It is clear from a reading of the Development Guidelines
read with the functions of the State Utility in terms of Section
39(2) of the Act that while the State Transmission Utility shall be
the apex authority for planning of intra-state transmission projects,
the Empowered Committee is to identify projects to be undertaken
under the TBCB route. [Para 120][704-G-H]
7.2 It is clear that the MSETCL's decision regarding the
HVDC Project not being referred under the TBCB route was in
line with the Empowered Committee's directions which have been
set up in terms of the GoM GR and which has been granted the
power to select projects to be taken up under the TBCB route.
[Para 127][707-D-E]
8.1 Conclusion
The Electricity Act, 2003 provides the States sufficient
flexibility to regulate the intra-state transmission systems,
wherein the Appropriate State Commissions possess the power
to determine and regulate tariff. The Electricity Act 2003 seeks
to distance the State Governments from the determination and
Regulation of tariff, placing such power completely within the ambit
of the Appropriate Commissions. The provisions of the Electricity
Act 2003 do not prescribe one dominant method to determine
tariff. Section 63 operates after the bidding process has been
conducted. Where the tariff has already been determined through
bidding, the Appropriate Commission has to adopt such tariff that
has been determined. The Appropriate Commission cannot
negate such tariff determined through bidding by using its powers
under Section 62. The tariff determined through the bidding
process may not be adopted by the Appropriate Commission only
if the bidding process was not transparent (undertaking a
substantive review) or the procedure prescribed by the Central
Government guidelines under Section 63 was not followed
(undertaking a procedural review). Sections 62 and 63 stipulate
the modalities of tariff determination. The non-obstante Clause
in Section 63 cannot be interpreted to mean that Section 63 would
take precedence over Section 62 at the stage of choosing the
modality to determine tariff. The criteria or guidelines for the
determination of the modality of tariff determination ought to be
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notified by the Appropriate State Commission either through
Regulations under Section 181 of the Act or guidelines Under
Section 61 of the Act. MERC has neither framed Regulations
nor notified guidelines prescribing the criteria or guidelines for
choosing the modalities to determine tariff. Thus, MERC shall
determine the tariff by exercising its general regulatory powers
under Section 86(1)(a) of the Act. MERC while exercising its
general regulatory powers under Section 86(1)(a) shall be guided
by the NTP 2016, which shall be a material consideration.
Accordingly, while NTP 2016 requires intra-state transmission
projects above the threshold limit to be allotted through the
TBCB route, this constitutes a material consideration to be taken
into account. The threshold value in the case of Maharashtra has
not yet been notified by MERC. The threshold limit not having
been notified by MERC, it was open to MERC to allot the HVDC
project either under the RTM or the TBCB route. MERC and
APTEL have arrived at concurrent findings that the 1000 MW
HVDC Aarey-Kudus project is an 'existing project' for the
purpose of the applicability of the GoM's GR 2019. This Court
deciding a statutory appeal under Section 125 of the Act cannot
interfere with the concurrent findings on a question of fact.
Nonetheless, even on an independent assessment of the facts,
the HVDC project is an existing project. Even if the HVDC
Project were to be considered a 'new project' in terms of the
GoM's GR, the same not having been issued in terms of Section
108 as a direction to the State Commission, MERC's decision
cannot be challenged for failing to comply with the same as MERC
is an independent body with statutory powers to determine and
regulate tariff. MSETCL has acted in terms of the GoM's GR as
it has referred the HVDC project to the Empowered Committee
and the decision to not refer the HVDC project under the TBCB
route was in line with the Empowered Committee's directions.
