-Report by Mehul Jain
It was held by the Supreme Court of India in the case of GUJARAT URJA VIKAS NIGAM LIMITED & ORS VS RENEW WIND ENERGY (RAJKOT) PRIVATE LIMITED & ORS that on April 13, it held that the concurrent findings and orders of the State Commission and APTEL cannot be sustained. They are 51 accordingly set aside. The appeals are allowed, with costs payable to the appellants. It is the conclusion of the Supreme Court of India.
FACTS
The judgment is made by the learned Double Judge bench “Hon’ble Mr Justice S. Ravindra Bhat, Hon’ble Mr Justice Dipankar Datta” On 13 April 2023. The Judgment Is Given By “Hon’ble Mr Justice S. Ravindra Bhat”.
The current civil appeals,1 under Section 125 of the Electricity Act, 2003, challenge orders of the Appellate Tribunal for Electricity (hereafter, “APTEL”), dated 06.12.2018 (“first impugned order”) and order dated 24.07.2020 (“second impugned order”). The APTEL had, by those orders, rejected the appeals preferred by the present appellant, and the review petition, as well. Resultantly, the order of the Gujarat Electricity Regulatory Commission (hereafter “the State Commission”), dated 01.07.20154 was affirmed.
The first appellant – Gujarat Urja Vikas Nigam Limited (hereafter “Gujarat Urja”) had approached this court previously challenging the order of APTEL, which was disposed of by this court granting liberty to it, to seek review/rectification. Gujarat Urja then preferred a review petition, which was rejected by APTEL, by the second impugned order. When this appeal was taken up for hearing, on 14.10.2020, this court issued a notice and stayed the impugned order of APTEL.
Gujarat Urja procures power in bulk on behalf of distribution licensees in the state of Gujarat; it is an authorized licensee within the meaning of the term under the Act. The second, third, fourth and fifth appellants are distribution licensees in the State of Gujarat. The first respondent, Renew Wind Energy (Rajkot) Pvt Ltd (hereafter “RWE”) is a wind generator which had set up 25.2 MW Wind Turbine Generators at District Rajkot, Gujarat under the Renewable Energy Certification scheme notified by the Central Electricity Regulatory Commission (hereafter, “Central Commission”). The second respondent is the Wind Independent Power Producers Association (hereafter “Association”). Respondent No 3, Gujarat Electricity Regulatory Commission (hereinafter “theState Commission”) is the regulatory commission under the Act, for the State of Gujarat. The fourth respondent, Wish Wind Infrastructure LLP (“Wish Wind” hereafter) is a wind generator.
On 11.07.2013, Central Commission amended the REC Regulations 2010 (hereafter “Second Amendment”) and replaced “at a price not exceeding the pooled cost of the power purchase “with” at the pooled cost of power purchase”14 along with the relevant statement of reasons for the said amendment. It was clarified in the amendment that PPAs already executed before this amendment at a tariff lower than APCC would not be affected. The first two respondents were aggrieved by the order of the Central Commission. They filed a petition before the State Commission arguing that the terms of the PPA had to be changed because of the change in the REC regulations. This petition was allowed by the State Commission directing that the order of the Central Commission was general and was therefore applicable to all similarly situated wind power generators. Aggrieved by the order of the State Commission, Gujarat Urja had preferred an appeal16 before APTEL. This appeal was rejected by APTEL by order dated 06.12.2018. The appellants preferred a review petition against APTEL’s order rejecting their appeal against State Commission’s order; that too was dismissed by APTEL vide order dated 24.07.2020.
