M/S. ADANI POWER LTD. Vs. GUJARAT ELECTY REG.COMMISSION & ORS.

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 11133 of 2011, Judgment Date: Dec 03, 2015

                                                              NON REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                              I.A. NO.4 OF 2015
                                     IN
                       CIVIL APPEAL  NO. 11133 OF 2011

M/S. ADANI POWER LTD.  …                                 APPLICANT/APPELLANT

                                    Versus

GUJARAT ELECTRICITY REGULATORY
COMMISSION & OTHERS                                         …    RESPONDENTS


                                  O R D E R
Chelameswar, J.


1.     This  application  is  filed  by  the  appellant  in   Civil   Appeal
No.11133/2011.  The prayer in the application is as follows:
“a)   to stay the operation of the  impugned  Judgment  dated  7.9.2011  and
suspend further supply of  electricity  in  terms  of  the  PPA  during  the
pendency of this Appeal.

b)    in the alternative to prayer (a) above, during  the  pendency  of  the
accompanying Civil Appeal the Hon’ble Court may direct the Respondent(s)  to
pay the tariff as per CERC norms for tariff on cost  plus  basis;  and  also
make the payment from the date of the supply of power under the PPA  of  the
differential amount between the PPA tariff and the tariff as per CERC  norms
for tariff on cost plus basis on  the  such  terms  and  condition  as  this
Hon’ble court deems fit as just and proper;”

However, prayer (a) was not  pressed  when  the  matter  was  taken  up  for
hearing.  A brief background  of  the  appeal  and  the  application  is  as
follows.

2.    The  appellant  company  is  a  power  generating  company.   The  2nd
respondent herein is a company owned by the State  of  Gujarat  carrying  on
business of purchasing power in bulk from power  generating  companies  such
as the appellant herein and supplying to various distributing  companies  in
the State of Gujarat.

3.    The appellant and the 2nd respondent entered  into  a  Power  Purchase
Agreement (hereinafter PPA, for  short).   Under  the  said  agreement,  the
appellant is obliged to sell 1000 megawatt of  power  from  the  appellant’s
power project.  For various reasons, the details of which are not  necessary
at  this  stage,  the  appellant  issued  a  notice  of  termination   dated
28.12.2009 of the above mentioned PPA w.e.f. 4.1.2010.

4.    After some correspondence, the 2nd respondent filed a petition  before
the Gujarat Electricity Regulatory Commission (the  1st  respondent  herein)
seeking adjudication of the dispute arising out of termination  of  the  PPA
by the appellant.

5.    The 1st respondent, by  its  order  dated  31.8.2010,  set  aside  the
termination notice sent by the  appellant  and  directed  the  appellant  to
supply power to the 2nd respondent as per the terms of the PPA.

6.    Aggrieved by the said order,  the  appellant  carried  the  matter  in
appeal  before  the  Appellate  Tribunal  for  Electricity   unsuccessfully.
Hence, the appeal No.11133/2011.  The appeal was admitted by an order  dated
13.8.2012 and since pending.  Hence the instant application  with  averments
as follows:
“7.   If the relief sought for by the Appellant is not granted, there  is  a
serious risk of  Mundra  Power  Project  becoming  a  Non  Performing  Asset
causing an irreparable harm to the consumers as well as the lenders  of  the
Mundra Power Project.  Since the main Civil Appeal is  pending  adjudication
for  final  hearing  and  the  Appellant  is  supplying  the  power  to  the
Respondent  No.2  –  GUVNL,  the  present  application  is  being  filed  to
compensate the Appellant upto the actual cost  of  generation  as  per  CERC
norms for determination of tariff.  The same is  in  order  to  sustain  the
generation and supply of  power  pending  the  hearing  of  the  main  Civil
Appeal.

            xxxx       xxxx       xxxx

9.    It is submitted that whereas the pendency of  the  present  appeal  is
piling huge losses upon the Appellant no prejudice would  be  occasioned  to
the Respondents if the present Application is allowed on an  undertaking  by
the Appellant to refund the amount over and above the PPA tariff  that  will
be paid, to the Respondent No.2 or such  other  condition  as  this  Hon’ble
Court may deem fit. Alternatively, in view  of  the  recurring  losses,  the
Appellant be permitted to suspend further supply of electricity in terms  of
the PPA during the pendency of this Appeal.  This shall  meet  the  ends  of
justice.”