The Empowered Committee has the power to select projects to
be taken up under the TBCB route under the GoM's GR. [Para
128][707-F-H; 708-A-H; 709-A-D]
8.2 The Electricity Act 2003 or the policy framework,
particularly NTP 2016 read with the GoM GR dated 4 January
2019, did not make it binding upon MERC to allot the HVDC
project only through the TBCB route. The Regulatory
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Commission's decision to grant the HVDC project under Section
62 was within a reasonable exercise of its powers. [Para 129][709E]
8.3 This case has brought the ad-hoc nature of the
functioning of the STU to the notice of this Court. MSETCL has
been changing its stance on the HVDC technology without
following any due procedure. The flip-flops by MSETCL have
led to the loss of time and investment while the demand in the
electricity sector has been increasing exponentially. In matters
dealing with electricity regulation, the regulatory commissions
and the transmission utilities are usually bogged down by factors
such as technological uncertainty, requirement of heavy
investment and issues of right of way. The ad- hoc functioning of
the transmission utilities is also attributable to the lacunae in the
regulations guiding the exercise of their functions. The Electricity
Act 2003 was enacted with the objective of providing the States
with sufficient flexibility to regulate the intra-state electricity
system and simultaneously provided the regulatory commissions
with the power to determine tariffs. Though the Government,
both at the Centre and in the States, have framed statutory
policies and guidelines regulating the electricity sector, the
Regulatory Commissions have not framed the necessary
regulations to put into effect the principles prescribed under the
Act. All State Regulatory Commissions are directed to frame
Regulations under Section 181 of the Act on the terms and
conditions for determination of tariff within three months from
the date of this judgment. While framing these guidelines on
determination of tariff, the Appropriate Commission shall be
guided by the principles prescribed in Section 61, which also
includes the NEP and NTP. Where the Appropriate
Commission(s) has already framed regulations, they shall be
amended to include provisions on the criteria for choosing the
modalities to determine the tariff, in case they have not been
already included. The Commissions while being guided by the
principles contained in Section 61 shall effectuate a balance that
would create a sustainable model of electricity regulation in the
States. The Regulatory Commission shall curate to the specific
needs of the State while framing these regulations. Further, the
regulations framed must be in consonance with the objective of
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the Electricity Act 2003, which is to enhance the investment of
private stakeholders in the electricity regulatory sector so as to
create a sustainable and effective system of tariff determination
that is cost efficient so that such benefits percolate to the end
consumers. [Paras 130, 131][709-F-H; 710-A-E]
Govindaraju v. Mariamman (2005) 2 SCC 500 : [2005]
1 SCR 1100; Hari Singh v. Kanhaiya Lal (1999) 7 SCC
288 : [1999] 2 Suppl. SCR 216; Ramaswamy
Kalingaryar v. Mathayan Padayachi (1992) 1 Supp SCC
712; Kehar Singh v. Yash Pal (2015) 7 SCC 769;
Bismillah Begum v. Rahmatullah Khan (1998) 2 SCC
226 : [1998] 1 SCR 284 - referred to.
Case Law Reference
[2017] 3 SCR 153
referred to Para 39
[2010] 3 SCR 609
referred to Para 86
[2019] 1 SCR 886
referred to Para 94
[2012] 5 SCR 583
referred to Para 106.2
[2005] 1 SCR 1100
referred to Para 106.2
[1999] 2 Suppl. SCR 216
referred to Para 106.2
[1998] 1 SCR 284
referred to Para 106.2
CIVIL APPELLATE JURISDICTION : Civil Appeal No.1933
of 2022.
From the Judgment and Order dated 18.02.2022 of the Appellate
Tribunal for Electricity in Appeal No.280 of 2021.
Shyam Divan, Sr. Adv., Shri Venkatesh, Ms. Kanika Chugh, Nitin
Saluja, Suhael Buttan, Siddharth Joshi, Vineet Kumar, Anant Singh, Advs.
for the Appellant.
Dr. A.M. Singhvi, Vikas Singh, Sr Advs., Ms. Deepa Chawan,
Mahesh Agarwal, Hemant Singh, Arshit Anand, Ms. Geetika Sharma,
Harshit Singh, Mridul Chakravarty, Biju Mattam, Lakshyajit Singh
Bagdwal, Ms. Lavanya Panwar, Ms. Reshma Nathani, E. C. Agrawala,
Ms. Deepieka Kalia, Kapish Seth, Ms. Priyanka Khosla, Buddy
Ranganathan, Ms. Prititi Rungta, Sumit Pargal, Ms. Amita Singh Kalkal,
Sudhanshu S. Choudhari, Rahul Chitnis, Sachin Patil, Aaditya A. Pande,
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Geo Joseph, Ms. Shwetal Shepal, Durgesh Gupta, Advs. for the
Respondents.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, CJI
A glossary of defined terms used in the judgment has been provided
below:
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RInfra
Reliance Infrastructure Limited
RTM
Regulated Tariff Mechanism
STU
State Transmission Utility
TBCB
Tariff Based Competitive Bidding
TBCB Guidelines
Tariff Based Competitive Bidding Guidelines for
Transmission Service issued by the MoP dated
13.04.2006
TPC-T/ appellant
Tata Power Company Limited Transmission
VSC
Voltage Source Converter
This judgment has been divided into the following sections to
facilitate analysis:
A. The Facts.........................................................................5*
B. Proceedings before the MERC and APTEL................. 27*
C. The Submissions ............................................................ 34*
D. Regulatory Framework ................................................. 37*
D. 1 Electricity Act 2003 .............................................. 37*
D.2 Policy framework .................................................. 42*
D. 2.1 Central Policies ............................................. 42*
D. 2.2 State Policies................................................. 47*
E. The Analysis .................................................................. 48*
E. 1 Section 63: The dominant route or the alternative
route............................................................................... 49*
E. 1.1. The value of TBCB Guidelines prescribed
under Section 63....................................................... 54*
E. 2 General Regulatory Power of the Appropriate
Commission ................................................................... 56*
E.2.1 The nature of NTP- binding or a
material consideration............................................... 61*
*Ed Note : Pegination is as per the original judgment.