APPELLANT’S CONTENTION
The learned senior counsel for the appellant, Mr C.A. Sundaram submitted that governing regulations for the PPAs in question were the CERC Regulations 2010. Therefore, the State Commission had no jurisdiction to decide the tariff contrary to the agreement. Further, counsel argued that Central Commission itself has clarified by the Second Amendment that in respect of PPAs entered into before 11.07.2013, tariffs mutually agreed upon between the parties would be valid for the entire duration of the PPA (i.e.25 years) and they could not be substituted or re-determined by the State Commission. It was further argued that had the appellants known about the APPC on a year-on-year basis at the time of signing the agreement, they would not have adopted the REC mechanism but instead would have availed a different method whereby prices were fixed and appellants would have been entitled to RPO benefits as well. Reliance was placed on this court’s judgment in “Gujarat Urja Vikas Nigam Limited v. Solar Semi-Conductors Power Limited Company (India) Private Limited” to argue that if the State Commission re-determines the tariff amongst the parties, then the aggrieved party cannot be compelled to continue the said agreement or enter into a new agreement on such increased tariff.
It is further argued that there is no Regulation of the state or central commissions prohibiting a term being incorporated in PPA which permits an option to either party to switch from REC mechanism to Preferential Tariff Mechanism. The impugned order had not considered judgments referred to by the appellants on clauses granting power to one party to cancel the contract. Inthis regard, reliance is placed on “Central Bank of India v Hartford Fire Insurance Co. Ltd” and “Her Highness Maharani Shantidevi P Gaikwad v Savjibai Haribai Patel & Ors.”
RESPONDENT’S CONTENTION
Mr Shyam Divan and Mr Dhruv Mehta learned senior counsels appearing for the first two respondents urged that State Commission had jurisdiction in the present case. Reliance was placed on the definitional clause of the PPA (Article 1.1) to submit that commission meant ‘State Commission’. It was urged that in terms of the extant regulatory framework, (which provided for regulatory oversight by the appropriate commission), PPAs executed by generating companies and distribution licensees necessarily required approval by the appropriate commission. Firstly, Section 86(1)(b) of the Act specifically vests the State Commission with the power to regulate the electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies. Secondly, under the Multi-Year Tariff Regulations, 2011 (hereafter “GERC (Multi Year Tariff) Regulations”) notified by the State Commission, PPAs are to be mandatorily approved for them to be considered effective and enforceable.
It was also submitted that Section 86(1)(b) of the Act empowers the state commission to modify, alter or vary the terms of the agreement of PPAs, to ensure their compliance following the regulatory framework established under the Act. It was further submitted that taking into consideration the definition of APPC, it is evident that floor price and forbearance price are dynamic and APPC is associated with the floor price and the forbearance price is also required to be determined on a year-to-year basis so that the guaranteed return to the generators is not affected.
JUDGEMENT
The crisis arising out of, and the enormous environmental cost involved in the continued use of fossil fuels has led governments, the world over, to promote alternative and renewable sources of energy. The rapid growth of renewable energy over the decade and a half has witnessed that solar and wind power are now the cheapest sources of energy in many countries in the world. Once green energy was an expensive alternative, however, it is now helping to reduce energy bills.
The rapidly changing economics of such sources has led, the Union government to realize that solar and other renewables can potentially transform the energy landscape, increase access and help India meet its climate change objectives. Grid transmission capacity has been a barrier; however, distributed and off-grid solar solutions provide a viable solution for increasing energy access. Being dependent primarily on cheap coal-based power generation, traditional thinking on energy has been that increase in renewable energy’s share of electricity generation would further impair local distribution companies’ poor financial situation.
In the present case, this salutary rule was thrown to the wind, by the State Commission. In this court’s opinion, APTEL, in the most cavalier fashion, virtually rubber-stamped the State Commission’s findings on coercion, regarding the entering into the PPA by the parties. There was no shred of evidence, nor any particularity of pleadings, beyond a bare allegation of coercion, alleged against Gujarat Urja. As a judicial tribunal, dealing with contracts and bargains, which are entered into by parties with equal bargaining power, APTEL is not expected to casually render findings of coercion, or fraud, without proper pleadings or proof, or without probing into evidence. The findings of coercion are, therefore, set aside.
Given the foregoing discussion, it is held that the concurrent findings and orders of the State Commission and APTEL cannot be sustained. They are accordingly set aside. The appeals are allowed, with costs payable to the appellants.
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