7.    On behalf of the 2nd respondent,  an  affidavit  dated  23.11.2015  is
filed.  The said affidavit, while contesting the various assertions made  by
the appellant and its rights, stated:
15.   I submit that, without prejudice to the rights of the Respondent  No.2
to contest the present appeal, the answering Respondent  with  the  approval
of  Government  of  Gujarat  has  already  shown  its  willingness  to   pay
compensatory tariff prospectively (from next month of CERC order i.e.  March
2014) subject to paras 12 and 13  above  to  resolve  the  issue  by  making
suitable adjustments in tariff which till date is  not  implemented  because
of non acceptance by Appellant and other stakeholders.

16.   I say that without prejudice to its rights in the present appeals  the
Respondent No.2 is willing to implement the decisions  of  State  Govt.  for
paying compensatory tariff prospectively (from  next  month  of  CERC  order
i.e. March 2014) to resolve the  issue  by  making  suitable  adjustment  in
tariff on the directions of the Hon’ble Court. xxxxxx”



8.    Shri Prashant Bhushan, learned counsel appearing for  respondent  No.4
opposed the prayers of the applicant alleging that  the  2nd  respondent  is
colluding with the appellant as there is no occasion for the  respondent  to
make any concession such as the one made in the affidavit filed by  the  2nd
respondent (the relevant portion of  which  are  already  extracted  above).
More particularly, when the 2nd respondent succeeded before two fora  below,
the concession of the 2nd respondent  to  pay  compensatory  tariff  to  the
appellant though said to be subject to the contentions of the respondent  in
the appeal is nothing but largesse of the State to  the  appellant  and  not
consistent with public interest.  He further submitted that this  Court  may
not affix a stamp of approval for such a decision of the 2nd  respondent  by
passing any order accepting the concession  made  by  the  respondent.    He
also submitted that the payment of  compensatory  tariff  to  the  appellant
would ultimately result in compelling the consumers to pay higher price.

9.    On the other hand, Shri Harish Salve, learned senior counsel  for  the
appellant denied the allegations of collusion between the appellant and  the
2nd respondent.  He argued that  the  decision  of  the  2nd  respondent  is
supported by a decision of the State of Gujarat  on  an  assessment  of  the
subsequent developments.  He submitted  that  compelling  the  appellant  to
supply energy in terms of the  PPA  is  bound  to  financially  destroy  the
appellant company and therefore prayed that the 2nd respondent be  permitted
to make the payment in terms of his concession.

10.   A PPA is a contract between the parties and the terms of any  contract
are nothing but the agreed terms of the contracting parties.  It is  also  a
settled principle of the law of contracts that parties  to  a  contract  can
alter the terms of the contract subsequent to the formation of the  contract
by mutual consent.



11.    However,  the  rights  of   the   State   and   its   agencies    and
instrumentalities in  the  realm  of  contracts  are  circumscribed  by  the
considerations of public interest.  Apart from such general  principle,  the
rights and obligations of the parties  to  the  PPA  in  question  are  also
subject to certain statutory prescriptions.

12.   The questions (i) whether the appellant is entitled to  terminate  the
PPA and (ii) if so, on what terms and conditions are to be examined  in  the
appeal.

13.   Independent of such right, if any, of the appellant,  if  the  parties
to the PPA are agreeable to alter the terms of the PPA (as indicated in  the
counter) for whatever reasons, whether such a variation is  consistent  with
the requirements of the statutes applicable to the contract  is  a  separate
question.  Whether such a variation is consistent  with  the  larger  public
interest is altogether a different question.  An ancillary  question  arises
whether such an issue can be properly the  subject  matter  of  the  instant
appeal.  All these matters require a detailed examination as  and  when  the
appeal is taken up for hearing.

14.   Coming to the question whether the 2nd respondent be directed  to  pay
the appellant compensatory tariff as indicated in its  counter,  we  are  of
the opinion no direction can be given at this stage during the  pendency  of
the appeal as the right  of  the  appellant  for  such  compensatory  tariff
appears to be one of the issues in the appeal.

15.   In so far as the question of permitting the 2nd respondent to pay  the
compensatory tariff as indicated in its counter, we are of the opinion  that
it requires no permission from this Court.  It is upto  the  2nd  respondent
to take a decision in accordance with law to the best of its  understanding.
 We may make it clear that if  the  2nd  respondent  chooses  to  make  such
payment, the same shall be subject to the result of the appeal.

The I.A. is disposed of as indicated above.


                                                             ….………………………….J.
                                                           (J. Chelameswar)


                                                             …….……………………….J.
                                                      (Abhay Manohar Sapre)

New Delhi;
December 3, 2015