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E. 3 Value of GoM GR.................................................. 72*
E. 3. 1The New- Old Conundrum ............................ 73*
E. 3. 2 Relevance of GoM GR for MERC's
Decision.................................................................... 80*
E. 3. 3 Relevance of GoM GR vis-à-vis
MSETCL's decision ................................................. 83*
F Conclusion ....................................................................... 89*
1. APTEL, by its judgment dated 18 February 2022, dismissed an
appeal under Section 111 of the Act instituted by the appellant against a
decision of MERC dated 21 March 2021.
2. On 21 March 2021, MERC granted a transmission licence to
AEMIL under Sections 14 and 15 of the Act for setting up a 1000 MW
HVDC (VSC based) link between 400 kV MSETCL Kudus and 220
kV AEML Aarey EHV Station.
3. The appellant challenged MERC's order before APTEL, inter
alia, on the ground that the grant of the licence was not preceded by a
TBCB process. TPC-T contended that the failure to adhere to a TBCB
process pursuant to Section 63 was contrary to public interest and
statutory mandate. APTEL dismissed the appeal. This has given rise to
a statutory appeal under Section 125 of the Act.
A. The Facts
4. On 12 November 2007, MSETCL issued a communication to
CEA stating, inter alia, that it was difficult to lay overhead AC lines to
bring power from the new 400kV sub-station, which was required to
meet Mumbai's growing demand of power, to Mumbai's load centres
due to constraints. Hence, it was proposed that VSC based HVDC
technology may be utilised to connect the new sub-station with major
load centres in Mumbai through DC cables. In that context, the letter
stated:
"M/s. Reliance energy (REL) and M/s. TATA Power Co. Ltd.
(TPC) has carried out necessary survey and accordingly M/s.
REL has proposed to connect Mumbai new location to Ghodbunder
partly by overhead line and partly by underground cables. Further,
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M/s. REL also proposed to connect Mumbai New Location
to Aarey by HVDC (VSC based technology).
M/s. TPC has planned to establish a 220 kV substation at Vikhroli
and have existing Salset, Dharavi and Trombay substations. These
substations will be fed from 400 kV proposed substation at
Ghatkopar.
Thus the major load centres in Mumbai will be fed as below.
Colaba area will be fed by 220KV Dharavi S/S (Tata)
Andheri area will be fed by 220KV Versova & Aarey S/S (REL)
Bandra area will be fed by 220KV Aarey S/S
Maharashtra State Transmission Company Ltd. (MSETCL) has
also proposed to connect 400KV Mumbai New Location with
400KV New Mumbai (Panvel) for system strengthening.
State Transmission Utility (STU) office would appoint a Consultant
who is having sufficient knowledge in VSC based HVDC
technology for finalizing the scheme, subject to M/s REL agreeing
to bear the cost of the same."
(emphasis supplied)
REL envisaged a transmission project by deploying HVDC (VSC)
based technology, where the load/evacuation point for the power to be
received into Mumbai city was at Aarey. Both REL and TPC-T were to
participate in identifiable segments for bringing power to Mumbai's load
centres.
5. On 5 May 2009, MSETCL notified a five-year plan for the
period 2009-10 to 2013-14. The plan included the Nagothane-Aarey
HVDC link. Likewise, details of the on-going and new schemes of TPCT were also provided. In terms of the plan, REL was to execute the
Nagothane - Aarey transmission project.
