Appellate Tribunal For Electricity
Gujarat Urja Vikas Nigam Limited vs M/S Tarini Infrastructure Ltd & Ors on 11 March, 2026
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO. 221 OF 2018
&
APPEAL NO. 298 OF 2018
Dated: 11th March, 2025
Present: Hon'ble Ms. Seema Gupta, Officiating Chairperson
Hon'ble Mr. Virender Bhat, Judicial Member
APPEAL NO. 221 OF 2018
IN THE MATTER OF:
Gujarat Urja Vikas Nigam Limited,
Sardar Patel Vidyut Bhawan,
Race Course Circle, Vadodara- 390007 ... Appellant
VERSUS
1. M/s Tarini Infrastructure Ltd
Through its Managing Director,
D-2, 1st Floor, Amar Colony,
Lajpat Nagar, New Delhi 110024
2. Narmada Water Resources,
Through its Secretary
Department of Irrigation,
Water Supply & Kalpsar,
Government of Gujarat
Gandhinagar-382010
3. Gujarat Energy Transmission Corporation Limited
Through its Managing Director,
Sardar Patel Vidyut Bhavan
Race Course Circle - Vadodara 390007
4. Gujarat Electricity Regulatory Commission
Through its Secretary,
6th Floor, GIFT-1, Road No. 5-CGift City, ...Respondent(s)
Gandhinagar - 332 335
Page 1 of 76
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
Counsel for the Appellant(s) : Ms. Ranjitha Ramachandran
Mr. Anand K Ganesan
Ms. Swapna Seshadri
Ms. Harsha Manav
Ms. Srishti Khindaraia
Counsel for the Respondent(s) : Mr. Hemant Singh
Mr. Mridul Chakravarty
Mr. Biju Mattam
Mr. Sourav Roy
Mr. Laksyajit Singh Bagdwal
Ms. Ankita Bafna
Mr. Harshit Singh
Ms. Nehul Sharma
Ms. Supriya Rastogi Agarwal
Ms. Alchi Thapliyal
Mr. Sanjeev Singh Thakur
Ms. Lavanya Panwar
Mr. Indrayudh Chowdhury
Mr. Devansh Pundir for Res.1
Mr. Maulik G Nanavati
Mr. Jaikirti S Jadeja for Res.2
Mr. Pallav Mongia for Res.4
APPEAL NO. 298 OF 2018
IN THE MATTER OF:
M/s Tarini Infrastructure Ltd
Through its Managing Director,
D-2, 1st Floor, Amar Colony,
Lajpat Nagar, New Delhi. ... Appellant
VERSUS
1. Gujarat Electricity Regulatory Commission
Through Chairman,
6th Floor, GIFT ONE,
Road No. 5, Zone 5, Gift City,
Gandhinagar - 382 355
2. Gujarat Urja Vikas Nigam Limited,
Through Managing Director,
Sardar Patel Vidyut Bhawan,
Race Course, Vadodara- 390007
Gujarat India,
Page 2 of 76
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
3. Narmada Water Resources,
Through Secretary
Department of Irrigation,
Water Supply & Kalpsar,
Government of Gujarat
Gandhinagar-382010
4. Gujarat Energy Transmission Corporation Limited
Through its Managing Director,
Sardar Patel Vidyut Bhavan
Race Course Circle - Vadodara 390007 ...Respondent(s)
Counsel for the Appellant(s) : Mr. Hemant Singh
Mr. Mridul Chakravarty
Mr. Biju Mattam
Mr. Sourav Roy
Mr. Laksyajit Singh Bagdwal
Ms. Ankita Bafna
Mr. Harshit Singh
Ms. Nehul Sharma
Ms. Supriya Rastogi Agarwal
Ms. Alchi Thapliyal
Mr. Sanjeev Singh Thakur
Ms. Lavanya Panwar
Mr. Indrayudh Chowdhury
Mr. Devansh Pundir
Counsel for the Respondent(s) : Mr. Pallav Mongia for Res.1
Ms. Ranjitha Ramachandran
Mr. Anand K Ganesan
Ms. Swapna Seshadri
Ms. Harsha Manav
Ms. Srishti Khindaraia for Res.2
Mr. Maulik G Nanavati
Mr. Jaikirti S Jadeja for Res.3
JUDGEMENT
PER HON'BLE MRS. SEEMA GUPTA, OFFICIATING CHAIRPERSON
1. Appeal no. 221 of 2018 has been filed by M/s Gujarat Urja Vikas Nigam Limited, challenging the order dated 07.05.2018 in Petition No. 1024 of 2010 ("Impugned Order") passed by the Gujarat Electricity Regulatory Page 3 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Commission, whereby the State Commission has re-determined the tariff for small hydro power project of 5.6 MW of the M/s Tarini Infrastructure Ltd
2. Appeal no. 298 of 2018 has been filed by M/s Tarini Infrastructure Ltd., challenging the same order dated 07.05.2018 in Petition No. 1024 of 2010 ("Impugned Order") passed by the Gujarat Electricity Regulatory Commission, with regard to the tariff determined for the two small hydro power plants of the Appellant having capacity of 3 MW (2x1.5 MW) and 2.6 MW (1x2.6 MW) at Daman Ganga Dam / Madhuban Reservoir (hereinafter referred to as the "Project").
3. The issues involved in both the appeals are connected and against the same Impugned Order, are accordingly being disposed off with this common judgement. As both the appeals are cross appeals, for the sake of convenience, the description of the parties is given hereunder as per appeal No.221 of 2018.
Description of Parties (Appeal No.221of 2018)
4. The Appellant, M/s Gujarat Urja Vikas Nigam Limited (hereinafter referred as "GUVNL") is a Company incorporated under the provisions of the Companies Act, 1956 and undertakes the functions of Bulk purchase of electricity from the generators and other sources and bulk supply of electricity to the distribution licensees in the State of Gujarat for onward supply to consumers in the State.
5. The Respondent No. 1, M/s Tarini Infrastructure Limited (Appellant in Appeal 298 of 2018 and hereinafter referred as "Tarini") is a generating company within the meaning of Section 2 (28) of the Electricity Act, 2003, which operates 5.6 MW (2 X 1.5 MW and 1 X 2.6 MW) hydro power project at Daman Ganga Dam/Madhuban Reservoir on the Damanganga River in the State of Gujarat.
Page 4 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
6. The Respondent No. 2 is Narmada Water Resources, Department of Irrigation, Water Supply & Kalpsar, Government of Gujarat. The Respondent No. 3, Gujarat Energy Transmission Corporation Limited is the transmission licensee in the State of Gujarat. The Respondent No. 4, is the State Electricity Regulatory Commission for the State of Gujarat (hereinafter referred as "State Commission/ GERC ") and is discharging functions under the provisions of the Act.
Factual matrix of the Case: (Appeal No.221 of 2018 & Appeal No 298 & 2018)
7. The present case has a Chequered history. Based on sequence of events submitted by M/s Tarini, following has been observed:
• In pursuance to Government of Gujarat (GoG) policy in 2006 for development of small and mini hydro projects, Narmada water Resource (NWR)was to initiate bidding process and accordingly in June 2006 M/s Tarini prepared the Detailed Project Report for development of small hydro projects and submitted the same to GoG.
• Central Design Organisation (COD), GOG submitted its comments on the DPR with regard to design parameters, few of which were accepted by M/s Tarini and communicated to COD vide letter dated 01.08.2006. • On 09.11.2006, The Respondent No. 2 - Narmada Water Resource had initiated the bidding process on Build, Operate and Own (BOO) basis for setting up of 3 MW (2 X 1.5 MW) and 2.6 MW (1 X 2.6 MW) small hydro power project on river Daman Ganga at Madhubhan Reservoir. The criteria for selection of bidder and awarding the project was based on highest royalty/license fees offered to Irrigation Department, Government of Gujarat However, any bidder offering better financial proposal then original proponent (M/s Tarini), the original proponent shall have the first right of refusal.
Page 5 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 • The M/s Tarini had quoted 0.23 paise per unit as license fees to the Respondent No. 2. As no bidder was able to match the M/s Tarini's bid, M/s Tarini was awarded the concession to build the hydro projects. • In July 2007, revised DPR was submitted by M/s Tarini to NWR in which total cost of both the projects was estimated as Rs 31.35 Crore. • On 27.08.2007, M/s Tarini entered into Concession Agreement valid for 35 years with NWR to set up both the Hydro projects. The transmission line from the hydro project up to the GETCO substation was in the scope of M/s Tarini • 15.11.2007, based on the land location allocated for the said projects, M/s Tarini submitted Revised DPR • On 29.07.2008, the Appellant-GUVNL and the Appellant - Tarini entered into PPA for sale and purchase of electricity from the referred 5.6 MW Hydro power project of the Respondent No. 2 for a period of 35 years at Rs. 3.29 per kWh for the year 2007-08 as the base rate with escalation of 3% per annum till the commercial operation date in accordance with the generic tariff decided by the State Commission in the Order dated 14.06.2007. The SCOD of the project was 20 months from the date of signing of PPA i.e 28.09.2009 • 05.09.2008, GETCO indicated the name of the substation as Mota Pondha for connection of the hydro projects, which was at a distance of 24.5 km instead of Rakholi substation at a distance of 4 km, envisaged in the DPR • 13.05.2010: M/s Tarini filed a petition no 1024 of 2010 before GERC seeking determination of tariff for these projects.
