LexGUJARAT URJA VIKAS NIGAM LIMITED versus TARINI INFRASTRUCTURE LTD. & ORS.
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[2016) 5 S.C.R. 990
GUJARAT URJA VIKAS NIGAM LIMITED
v.
TARIN! INFRASTRUCTURE LTD. & ORS.
(Civil Appeal No. 5875 of2012)
JULY05,2016
[RANJAN GOGOi AND PRAFULLA C. PANT, JJ.)
Electricity Act, 2003 - ss. 61,62, 6./ and 86 - Tariff under a
Power Purchase Agreement (PPA) - Review of- Whether permissible
by State Electricity Regulatory Commission - Held: Determination
and fixation of tariff is a statutory function to be pe1formed by the
Commission, in exercise of its powers u!s. 86(1){b) in consonance
with the principles enuniciated by the Electricity Act - Under
Regulation 31 of Gujarat Electricity Regulatory Commission (Multi
Year Tariff) Regulations, 2016, tariff fixed is subject to periodic
review - Further under Regulation 23 of 2016 Regulations,
adjustment in tariff is permissible on account of uncontrollable
factors - Thus, in view of s. 86(1){b), the Court must lean in favour
of flexibility and not read inviolability in terms of the agreement -
Court to lean in favour of such a view also in view of ss. U and 21
of General Clauses Act - Gujarat Electricity Regulatory Commission
(Multi Year Tariff) Regulations, 2016 - Regulations 23 and 31 -
General Clauses Act, 1897 - ss. U and 21.
Dismissing the appeals, the Court
HELD: 1. A reading of the provisions of the Electricity Act,
2003 would go to show that apart from fixation of tariff in a
"situation of open access" or in a situation of competitive bidding
covered by Section 63 of the Act, determination and fixation of
tariff is a statutory function to be performed by the State Regulatory
Commissions constituted under the Electricity Regulatory
Commissions Act, 1988 and exercising powers in consonance
with the principles enunciated by the Electricity Act 2003. [Para
9) (997-F-G)
2. The principles on which tariff is to be determined by the
commission are set out in Section 61 of Electricity Act. Generation,
transmission, distribution and supply of electricity is required to
990
GUJARAT URJA VIKAS NIGAM LIMITED v. TARIN!
INFRASTRUCTURE LTD. & ORS.
be conducted on commercial principles; while the consumers'
interest is to be safeguarded, recovery of cost of electricity in a
reasonable manner has also to be ensured. Under Section 64(6)
a tariff order continues to remain in force for such period as may
be specified. In the State of Gujarat, currently, the Gujarat
Electricity Regulatory Commission (Multi Year Tariff)
Regulations, 2016 govern the fixation of tariff by the State
Commission. As per Regulation, the Commission is required to
determine the tariff of a generating company, transmission
licensee, SLDC and distribution licensee for each financial year
during the control period (control period is 5 years). [Para 11]
[1003-C-E]
3. Not only the tariff fixed is subject to periodic review,
furthermore the above Regulations provide for taking into
consideration the force majeure events. Any force majeure is
considered as an uncontrollable factor. In fact Regulation 23
provides that the approved aggregate gain or loss on account of
uncontrollable factor shall be passed through as an adjustment in
the· tariff over such period as inay be specified in the order of the
Commission. [Para 12] [1003-H; 1004-A)
4. When the tariff order itself is subject to periodic review
it is difficult to see how incorporation of a particular tariff prevailing
on the date of commissioning of the power project can be
understood to bind the power producer for the entire duration of
the plant life (20 years) as has been envisaged by Clause 4.6 of
the PPA in the case of Junagadh in C.A.Nos. 1973-1974 of 2014.
That apart, modification of the tariff on account of air cooled
condensers and denying the same on account of claimed
inadequate pricing of biogas fuel is itself contradictory. [Para 14]
[1005-C-D]
5. Section 86(l)(b) of the Electricity Act empowers the State
Commission to regulate the price of sale and purchase of
electricity between the generating companies and distribution
licensees through agreements for power produced for distribution
and supply. The power of regulation is indeed of wide import.
[Para 15) [1005-C-E)
Sri Venkata Setaramanjaneya Rice & Oil Mills and Ors.
v. State of A.P. 1964 SCR 456 : AIR 1964 SC 1781; K.
991
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SUPREME COURT REPORTS
[2016] 5 S.C.R.
Ramanathan v. State of T.N & Am: 1985 (2) SCR 1028
: (1985) 2 SCC 116 and D.KExcerpt shown. Read the full judgment & AI analysis in Lexace.