6. In November 2010, Mumbai experienced a partial grid
disturbance. A Committee chaired by Professor Dr SA Khaparde of IIT
Mumbai was constituted to study the situation. The Committee
recommended adopting the HVDC technology as a long-term solution
for ensuring the reliability of power supply for Mumbai for the proposed
transmission project with a 2 x 350 MW HVDC voltage source converter
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based transmission link for Mumbai. This was identified as a critical
bulk power injection scheme.
7. On 13 May 2011, RInfra submitted an application under the
provisions of Section 14 and 15 of the Act for the grant of a transmission
licence for the entire State of Maharashtra. By an order dated 11 August
2011, MERC observed that R-Infra cannot be granted a transmission
licence for the entire State of Maharashtra as paragraph 5.1 read with
7.1.6 of NTP 2016 mandated TBCB for transmission services. Instead,
MERC granted RInfra a transmission licence to establish and operate
specific transmission lines for a period of twenty-five years. The
transmission lines in respect of which the licence was granted to RInfra were specified in the communication dated 11 August 2011.
8. On 2 November 2012, the report of the HVDC sub-committee
for finalization of the consultant noted the reasons for adopting HVDC
(VSC) based technology to meet the power demand for Mumbai. The
following extract indicates that after exploring various operations it was
found that connectivity at Nagothane was suitable. On the other hand,
Aarey being a major load centre was a "suitable sink point for
connection":
"The First Meeting of the Sub-Committee was held on 28.08.2012,
where in following as discussed and agreed upon
Following requirements were discussed & considered:
i. Classic HVDC has limited capability of Active / Reactive Power
control, whereas VSC HVDC has dynamic control of Active &
Reactive Power Control
ii.Classic HVDC has no Blackstart facility; whereas VSC HVDC
has blackstart facility which can be a major support to revive Grid
failures.
iii. Classic HVDC requires more footprints. VSC HVDC being
compact and modular in design hence it requires only 30% footprint
area to setup a converter station
iv. Short Circuit levels are increasing, hence HVDC link to Mumbai
shall be ideal
To meet the above, it is concluded that, 2x500 MW HVDC Voltage
Source Converter (VSC) based technology for Mumbai is essential.
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For connectivity with the grid, various options were explored and
it is concluded that electrical connectivity at Nagothane is suitable.
Similarly Aarey, being the major load centre, it is concluded that
Aarey is the suitable sink point for connection."
9. On 1 February 2013, RInfra submitted a DPR to MERC for
the appointment of a consultant for its proposed 2 x 500 MW HVDC
(VSC) based transmission line from MSETCL's 400 kV Nagothane
station to the 220 kV Aarey sub-station.
10. On 5 April 2013, MERC addressed a letter to R-Infra, granting
it in-principle clearance for hiring a consultant for the Nagothane-Aarey
HVDC Scheme to study the system and assist in the selection and design
of the technology and bidding process of the DPR. However, it was
noted that the 'in-principle' clearance should not be construed as a final
approval for the purposes of the Annual Recurring Revenue and the
scheme would be open to scrutiny during the tariff determination process,
particularly in the context of actual cost incurred, scope and objective
achieved. MERC approved the hiring of the consultant for the
implementation of R-Infra's transmission projects. R-Infra was directed
to submit quarterly progress reports on the transmission projects based
on HVDC technology.
11. The five-year plan is submitted by MSETCL in terms of Section
39 of the Act and Regulation 8 of the MERC (State Grid Code)
Regulations 2006. On 7 March 2013, MSETCL in a communication to
MERC confirmed that the following scheme was being considered in
the five-year plan for 2013-14 to 2017-18 for the Mumbai Metropolitan
region:
S.
No.
Name of Scheme
Year
of
Commissioning
Remarks
1.
2x500 MW HVDC IGBT (VSC) based
Aarey - Nagothane Link (120 Ckt km)
with Bays.
2016-17
Implementation
utility RInfra-T
12. On 19 March 2013, RInfra submitted an application to MSETCL
seeking grid connectivity for the Nagothane-Aarey HVDC Scheme.
This was allowed on 21 August 2013 by MSETCL. The letter detailed
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out the scope of the work to be carried out by R-Infra and specified the
conditions for compliance.
13.