• 29.06.2010: M/s Tarini filed petition No 1025 of 2010 before GERC, seeking direction to GETCO to allow M/s Tarini to connect its project to Mota substation through the dedicated line.
• As per the PPA, the scheduled commissioning date for the project was 28.09.2009. As against the above, the actual commissioning dates of the Page 6 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 project for 3 MW Phase 1 has been 06.08.2010 and for 2.6 MW Phase 2 as 28.11.2013. There in view of the delay in commissioning of the project and liquidated damages were sought payable by the Appellant - Tarini, however it had sought waiver of liquidated damages as well as an increase in tariff, which was rejected by the GUVNL. M/s Tarini has subsequently paid the liquidated damages of Rs 27.99 lakhs to the GUVNL as per the PPA.
• On 13.05.2010, the Appellant - Tarini filed a Petition being Petition No. 1024/2010 seeking re-determination of tariff on the ground of increase in the project cost including cost of transmission line. The State Commission vide Order dated 03.09.2010 had held that the tariff as decided by the State Commission in Order dated 14.06.2007 and adopted in the PPA, is binding and there cannot be any revision in the tariff by re-opening of PPA. • Aggrieved by the Order dated 03.09.2010, the M/s Tarini filed an Appeal before this Tribunal being Appeal No. 29 of 2011 and this Tribunal vide Order dated 31.05.2012 set aside the Order dated 03.09.2010 of the State Commission and remanded the matter back to the State Commission to consider if there was any good reason for the tariff to be at variance with the PPA.
• Aggrieved by the above Order dated 31.05.2012, the GUVNL filed an Appeal before the Supreme Court being Civil Appeal No. 5875 of 2012 and the Supreme Court vide Order dated 05.07.2016 upheld the Order dated 31.05.2012 of this Tribunal.
• In pursuance to the above, the Appellant - Tarini filed I.A. No. 8 of 2016 before the State Commission seeking re-determination of project specific tariff and filed additional facts and documents. The State Commission vide Order dated 07.05.2018 re-determined the tariff for the M/s Tarini's project at Rs. 3.61 per unit as against tariff of Rs. 3.49 per unit incorporated in the PPAs.
Page 7 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 • Aggrieved by the Order dated 07.05.2018, on different aspects, both GUVNL and Tarini have filed the present appeals No 221 of 2018 and Appeal No 298 of 2018 respectively.
DISCUSSION AND ANALYSIS
8. We have heard Mr. Hemant Singh, learned counsel appearing on behalf of the Tarini Infrastructure Ltd, (Appellant in Appeal no 298 of 2018 and Respondent No 1 in Appeal No 221 of 2018), and Ms Ranjita Ramchandran, learned counsel appearing on behalf of the Gujarat Urja Vikas Nigam Ltd ( Appellant in Appeal no 221 of 2018 and Respondent No. 2 in Appeal No 298 of 2018). We have also perused the Impugned Order, the documents placed on record, and the written submissions filed by the learned counsels and following issues have been raised in both the Appeals for consideration.
Appeal No 221 of 2018 Issue A. Capital cost of the project specially in respect of.
•Cost of Power House Building •Cost for Civil Works and Hydro Mechanical Works •Cost of Electro Mechanical Works •Cost for Gate Removal etc •Cost of capital work under progress and pre-operative expenses Issue B. Higher Cost for construction of Transmission Line;
Issue C. Costs associated with delay in commissioning of the power project - IDC & IEDC and Liquidated damages Issue D. Consideration of Capacity Utilisation Factor (CUF) at 66% instead of 70% as per PPA;
Issue F. Consideration of premium/licence fee of Rs. 0.23 per unit;
Issue G. Allowance of higher interest rate of 13.2%; and Page 8 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Issue H Allowance of the higher tariff retrospectively instead of prospectively Appeal No 221 of 2018 Issue I: Disallowance of additional cost of Rs 3 Crores in regard to Steel liners;
Issue J: Disallowance of liquidated damages paid by Tarini to GUVNL Issue K: Consideration of Capacity Utilisation Factor (CUF) at 66%;
Issue L: Interest/Carrying Cost for period prior to tariff determination The forgoing issues, as raised in both the Appeals, have been examined and deliberated under following paragraphs:
ISSUE A: CAPITAL COST submissions urged on behalf of GUVNL
9. It is submitted that against the Detailed Project Report ("DPR") estimates of Rs 31.35 Crore for both the hydro projects, State Commission has allowed an actual capital cost of Rs 62.33 crore, without any justification whereas the MYT Regulations, 2016 expressly recognise the need for scrutiny and justification of escalation in capital cost. Tarini has failed to justify the alleged increase in capital cost, and despite the Water Resources Department specifically raising the issue that there was no justification for the additional costs claimed over and above the DPR, the State Commission failed to examine or record any justification for such cost overrun. In the absence of any justification for the alleged cost overrun, only the capital cost as estimated in the DPR ought to have been considered and allowed.
With regard to reliance placed by Tarini upon judgements in "RDM Case (India) Ltd v. MPERC and judgement dated 18.04.2018 in Appeal No. 327 and Raj West Power Ltd v. RERC in Appeal No. 236 of 2012 to claim that cost in DPR in indicative and subject to tariff determination. It is not the case Page 9 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 of GUVNL that the DPR cost has to be final cost in all circumstances. However, when the costs have doubled as compared to DPR, it is the responsibility of Tarini to justify cost overruns. The decision RDM Case itself notes that the State Commission has to apply prudence check on the costs.
The submissions on the specific cost elements are set out here in below.
(i) Cost of Rs.3.5 crore for raising power house building height from 4/5 meter to 24 meters
10. The claim of Rs 3.5 Crore towards alleged additional work for raising the height of the power house building from 4-5 metres to about 24 metres is wholly misconceived and unsustainable. While the State Commission has sought to justify the increase in cost on the premise that the powerhouse height was increased to 4-5 metres due to high floods, Tarini has itself admitted that a height of 24 metres was already envisaged in the DPR. The Narmada Water Resources Department has also categorically stated that the said technical aspects were an integral part of the project and the DPR, and could not justify any additional cost. Consequently, since the powerhouse height was already factored at 24m in the DPR, it could not form the basis for any cost escalation beyond the DPR estimates, and in the absence of any other justification for the additional claim, the allowance thereof is wholly unjustified and is liable to be set aside.
(ii) Additional Cost of Rs.4.13 crore (Rs 11.31 crore instead of Rs 7.18 crore in DPR) for Civil Work and Hydro Mechanical Works -
11. Tarini has claimed an amount of Rs.11.31 Crore towards Civil Works and Hydro-Mechanical Works, which is ex facie excessive when compared to the DPR estimate of Rs 7.18 Crore, reflecting an unjustified escalation of nearly 57%. It has been specifically contended by GUVNL that the said civil works were executed by Tarini's own promoters without following any competitive bidding or tendering process, rendering the expenditure neither Page 10 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 prudent nor verifiable. There is no finding, no analysis of the costs, no reasoning on the related party transaction in the Impugned Order.
12. GUVNL had also placed before the State Commission, on the basis of the Capitalisation Report, that substantial amounts were capitalised under the head "Civil Works" towards items wholly unrelated thereto, including hotel expenses, travelling expenses, printing and stationery, bank charges, foreign exchange variation, interest on term loan, repair and maintenance, salaries, medical expenses and staff welfare ; notwithstanding the fact that Appellant
- Tarini had separately claimed an amount of Rs 2.43 Crore under the head "Direct Expenses." Such expenditures are not attributable to Civil Works and are not permissible for capitalisation. Such capitalisation is impermissible in law and results in double counting.
(iii) Additional Cost of E&M Machineries at Rs.25.25 Crore as against DPR cost and Costs of FERV
13. The State Commission has allowed Tarini's claim towards the total cost of Electro-Mechanical Works (machineries) for 5.6 MW at Rs 25.25 Crore, which is substantially higher than the costs envisaged in the DPR without examining the prudence or reasonableness of such expenditure. As per the 2006 DPR, the cost was estimated at Rs 7.50 Crore & Rs 6.48 Crore, aggregating to Rs13.98 Crore, and even with the revised cost of Rs13.51 Crore for 3 MW, the total comes to only Rs 19.98 Crore.
14. The cost claimed by Tarini is not only higher than the DPR estimates but is also unreasonably excessive when compared with similarly placed hydro projects in the State. GUVNL had specifically brought to the notice of the State Commission that in the case of Ajanta Energy Private Limited, in Petition No. 1569 of 2016, the cost of Electro-Mechanical equipment for a 12 MW project, procured in the year 2014, was Rs 19.45 Crore, which was lower than the cost claimed by Tarini for its 5.6 MW project. The cost in Ajanta's Page 11 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 case thus worked out to Rs1.62 crore per MW, as against Rs 4.50 crore per MW claimed by Tarini for the year 2007-08. The said cost was based on a competitive bid received from Mecamidi HPP India Pvt. Ltd., Noida. Further, as per the Order dated 24.12.2019, passed subsequent to the Impugned Order, the actual cost incurred by Ajanta was recognised at Rs16.76 Crore, translating to Rs1.39 Crore per MW. Tarini has incurred higher cost on absolute basis for 5.6 MW project than Ajanta had for its 12 MW project.
15. The cost claimed by Tarini is not only higher than the DPR estimates but is also unreasonably excessive when compared with similarly placed hydro projects in the State. GUVNL had specifically brought to the notice of the State Commission that in the case of Ajanta Energy Private Limited, in Petition No. 1569 of 2016, the cost of Electro-Mechanical equipment for a 12 MW project, procured in the year 2014, was Rs 19.45 Crore, which was lower than the cost claimed by Tarini for its 5.6 MW project. The cost in Ajanta's case thus worked out to Rs1.62 crore per MW, as against Rs 4.50 crore per MW claimed by Tarini for the year 2007-08. The said cost was based on a competitive bid received from Mecamidi HPP India Pvt. Ltd., Noida. Further, as per the Order dated 24.12.2019, passed subsequent to the Impugned Order, the actual cost incurred by Ajanta was recognised at Rs16.76 Crore, translating to Rs1.39 Crore per MW. Tarini has incurred higher cost on absolute basis for 5.6 MW project than Ajanta had for its 12 MW project.
16. It is submitted that when equipment was available from domestic sources at substantially lower costs, there was no justification whatsoever for Tarini to import such equipment at significantly higher prices. In terms of the decision of this Tribunal dated 20.10.2011 in "Dodson-Lindblom Hydro Power Private Limited Vs MERC"; 2011 SCC OnLine APTEL 156, expenditure must align with industry norms, be prudent, necessary, and beneficial. The sole contention of Tarini that its commercial decisions, including import of equipment, are beyond scrutiny is ex facie untenable and Page 12 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 directly contrary to the ratio laid down in the Dodson Case, particularly in the absence of any competitive bidding, and more so when such costs are sought to be passed on to GUVNL and the consumers at large. Tarini's contention that the turbine was required to be imported on account of non-availability of indigenous equipment was specifically refuted by GUVNL before the State Commission, however, State Commission failed to consider the said material altogether. Further, in the written submissions before this Tribunal, Tarini has raised a new plea about vertical shaft Kaplan design and linking it with higher CUF, which was not pleaded before State Commission and this Tribunal and same ought not be considered.
17. Tarini has failed to provide any justification why the costs claimed by Tarini cannot be compared with that of the Ajanta Project, but has sought to rely upon an alleged flooding of the Ajanta Project. The said contention is neither pleaded nor supported by any material on record and remains a mere unsubstantiated oral submission of counsel, with no clarity as to the nature or cause of the alleged damage. In any event, flooding, if at all, pertains to civil works and has no nexus with electro-mechanical (E&M) works and therefore cannot justify the higher costs claimed by Tarini. There is no basis for allowing any additional capital cost and it is submitted that the benchmark cost of M/s Ajanta may be considered, i.e. Rs.1.39 Crore per MW aggregating to Rs.7.78 Crore for 5.6 MW or Rs 1.62 Crore per MW aggregating to Rs 9.07 Crores as per the then pending petition. Without prejudice thereto, and in any event, any capital cost exceeding the DPR estimate is impermissible and liable to be disallowed,
18. The State Commission has also erred in permitting the Foreign Exchange Rate Variation claimed by Tarini as it has failed to furnish any particulars regarding the items or machinery allegedly imported, nor has it provided any justification for procuring machinery from overseas when comparable plant and machinery of acceptable quality were available from Page 13 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 domestic suppliers. The State Commission has proceeded on the erroneous premise that mere incurrence of cost warrants its allowance, whereas procurement of costlier imported equipment in preference to cheaper domestic alternatives cannot be regarded as a prudent or reasonable expenditure, and the burden thereof cannot be fastened upon consumers. Without any documentary proof in support of the alleged foreign exchange variation, the costs cannot be allowed only on a mere statement of Tarini.
(iv) Additional Cost of Rs.80 Lakhs for gate removal etc
19. Tarini has claimed an additional cost of Rs.80 lakhs on account of removal of gates, which was specifically disputed by GUVNL as well as Narmada Water Resources; however, the Impugned Order contains no analysis or discussion on this aspect. Tarini has sought to attribute the same alleged activity of removal of gates--equipment and deployment of specialised scuba divers--to an amount of Rs 80 lakhs and simultaneously included it within the alleged higher cost towards E&M machinery amounting to Rs 25.25 crores. As such, such claim cannot be accepted as an additional cost over and above the DPR, as Tarini was at all material times fully aware of the location of the power project and project requirements, and the said work was neither unforeseen nor subsequently introduced.
20. It is further submitted that, the bid documents had referred to the existence and completion of various gates of the dam, including gate leafs, and therefore M/s Tarini cannot claim that it had not envisaged the necessary alterations or modifications to the gates and gate leafs for accommodating the power project and requisite water flow. Significantly, Tarini revised the DPR in 2007, i.e. subsequent to the bid documents. The dam was already in existence much prior to the first DPR, having been completed in 1985 and the gates in 1987, which fact was specifically noted in the bid documents, and hence the age of the gates or their condition was neither new nor unforeseen. The DPR itself records that detailed surveys and investigations had been Page 14 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 undertaken. In these circumstances, there is no justification as to why the DPR costs would not have included expenses associated with the gates.
21. The Narmada Water Resources Department had categorically stated before the State Commission that these works formed part of the project from its inception and had been duly considered in the DPR. It is submitted that Tarini is now attempting to introduce a new submission that the alleged gate was located inside the duct and could not have been known earlier, despite there being no such finding in the Impugned Order and in the absence of any communication, report or contemporaneous material to substantiate this assertion. Mere submissions, unsupported by evidence, cannot displace a specific and unrebutted affidavit of a statutory authority, particularly when Tarini consciously chose not to file any rejoinder or justification in response thereto.
22. Further, if Tarini seeks to contend that the removal of gates fell within the purview of the Narmada Water Resources Department and not Tarini itself, there was no justification for Tarini to undertake the said work or to claim the costs of such additional work from GUVNL; accordingly the cost of Rs 0.80 Crore is liable to be disallowed and deducted from the capital cost.
(v) Cost of capital work under progress and pre-operative expenses being unreasonably high
23. M/s Tarini had claimed an amount of Rs 30 Crore as capital work-in- progress for the 2.6 MW project, out of which Rs 10.97 Crore was shown as pre-operative expenses and subsequently capitalised. GUVNL specifically objected that the said costs were unreasonable, unusual, and not eligible to be included in the capital cost, when it is abnormally high, and no details were furnished as to the nature or break-up of such expenses. The State Commission accepted the capitalisation merely on the ground that the amount of Rs 10.97 crores formed part of the balance sheet, which approach Page 15 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 is contrary to the settled principle that costs reflected in the balance sheet are subject to a prudence check. Further the State Commission has not considered implications of time overrun attributable to Tarini. There was a delay in commissioning of the power project and this was not due to any force majeure condition as is clear from the fact that M/s Tarini paid liquidated damages to GUVNL at PPA and had never claimed force majeure. Therefore, the implication of time overrun have to be considered and disallowed.
Submissions urged on behalf of TARINI
24. It is submitted that GERC, being a super auditor, has verified and scrutinized each and every expenditure incurred by Tarini by examining the balance sheets duly furnished by Tarini and certified by its statutory auditors, and GUVNL has not raised any objection to the figures reflected therein. Consequently, there is no dispute whatsoever with respect to the actual costs incurred by Tarini. Without prejudice thereto, GUVNL's primary contention is that Tarini did not undertake any bidding process for procurement of equipment for construction of the hydro plant and that the GERC has allegedly determined the capital cost solely on the basis of audited balance sheets without undertaking any prudence check.
25. The aforesaid contentions of GUVNL are fundamentally flawed, misconceived and devoid of any merit, inasmuch as the project of Tarini was constructed pursuant to the bidding process undertaken by the Government of Gujarat/Narmada Water Resources (GoG/NWR), in which GUVNL had no role whatsoever, and the project capacity, technology and design of the hydro project were entirely governed by the bid conditions issued by GoG/NWR. The role of GUVNL is limited to procuring the power generated by Tarini at the tariff determined by the GERC, and for GUVNL to have any say in the cost incurred by Tarini, it would have been incumbent upon GUVNL to have called for a separate tender or entered into a negotiated PPA, which is admittedly not the case herein. As is evident from the tender documents of Page 16 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 GoG/NWR, the decision to set up the hydro project, including determination of maximum generation capacity, and the discretion to design and construct the project with Tarini's choice of technology and equipment, rested solely with GoG/NWR and Tarini under a design-and-build framework. Accordingly, there arises no occasion for GUVNL to question either the technology, design or equipment adopted by Tarini, more so when the autonomous mode and manner of execution of the project was always within the knowledge of GUVNL, and it is not open for GUVNL to assail the same at a belated stage. Therefore, it does not lie in the mouth of GUVNL to question the import of machines by Tarini, particularly when the bid parameters expressly permitted construction autonomy to achieve generation above 5 MW. Further, the sole basis relied upon by GUVNL, namely its alleged "interaction" with certain purported domestic manufacturers, is purely hearsay, legally unsubstantiated and warrants no consideration by this Tribunal. In any event, Tarini's turbines are of Vertical Shaft Kaplan design with customized height of 18 to 20 meters, whereas GUVNL has vaguely referred to Vertical Kaplan design, allegedly available with domestic vendors, on a hearsay basis, and on this ground as well, the contentions of GUVNL deserve to be outrightly rejected.
26. It is submitted that there is neither any uniformity nor any mandatory requirement under the tariff regulations framed by various State Commissions for undertaking a bidding process for procurement of machines even for thermal or conventional power plants, much less for renewable energy projects such as that of Tarini, which carry a clear legislative mandate for promotion of renewable energy. Accordingly, the primary contention of GUVNL that Tarini ought to have procured the machines through a bidding process is fallacious and cannot be treated as a straitjacket formula for testing prudence. Consequently, the only lawful and appropriate manner in which the GERC could have determined Tarini's tariff was by relying upon the audited balance sheets certified by independent statutory auditors, since, for achieving maximum efficiency in generation in terms of the bid of GoG/NWR, Page 17 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 the actual cost incurred by Tarini for procurement of machines was required to be allowed as a pass-through in tariff in accordance with the principles under Section 61 of the Electricity Act, 2003, particularly Section 61(d), which entitles a generating company to recovery of its cost of generation. Without incurring the costs as claimed by Tarini, it would not have been possible to maintain and generate power in accordance with the bid conditions of GoG/NWR.
27. GUVNL has contended that the project cost indicated in the revised DPR of Tarini was Rs. 31.35 Crore, whereas the actual cost claimed by Tarini was Rs. 67.13 Crore, and on this basis has sought to peg Tarini's project cost to the figures mentioned in the revised DPR. The said contention is fundamentally flawed, inasmuch as the cost mentioned in a DPR is only indicative in nature and is always subject to tariff determination by the appropriate Regulatory Commission. In this regard, reliance is placed on the judgments of this Tribunal dated 18.04.2018 passed in Appeal No. 327 of 2017 in "RDM Care (India) Ltd. v. MPERC and Anr.", and in Appeal No. 236 of 2012 in "Raj west Power Ltd. v. RERC and Ors." dated 29.10.2013. Accordingly, the figures mentioned in the revised DPR by Tarini cannot be relied upon as a conclusive measure of actual cost, particularly in the peculiar facts of the present case where Tarini was conferred with complete autonomy by GoG/NWR with respect to engineering and design of the project. It is further relevant to note that Clause 6.1 of the Concession Agreement expressly provides that the tariff for supply of power to DISCOM/GUVNL shall be as determined by the GERC in terms of the Electricity Act, 2003, thereby clearly envisaging, from the very inception, a cost-plus tariff regime factoring in the actual costs incurred by Tarini for setting up its hydro power project.
28. The revised DPR was approved by GoG/NWR vide its letter dated 14.08.2013; however, the cost figures mentioned therein are not determinative for tariff purposes, as tariff is required to be determined by the Page 18 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 GERC strictly in accordance with Sections 61 and 62 of the Electricity Act, 2003. Under a cost-plus tariff regime, each and every legitimate expense is required to be allowed to the generating company in terms of Section 61(d) of the Electricity Act, 2003. Accordingly, the reliance placed by GUVNL on the affidavit filed by NWR before the GERC, to contend that Tarini is not entitled to costs which were allegedly within its knowledge at the DPR stage, is fundamentally misconceived, particularly when the said affidavit does not even aver that the works undertaken by Tarini were not required for construction of the hydro project. Any work undertaken for execution of the project, whether contemplated at the DPR stage or otherwise, is liable to be allowed as a pass-through in tariff. The contention of GUVNL impermissibly seeks to conflate principles applicable to change-in-law or bid tariff regimes with determination of capital cost under the Section 62 cost-plus route, which is legally untenable.
29. It is submitted that the GUVNL, in order to further attempt to mislead this Tribunal, has sought to compare the E&M equipment cost of Tarini with that of another hydro project, namely Ajanta Energy Pvt. Ltd., which comparison is wholly misconceived and legally untenable. The Tarini project cannot be compared with any other hydro project, as it was executed strictly in accordance with the bid mandates of GoG/NWR, which conferred absolute autonomy upon Tarini in respect of design and construction so as to achieve the technical feasibility criteria of generation above 5 MW. In fact, such autonomy has resulted in Tarini, despite being a smaller project of 5.6 MW capacity, generating approximately 4 crore additional units from 2018 onwards as compared to the Ajanta hydro plant of 12 MW capacity commissioned in 2018. Further, the capital cost of Ajanta is in the range of Rs. 10-11 Crore per MW, as recorded in the tariff order dated 24.12.2019 passed by the GERC in Petition No. 1569 of 2016, which is in the same broad range as the capital cost claimed by Tarini on a per MW basis. Pertinently, while the Ajanta hydro plant was washed away in September 2025, the Tarini Page 19 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 project has remained robust and has demonstrated superior efficiency by generating substantially higher power over the same period. Moreover, the tariff determined by the GERC for Ajanta is Rs. 4.40 per unit, whereas the tariff determined for Tarini is Rs. 3.61 per unit, which itself demonstrates that GUVNL's attempt to rely upon Ajanta for benchmarking E&M costs is blatantly misleading. If GUVNL's contention that Ajanta's allegedly lower E&M costs ought to be applied to Tarini were to be accepted, then the per unit tariff of Ajanta would necessarily have been lower than that of Tarini, which is admittedly not the case.
30. It is further submitted that the Daman Ganga/Madhuban Dam is a masonry-cum-earthen dam over 40 years old, and Tarini was required to incur approximately Rs. 80 lakhs towards additional water works, including the safe removal of gates stuck inside the body of the dam, in order to clear the waterway from the reservoir and facilitate execution of the project. Emergency sunken gates installed within the dam structure had obstructed water flow inside the dam duct, which were not visible and were not known to the Appellant - Tarini at the DPR stage. These gates had been jammed in the RCC duct by GoG/NWR in the 1980s when, due to excessive water pressure, the authorities decided to stop water flow while abandoning the earlier plan to develop a hydro power plant at the said location. Removal of gates became apparent only when Tarini requested the dam authorities to release water from the two RCC ducts at the dam toe for SHP-I to facilitate test runs of its two units constructed approximately 20 meters downstream of the Daman Ganga/Madhuban Dam, and the obstruction was observed only in the year 2010, post construction. The condition of gate obstruction was neither disclosed to Tarini nor was the same visible, as the said gates were installed and stuck deep within the dam structure, which did not form part of the Project under the Concession Agreement and the DPR. It is further submitted that GoG/NWR was obligated to provide the site free from any obstruction in the flow of water up to the point of integration at the downstream mouth of the Page 20 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 RCC duct; however, the issue relating to the old gates surfaced only at the stage of test runs of SHP-I. Consequently, in order to remove the said old and stuck gates, Tarini was compelled to deploy high-end technology and engage specialized deep-water divers from South Africa for removal of two such gates from deep within the Madhuban Dam body.
31. Reliance placed by GUVNL on the reply of NWR filed before this Tribunal to deny Tarini the costs incurred towards removal of sunken gates is wholly erroneous, inasmuch as NWR has not stated that the said work was not required. On the contrary, GUVNL itself, has acknowledged that the said work was required to be undertaken by Tarini for construction of the power project. As already submitted, under the fundamental principles governing cost-plus determination of tariff, every legitimate expense is required to be allowed to the generating company, irrespective of whether the same was known at the DPR stage. Accordingly, the cost incurred towards removal of such gates was rightly allowed by the GERC as part of the total project cost.
OUR CONSIDERATION & VIEW
32. The main issue raised by GUVNL is with regard to allowing the Capital cost of hydro projects at Rs 62.33 Crore against the approved DPR cost of Rs 31.35 Crore merely based on the audited accounts as submitted by the Tarini without undertaking prudence check of the cost and justification for such cost increase. Besides general comments with regard to prudence check of cost, GUVNL has specifically objected to i) Cost of Power House Building ii) Cost for Civil Works and Hydro Mechanical Works iii) Cost of Electro Mechanical Works and (iv) Cost towards gate Removal. Per Contra, it has been contended on behalf of Tarini, that in view of the hydro project being a design-and-build contract conferring complete discretion upon Tarini with respect to project design, the GERC has rightly relied upon Tarini's audited balance sheets for the purpose of determination of capital cost. Furthermore, under a cost-plus tariff regime, each and every legitimate Page 21 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 expense is required to be allowed to the generating company in terms of Section 61(d) of the Electricity Act, 2003.
33. It is noted that GUVNL signed the PPA with M/s Tarini at a generic tariff of Rs. 3.29/kwh at base year of 2007-08, subject to escalation at 3% per annum till COD of plant and it worked out as Rs 3.49/kwh, basis generic tariff Order dated 14.06.2007 passed by the State Commission in Petition No. 853 of 2005 for Small Mini Micro Hydel Projects and it was irrespective of cost considered/approved in the DPR for these projects. This Tribunal in its order dated 31.05.2012 in Appeal No. 29 of 2011, found infirmity in the adoption of the said generic tariff by the State Commission, inter alia, on the ground that the capital cost has not been examined and that the tariff determined was based upon the MNRE guidelines issued prior to Electricity Act, 2003 and remanded the matter to State Commission to examine all relevant facts and work out the revised tariff for the hydro projects of Tarini. Relevant portion of the Order dated 31.05.2012 is extracted below:
"29. To summarize: The Bid Document is dated 9.11.2006 and the Concession Agreement is dated 27.8.2007, while the DPR was submitted in July, 2007. This is one aspect of the matter. The Power Purchase Agreement was executed on 29.1.2008, while the report and the letter of GETCO is dated 5.9.2008 so that at the time of finalisation of the Power Purchase Agreement the subsequent materials and developments could not be considered by the parties. After the enactment of the Electricity Act, 2003 there is no scope of framing by the Commission generic tariff on the basis of pre-Act,2003 guidelines which hardly carries any force of law. The Power Purchase Agreement has to be subordinated to the Act, 2003. If the Power Purchase Agreement is not in conformity with the Act,2003 then it loses its legal force. This is the broad principle which every statutory authority has to regard. The Commission has statutory power to examine, review and approve the Power Purchase Agreement. The Commission has itself noted in the impugned order that it did not examine the aspect of capital cost. What exactly were the MNRE guidelines are not known and in the impugned order the Commission does not explain it. The principles for determination of tariff as laid down in section 61 cannot be sacrificed even when parties go through Power Purchase Page 22 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Agreement. A Power Purchase Agreement based on MNRE guidelines, particularly in relation to generation through renewable sources of energy, and not after the principles laid down in the law are liable to be reopened and re-examined. The Power Purchase Agreement has not been approved upon examination earlier by the Commission. The provision of Section-86 (1) has not been complied with so far. In Rithwik Energy Systems case, which we have already noted, it has been held that it is the bounden duty of the Commission to incentivize the generation of energy through renewable sources of energy. Power Purchase Agreements' can be reopened only for the purpose of giving thrust to non-conventional energy projects and not for curtailing the incentive."
30. Accordingly, we allow the appeal, set aside the Impugned Order and remand the matter back to the Commission for examination upon hearing the parties and perusal of the materials of the question as to what should be the tariff in case it upon examination of the data come to find that there is good reason to be in variance with the PPA. No costs."
34. The order of this Tribunal has been upheld by the Supreme Court in its judgement in civil petition dated 05.07.2016. There is no doubt that a Detailed Project Report (DPR) serves as the comprehensive blueprint of a project, prepared with the intent of demonstrating its technical feasibility, financial viability, and overall justification. It outlines the project objectives, scope, design, implementation plan, and regulatory compliance requirements, thereby acting as a decision-making tool for investors, lenders, and authorities. Yet when undertaking project-specific tariff determination, regulator can and often must go beyond the Detailed Project Report (DPR). The DPR is a starting point for tariff determination, but it is not the final authority. Regulators are empowered to go beyond it, applying independent judgment, prudence checks, and stakeholder consultation to ensure tariffs are fair, reasonable, and reflective of efficient costs. Therefore, as decided by this Tribunal in its order dated 31.05.2012, and which was subsequently upheld by the Supreme Court, the State Commission was directed to undertake a project specific determination for the subject projects in Page 23 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 accordance with law, instead of relying on the generic tariff on which PPAs have been signed.
35. The State Commission, after considering the submissions/ contentions raised by GUVNL & Tarini, and observing that DPR cost as Rs 35 Crore and claimed capital cost of about Rs 67 Crore, decided following with regard to various components of Capital Cost:
"15.1........
The balance sheet submitted by Petitioner is audited by the Chartered Accountants and the details of various entries reflected in the balance sheet are verified and audited at various levels. Hence, the contention of the Respondent is not legal and valid.
36. Observation in the Impugned Order with regard to high pre operative Expenses claimed by M/s Tarini are as under:
"15.7 The Respondent No. 1 has also contended that the Petitioner has considered deferred revenue expenses of Rs. 11.67 Crore as per the Capitalisation Report which is not permissible. It is observed that the said Capitalisation Report is for the period upto FY 2010- 11 and no final Capitalisation Report has been filed by the Petitioner. We note that the Deferred Revenue Expenditure and Direct Expenditure is nothing but the pre-operative expenditure which includes various expenditure related to plant incurred before the commissioning date and also includes interest during 46 construction period which has since been capitalized starting from 2010-11 to 2013-14. It is observed that the Petitioner has incurred various pre- commissioning expenditure totalling to Rs. 13.71 Crore till 31.03.2011 and out of this expenditure the Petitioner has capitalised Rs. 5.83 Crore towards generating equipments and Rs. 2.01 Crore on transmission line and sub-stations in respect of Unit No.1. Further, it is also observed from the balance sheet for FY 2013-14 that the Petitioner has capitalised an amount of Rs. 10.98 Crore being the pre- operative and pre-commissioning expenditure which appears to have been incurred towards Unit No.2. Since the balance sheets of the Petitioner are duly audited by the statutory auditors and have been filed with the Ministry of Corporate Affairs (MCA), the Commission Page 24 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 has accepted the capitalisation of pre-operative expenses as appearing in the respective balance sheets."
37. There is no doubt that auditors play a critical role in certifying audited accounts by ensuring that financial statements present a true and fair view of a company's financial position, comply with applicable statutory requirements, and are free from material misstatements. Their certification provides credibility to the accounts and builds trust among shareholders, regulators, and the general public. It examines the books of account, vouchers, invoices and ensure accuracy, completeness and compliance with accounting standards and it also tend to identify material misstatements due to error or fraud. The certification serves to reinforces transparency, accountability, and integrity in financial reporting.
38. In terms of Section 61 of Electricity Act 2003, the Appropriate Commission is not only required to safeguard the consumer's interest but at the same time, to ensure recovery of the cost of electricity in a reasonable manner. In the context of project-specific tariff determination, the regulator is mandate requires an independent prudence check to verify whether the costs claimed are reasonable, efficient, and in line with sectoral benchmarks. This involves assessing market conditions, procurement practices, financing terms, and actual implementation outcomes, rather than relying solely on auditor-certified accounts or DPR estimates. While auditors certify that accounts are prepared in accordance with accounting standards and present a true and fair view of the financial position, their role is limited to financial accuracy and compliance. Regulators, on the other hand, must independently assess whether the costs claimed by utilities were incurred prudently, economically, and in line with approved plans or regulatory expectations. Therefore, the regulator's responsibility goes beyond financial certification-- it involves applying sector-specific judgment to balance consumer protection Page 25 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 with the financial viability of utilities. Thus, it is very important for the Regulator to undertake Prudence check of the cost involved.
39. This Tribunal in its judgement dated 20.10.2011 in "Dodson-Lindblom Hydro Power Private Limited Vs MERC"; 2011 SCC OnLine APTEL 156, has held that State Commission should undertake prudence check of the cost involved, the relevant paragraph is reproduced hereinbelow:
"10. Both the Regulations and the judgement of the Tribunal would indicate that the State Commission was bound to conduct a detailed "prudence check" and prudence check is not limited to the verification of whether an expenditure has actually been incurred or not. The prudence check involves the following factors:
(a) Whether such expenditure has been incurred exclusively towards the project or not;
(b) Whether such expenditure is justifiable having regard to the industry norms for such expenses;
(c) Whether such expenditure is such that a prudent businessman would have incurred on his business at the stage at which it was incurred;
(d) Whether such expenditure was necessitated having regard to all the surrounding circumstances of the project;
(e) Whether such expenditure is aligned to the "project specific requirements";
(f) What is the efficacy of such expenditure and whether such expenditure has actually resulted in some benefit or likely benefit to the project;
(g) Whether such expenditure is such that it ought to be passed through to the consumers in a cost plus oligopoly situation".
40. It has also been contended on behalf of GUVNL that cost should be capped at DPR as all the risk factors should have been factored in the DPR by the M/s Tarini and any expenditure beyond the DPR should not have been allowed, specially in the absence of its justification. In this context, it is profitable to quote relevant paragraphs of the Judgements of this Tribunal Page 26 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 dated 18.04.2018 passed in Appeal No. 327 of 2017 in "RDM Care (India) Ltd. v. MPERC":
"9.3...The Appellant has indicated that it has incurred an expenditure of Rs. 15.88 crores on the project and taking into account the subsidy granted by MNRE, the net capital cost works out to Rs. 12.28 crores. It is an admitted fact that the project costs estimated in the DPR are based on the broad parameters of planning, engineering, procurement, execution, etc. but the final completed costs are generally found to be, by and large, different from the DPR costs. Similar is the case for the instant bio-gas plant. Even in the conventional projects like thermal, hydro and gas based projects, the completed cost is generally found to be more than the DPR stage cost. Keeping this aspect in view, we opine that the State Commission could have applied its prudence check over the total expenditures incurred on the project by the Appellant and arrived at per MW cost accordingly for tariff computations. We also find that the generic tariff granted to the Appellant at Rs. 3.4 per unit is considered to be quite low as compared to the similar projects in other parts of the country and also the generic tariff for biogas plant provided by CERC in its tariff order dated 31.03.2015 for the FY 2015-16. As such, the cost/tariff fixation of the plant by the State Commission needs to be reviewed in the interest of justice and equity."
41. The Judgement dated 29.10.2013 in Appeal No. 236 of 2012 in the matter of "Raj west Power Ltd. v. RERC and Ors."
"26. We feel that the tariff as given in the DPR is only estimated tariff as per the prevalent costs, assumption of operational and financial parameters and the time schedule as envisaged at the time of preparing the DPR. However, the actual capital cost of the project would vary, sometimes substantially, depending on the actual costs due to cost escalation and other factors and time taken in completion of the project. The tariff as given in the DPR is only an estimated or indicative tariff at the time of preparation of the DPR to justify commercial viability of the project and could not be taken as the tariff at which the generating station has to sell electricity after completion of the project. The tariff of the State owned generating company for supply of power to the distribution licensees as per Sections 62 and 86(1)(a) of the Electricity Act, 2003 has to be determined by the State Commission according to its Tariff Regulations."Page 27 of 76
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
42. Considering the above deliberations and judicial pronouncements, we do not find merit in the submissions of GUVNL that cost should be capped at DPR cost as all the risks must have been factored therein; however, we agree with the contention raised by GUVNL, that Regulator must undertake the prudence check of the cost claimed by the Tarini instead of simply relying on the cost appearing in the balance sheet. We find that State commission has erred in not undertaking the prudence check of the cost claimed by M/s Tarini and relied only on the balance sheet figures without due verification and scrutiny.
43. While undertaking the prudence check, the Regulator must ensure that Utilities recover the costs that are prudently incurred and tariffs reflect efficiency and fairness. In such an exercise, it is important to ensure that consumers are shielded from inefficiencies, mismanagement, or inflated claims at the same time the sector remains financially healthy to attract investment and maintain reliable supply.
44. With regard to specific contention of GUVNL concerning deployment of imported turbines in the project while indigenous technology is available at much lower rate and quoted per MW cost of turbines deployed in some other project, we have been informed that as per concession agreement, the project capacity, technology and design parameters of the hydro project were governed by the bid conditions issued by GoG/NWR and as noted above the DPR of the project was prepared and shared by Tarini with GoG/NWR even before signing of the PPA with the GUVNL and bidding for setting up of the project was undertaken based on DPR prepared by Tarini, and same is not disputed by GUVNL. Further, GUVNL has not referred to any clause in the PPA or otherwise, which puts restrictions on the use imported turbines in the hydro projects. In terms of the APTEL Order dated 31.05.2012, which is reaffirmed by the Supreme Court, the State Commission was to determine project specific tariff and no restrictions have been placed with regard to Page 28 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 usage of technology whether indigenous or imported. Thus, we do not find merit in the submissions of GUVNL that Tarini should have used only indigenously available turbines or cap the cost at the DPR level. Further, it is unnecessary for us to comment on the per MW cost of units @ Rs 1.62 Crore/ MW used in Ajanta projects as contended by GUVNL or Cost of Rs 10-11 Crore/MW and the higher tariff of Rs 4.4/ unit allowed for Ajanta projects and washout of Ajanta projects during high flood situation as contended by Tarini as the same is not an issue before us, and more so as stated above no restrictions seems to have been placed on M/s Tarini either in the concession agreement with GoG or in the PPA with GUVNL, with regard to use of only indigenously developed turbines in the referred hydro projects and accordingly, this contention of GUVNL is rejected.
45. In view of above deliberation, we remand the matter of determination of capital cost of the hydro projects of M/s Tarini to State Commission to undertake prudence check of the cost incurred including that undertaken by the promoters of the Company without competitive bidding as well as FERV claimed by M/s Tarini.
ISSUE B : HIGHER COST FOR CONSTRUCTION OF TRANSMISSION LINE BY TARINI Submissions urged on behalf of GUVNL
46. Tarini has claimed a total cost of Rs 11.44 Crore to lay a dedicated 66 kV D/c line of 23 kms for evacuation of power to GETCO, which is ex facie excessive. GETCO, vide its letter dated 06.11.2018, had provided Tarini with multiple options, including the option of executing the work through GETCO itself at a cost of Rs 6.44 Crore; however, Tarini chose the option of doing the work itself and incurred Rs 11.44 Crore instead of the reasonable option of letting GETCO to construct the line. Tarini's assertion that it was entitled to choose the mode of construction does not address the issue of prudence of the expenditure incurred, and where Tarini, by its own decision, opted for a Page 29 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 substantially costlier option despite the availability of a cheaper and reasonable alternative, such additional expenditure cannot be passed on to GUVNL or to consumers at large. The plea raised during arguments that GETCO's estimate was limited only to labour and excluded material costs was never pleaded before the State Commission and cannot be permitted to be raised for the first time at the appellate stage; in any event, the GETCO letter indicates a comprehensive estimate. Supervision by GETCO does not establish prudence of expenditure. Accordingly, the additional cost of approximately Rs 5 Crore is unjustified and liable to be disallowed, Submissions urged on behalf of TARINI
47. The sole basis for GUVNL to challenge the costs incurred is the letter dated 06.11.2008 issued by GETCO to Tarini, whereby three options were proposed, for either getting the work done by GETCO or carry out by Tarini by paying supervision charges.
48. In terms of Clause 5.2.1(g) of the Concession Agreement, the obligation to construct the dedicated transmission line squarely lay upon Tarini, and since the entire project, including the transmission line, was to be executed by Tarini on a design-and-build basis, Tarini was under no obligation to accept the legally extraneous offer made by GETCO to construct the said transmission line. It is further submitted that the offer of GETCO was only in the nature of an erection (labour) contract and did not include supply and erection, as it excluded material costs such as procurement of hot-dip galvanized steel towers of approximately 40 meters height, conductors (running into more than 200 kilometers considering double circuit 66 kV configuration and sag), insulators and other associated materials, as well as costs relating to land acquisition and way-leave, none of which were covered under the options set out in GETCO's letter. Accordingly, the said letter cannot be treated as a valid benchmark for determining or capping the actual Page 30 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 transmission line costs incurred by Tarini. Without prejudice, GETCO itself had provided Tarini with the Option to construct the transmission line on its own, which option was duly accepted by Tarini, and the purport of GUVNL's contention impermissibly seeks to deprive Tarini of the contractual option expressly made available by GETCO. In any event, at the stage of issuance of the said letter, it was impossible for Tarini to conclusively determine that GETCO's execution of the entire works would have resulted in a lower cost, and on this ground as well, the contentions of GUVNL deserve to be rejected.
OUR CONSIDERATION AND VIEWS
49. There is no dispute that Tarini was required to lay a 24.5 km of transmission line instead of 4 km envisaged in the DPR on account of change in GETCO substation and as per Concession Agreement, the obligation to construct the dedicated transmission line lay upon the Tarini. It is also noted that, vide letter dated 06.11.2008 issued by GETCO, three options were given with regard to construction of transmission line and relevant portion is extracted hereunder:
"Option 1 - If GETCO carries out the work Sr. No. Item Amount Rs. lacs (1) Estimate of Deposit Work for erection of feeder bay at GETCO 83.04 end 66 Kv Mota Pondha S/S (2) Estimate for Deposit work for Feeder Bays at Wind Farm end 75.59 66 kv Madhuvan dam site S/S (3) Estimate of Deposit work for laying 66 Kv D/C Dog from 486.01 madhuban dam site to Mota Pondha S/S for M/s. Tarini Infrastructure Limited (4) Total Amount Payable 644.64 Option 2 - If M/s Tarini Infrastructure Ltd caries out the work (Except) GETCO S/s end work) Page 31 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Sr. No. Item Amount Rs. lacs (1) Estimate of Deposit Work for erection of feeder bay at GETCO 83.04 end 66 Kv Mota Pondha S/S (2) Estimate for Deposit work for Feeder Bays at Wind Farm end 11.69 66 kv Madhuvan dam site S/S (3) Estimate of Deposit work for laying 66 Kv D/C Dog from 73.70 madhuban dam site to Mota Pondha S/S for M/s. Tarini Infrastructure Limited (4) Total Amount Payable 168.20 Option 3 - If M/s Tarini Infrastructure Ltd carries out all the work S.No. Item Amount Rs.Lacs (1) Estimate of Deposit Work for erection of feeder bay at GETCO 12.59 end 66 Kv Mota Pondha S/S (2) Estimate for Deposit work for Feeder Bays at 66 kv Madhuvan 11.46 dam site S/S (3) Estimate of Deposit work for laying 66 Kv D/C Dog from 73.70 madhuban dam site to Mota Pondha S/S for M/s. Tarini Infrastructure Limited (4) Total Amount Payable 97.76
50. It is also observed from Annexure I (point no 3) of the referred letter that "the estimate is only approximate and final bill would be prepared on the basis of actual work carried out plus labour and supervision charges and other statutory/applicable charges as per prevailing norms". It is thus clear that under option I, i.e. if GETCO carries out the work, for which an estimate amount of Rs 6.44 Crore has been given, cannot be considered as firm final cost in terms of the offer letter. Therefore, the final cost would have been known only after construction of the line by GETCO in case this option was exercised. We find merit in the submissions of Tarini that there was no compulsion or statutory requirement on Tarini for getting the construction of line done from GETCO. We, therefore do not find merit in the submissions of the GUVNL that, by opting to construct the line on its own, Tarini has Page 32 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 incurred extra expenditure of Rs 5 Crore and same should be disallowed as what would be the final cost in case GETCO has constructed the said line cannot be ascertained and therefore it would not be fair to conclude that GETCO would have constructed the line at the estimate given and anything thing above the estimate of GETCO should be disallowed.
51. With regard to justification of cost of Rs 11.44 Crore incurred by Tarini in construction of said transmission line and its variance with the estimated cost given in Option - I by GETCO, it has been contended by Tarini that estimated cost does not include supply cost i.e supply of Tower and Conductors. However, in our considered view, such an explanation does not appear to be factually incorrect as deposit work cost usually includes the full expenditure when executing works on behalf of another entity, plus departmental charges. In simple terms, it covers not just the direct construction cost including supply and erection cost but also overheads, supervision, and statutory levies. Furthermore, a perusal of the aforesaid letter it cannot be inferred that supply items were specifically excluded from the estimated cost indicated in the option -I.
52. The State Commission in the Impugned Order has considered the cost of Transmission line as Rs 11.44 Crore as reflected in the audited accounts of Tarini and, has allowed the same for the purpose of tariff determination.
In view of above deliberations, and our views expressed in preceding paragraph with regard to prudence check of the cost incurred, this issue is remanded to the State Commission to undertake prudence check of the cost incurred by Tarini in implementation of the Transmission Line.
ISSUE C & I : COSTS ASSOCIATED WITH DELAY IN COMMISSIONING OF THE PROJECT ( IDC & IEDC AND LIQUIDATED DAMAGES) Submissions urged on behalf of GUVNL Page 33 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 IDC & IEDC for delayed period
53. Under the PPA, the SCOD was 20 months from the date of execution, i.e., 28.09.2009; however, the project was commissioned with substantial delay--Phase-I (3 MW) on 06.08.2010 (delays of approximately 11 months) and Phase-II (2.6 MW) on 12.12.2013 (delay of more than four years). Tarini has also paid liquidated damages in terms of Article 4.3 of the PPA and never challenged such liability, thereby accepting that the delay was attributable to it. Tarini neither invoked force majeure at the relevant time nor issued the mandatory notice prescribed under Article 8.1(b) of the PPA, which is a pre- condition for claiming force majeure; in the absence thereof, Tarini is barred from raising any such plea, as held by this Tribunal in "Punjab State Power Corporation Limited v. Punjab State Electricity Regulatory Commission & Ors.", Appeal No. 316 of 2018 decided on 28.08.2024. Tarini's reliance on its letter dated 24.03.2010 is misconceived, as the same was merely a response to GUVNL's letter dated 18.03.2010, and did not satisfy the requirements of a force majeure notice, and was issued after the SCOD had already lapsed. In any event, the alleged delay pertained to construction of the transmission line, which was Tarini's own responsibility. Tarini neither sought extension of time nor challenged the levy of liquidated damages before the State Commission.
54. Though State Commission has disallowed the claim of liquidated damages as pre-operative expenses in the balance sheet, thus acknowledging that delay was attributable to Tarini, it failed to examine the consequences of the admitted delay of approximately 10 months for the 2×1.5 MW units and about 50 months for the 1×2.6 MW unit on the project costs. Since the delay was attributable solely to Tarini, any cost overruns arising there from including Interest During Construction (IDC), Incidental Expenditure During Construction (IEDC), and escalation of costs during the delayed period--ought to have been subjected to a prudence check in terms Page 34 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 of the MYT Regulations and the settled principles laid down by this Tribunal in its judgement dated 03.01.2014 in " Lanco Amarkantak Power Ltd Vs HERC; 2014 SCC OnLine APTEL 4, that such costs cannot be passed on to GUVNL or consumers at large. Tarini had failed to furnish any details or analysis of cost escalation attributable to the delay, and, at the very least, the IDC and IEDC ought to have been reduced proportionately to the delay period; however, the State Commission failed to consider or adjudicate upon this issue altogether, despite of GUVNL specifically raising this issue.
55. Tarini, before the State Commission, has not claimed that the delay was beyond its control on account of connection to the substation of GETCO, but has now sought to raise this issue for the first time in Appeal No. 298 of 2018 and in reply to Appeal No. 221 of 2018, which is impermissible, as the same were never argued before the State Commission, nor were they considered in its proceedings. Tarini cannot now, after eight years from the COD of Phase-I, seek to contend that the delay in commissioning of the power plant was on account of force majeure. Letter dated 02.07.2011 issued by the Office of the Executive Engineer, Damanganga Project Division No. 1 records that Tarini had failed to complete the work within the stipulated time limit.
56. Tarini has also sought to rely upon an alleged Completion Certificate issued by an alleged Independent Engineer on 18.02.2010; however basis for appointment of such Engineer has not been justified by Tarini, as the same is neither in accordance with any provision of the PPA nor was such appointment ever agreed to by GUVNL. Accordingly, the said certificate has no contractual sanctity or evidentiary value under the PPA and has never been admitted by GUVNL. The Narmada Water Resources Department, Government of Gujarat, has disputed the said certificate on the ground that the necessary civil works had not been completed. The alleged certificate, therefore, cannot be relied upon in the face of such categorical dispute by the competent authority. In any event, the certificate itself is incorrect and Page 35 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 unreliable, being dated 08.02.2010, as despite the interim order dated 29.06.2010 in relation to connectivity, Tarini did not commission the project until August 2010 and thereafter till December 2013, clearly establishing that the power project was not ready as claimed. Moreover, the transmission line, which was within the scope of work of Tarini, was not complete even as per the said letter.
57. This Tribunal in Maharashtra State Power Generation Co. Ltd. v. Maharashtra Electricity Regulatory Commission and Ors., Appeal No. 72 of 2010 dated 27.04.2011 (Paras 7.2 and 7.4). and other several judgements have held that excess costs on account of delay attributable to the generating company/licensee are required to be borne by such generating company/licensee and cannot be passed on to consumers. Since there was delay in commissioning, the entire cost on account of time overrun is liable to be borne by Tarini.
58. As per Tarini, there is an increase in IDC from Rs. 1.8 crores to Rs. 5.5 crore, i.e., an increase of nearly three times, for which there can be no justification, particularly when the capital cost itself, even as per Tarini, has only approximately doubled. This clearly establishes that the substantial increase in IDC is directly attributable to the delay in commissioning. Tarini has now sought to contend during arguments that the IDC is claimed only up to 2010; however, there is no such finding by the State Commission nor any such specific averment in the pleadings before this Tribunal, and the said contention is an afterthought.
Claim of Liquidated Damages as Capital Cost
59. Tarini in its Appeal 298 of 2018 has sought to challenge the disallowance of liquidated damages of Rs. 27.99 lakhs from capital cost. It is an admitted position that Tarini had paid the said liquidated damages to GUVNL without any challenge and did not even raise the issue in Petition No. Page 36 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 1024 of 2010. The present claim is, therefore, not only time-barred but also barred by the principles of constructive res judicata. Tarini cannot now indirectly challenge the imposition of liquidated damages by seeking to capitalise the same as part of capital cost, as a party cannot be permitted to do indirectly what it is barred from doing directly, as held in "Jagir Singh v. Ranbir Singh, (1979) 1 SCC 560 and Sant Lal Guptav. Modern Coop. Group Housing Society Ltd., (2010) 13 SCC 336". Having failed to challenge the levy of liquidated damages, Tarini cannot now seek to negate its effect by adopting such indirect methods. It is impermissible for Tarini to seek inclusion of liquidated damages paid to GUVNL as part of capital cost. Liquidated damages are levied for delay in commissioning and to compensate for Tarini's failure to supply power and, therefore, cannot by any measure be capitalised as capital cost of the project. Tarini is, in effect, seeking to pass on the consequences of its own defaults to GUVNL and the consumers at large, which cannot be countenanced. Allowing such capitalisation would enable Tarini to earn interest on loan and return on equity on amounts paid as penalty for delay. This would defeat the very purpose of liquidated damages and result in undue enrichment of Tarini. The consumers would be unfairly burdened not only with the loss of power but also with higher tariff on account of such impermissible costs, which is wholly unjustified and untenable.
Submissions urged on behalf of TARINI
60. It is submitted that delay in commissioning of the project from the SCOD of 28.09.2009 as per PPAs dated 29.01.2008, was occasioned due to a change in the evacuation scheme by GETCO from Rakholi in Dadra and Nagar Haveli to Mota Pondha, thereby increasing the transmission line length from the originally envisaged 4 kilometers to approximately 24.5 kilometers, which was duly notified vide letter dated 24.03.2010, However, GUVNL proceeded to impose and recover liquidated damages amounting to Rs.
Page 37 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 27.99 lakhs from the Appellant towards the alleged delay in commissioning of the 3 MW project.
61. As is evident from the certificate of the independent engineer dated 18.02.2010, SHP-I and SHP-II were ready for commissioning, and Tarini is entitled to capital cost of the project incurred up to the said date, including the capital cost of the steel liner in respect of SHP-II, without any IDC beyond the completion certificate. The delay up to the issuance of the completion certificate was solely on account of the transmission line issue, as detailed in Tarini's force majeure letter dated 24.03.2010. Tarini, in its tariff petition, had challenged the levy of liquidated damages by claiming the same as part of capital cost; however, the GERC erroneously disallowed the same in paragraph 15.5 of the impugned order, without appreciating that Tarini cannot be fastened with liability for any delay attributable to the increase in the length of the transmission line, as specifically recorded in the said force majeure letter.
OUR CONSIDERATION AND VIEW
62. It is an admitted fact that Tarini has paid liquidated damages to the tune of Rs 27.99 lakhs on account of delay in commissioning of their project from the time line stated in the PPA, however Tarini sought to include the said amount as part of the capital expenditure in its petition before the State Commission. The State Commission, in the Impugned Order, disallowed the same. As submitted, Tarini vide its letter dated 24.03.2010 had requested GUVNL for the waiver of liquidated damages due to force majeure event (non availability of transmission facility) as a support measure to the small hydro projects, however the request of waiver of liquidated damages was denied by GUVNL vide its letter dated 05.05.2010. It has been contended by GUVNL that liquidated damages have been paid by Tarini, without any protest, a fact not disputed by Tarini.
Page 38 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
63. Liquidated damages are generally a pre-agreed monetary amount written into a contract that one party pay to the other if they breach the agreement. Liquidated damages are a contractual remedy for breach, not a component of regulated pricing. The Tarini has paid the liquidated damages in terms of the breach and not even disputed the same. Therefore, during the exercise of Tariff determination, it is not permissible to claim Liquidated damages as part of capital cost. In our view, there is no error in the Impugned Order with regard to disallowance of Liquidated damages as part of Capital cost, and the Impugned Order is accordingly upheld on this issue.
64. GUVNL has contended that State Commission, in the Impugned Order, failed to disallow the IDC and IEDC, on account of delay in commissioning of the Hydro Projects from the scheduled commissioning date as per the PPA, while Tarini has contended the delay occurred on account of Force Majeure event, on account of change in the evacuation scheme by GETCO from Rakholi in Dadra and Nagar Haveli to Mota Pondha, which was duly notified vide letter dated 24.03.2010. At the outset, it is to be noted that the alleged Force Majeure letter dated 24.03.2010, relied upon by Tarini is subsequent to the claim of Liquidated damages raised by GUVNL vide its letter dated 18.03.2010. As noted above, Tarini has paid liquidated damages as claimed by GUVNL, on account of delay in the project, without contesting it, accordingly it can be reasonably assumed that Tarini accepted that delay is on their account and even in the Tariff Petition filed before the State Commission, levy of liquidated damages has not been contested on account of Force majeure; rather, the said amount was merely included as part of the project cost.It is relevant to note the Force Majeure clause of the PPA.
"8.1 Force Majeure Events:
a. Neither Party shall be responsible of liable for or deemed in breach hereof because of any delay or failure in the performance of its obligations hereunder (except for obligations to pay money due prior to occurrence of Force Majeure Events under this Agreement) or failure Page 39 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 to meet milestone dates due to any event or circumstance (a "Force Majeure Event") beyond the reasonable control of the Party experiencing such delay or failure, including the occurrence of any of the following:
............
............
8.1 b The availability of Article 8.1 (a) to excuse a Party's obligations under this Agreement due to a Force Majeure Event shall be subject to the following limitations and restrictions:
(i) the affected party gives the other Party written notice describing the particulars of the Force Majeure Event soon as practicable after its occurrence.
65. The Power Purchase Agreement expressly stipulates a specific procedure and timeline for issuance of notice upon occurrence of a Force Majeure event, such contractual requirement is required to be complied with both in letter and in spirit. From the list of dates submitted by Tarini, it is evident that change in the location of substation as Mota Pondha instead of Rakholi, was communicated vide GETCO letter dated 05.09.2008, while the letter referred by Tarini, to be construed as a force majeure notice is dated 24.03.2010, almost after a lapse of 5-6 months, that too in response to the liquidated claim raised by GUVNL, which cannot be construed as a reasonable or practical time line after occurrence of an event to give notice under Force Majeure Clause. The notice contemplated under the Force Majeure clause is not an idle formality or a mere procedural ritual; rather, it constitutes the contractual mechanism that sets the claim in motion and enables the counter-party to take necessary mitigating and administrative measures. The Power Purchase Agreement expressly stipulates a specific procedure and timeline for issuance of notice upon occurrence of a Force Majeure event, such requirement is required to be complied with in letter and spirit. This Tribunal in its judgement dated 07.11.2017 in "Maruti Clean Coal and Power Limited v. Power Grid Corporation of India Limited and Anr.;
Page 40 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 2017 SCC OnLine APTEL 70" has emphasized that compliance with the notice requirement, where made a condition precedent, is mandatory for availing relief under the Force Majeure clause. Therefore, where the contract makes issuance of notice within a stipulated period or reasonable time, a condition precedent, strict adherence thereto is mandatory, and failure to comply would disentitle the affected party from seeking the contractual relief.
66. In this context, it is profitable to quote from the judgement dated 28.08.2024 passed by this Tribunal in "Punjab State Power Corporation Limited v. Punjab State Electricity Regulatory Commission & Ors.", Appeal No. 316 of 2018, as under:
41. Perusal of this force majeure clause of the PPA reveals that the party invoking the clause was required to serve a written notice of the force majeure events upon the other party within 7 days of the occurrence of the force majeure events. Concededly, no such notice has been issued in the present case by the 2nd respondent to either the appellant or the 3rd respondent, and therefore, it was precluded from claiming relief for such force majeure events.
67. In view of the settled position of law, we hold that Tarini letter dated 24.03.2010 cannot be construed as a Force Majeure notice, the same having been issued after an inordinate delay of approximately 5 months of occurrence of the alleged event and accordingly not entitled for claim of Liquidated damages under tariff and other consequential relief.
68. We therefore hold that Tarini is not entitled for IDC and IEDC beyond the scheduled completion date in terms of PPA, having failed to invoke Force majeure clause in terms of PPA signed with GUVNL. The Impugned Order with regard to denial of liquidated damages in the tariff is upheld and the issue with regard to allowance of IDC & IEDC for delayed period is remanded to State Commission to ascertain IDC & IEDC up to SCOD as per PPA. We would however like to add that Tarini shall be eligible for the actual cost Page 41 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 incurred post scheduled completion date as per prudence check of the cost by State Commission on remand in terms of this judgement.
ISSUE D & J: CAPACITY UTILISATION FACTOR (CUF) Submissions urged on behalf of GUVNL
69. State Commission has allowed a CUF of 66% allegedly based on actual generation data; however, CUF ought to be considered at 70% in terms of the Minimum Guaranteed Supply stipulated in the PPA and even on the basis of actual generation. While Tarini had initially sought to rely upon a CUF of 42% as per the Generic Tariff Order dated 14.12.2016, it has during arguments sought to restrict its case to alleged actual generation of around 60%. Under the PPA dated 29.01.2008 and supplementary PPA dated 11.07.2014, Tarini had voluntarily agreed to a Minimum Guaranteed Supply of 70%, and such stipulation was not pursuant to any direction of the State Commission but was a conscious contractual commitment by Tarini based on its own assessment of water availability and generation capability.
70. The contention of Tarini that the Minimum Guaranteed Supply clause in the PPA stands nullified by the judgments of this Tribunal and the Supreme Court is misconceived. The decision of the Supreme Court proceeded on the basis that tariff fixed by the State Commission, even if incorporated in the PPA, is not the result of volition of the parties and cannot be altered except by mutual consent. The said finding was in the context of the tariff of Rs. 3.29 per unit determined by the Tariff Order dated 14.06.2007. In contrast, the agreement of 70% in the PPA is not based on any tariff determination by the Commission but is a voluntary contractual commitment undertaken by Tarini. It is always open to a generator to agree to a higher or better norm for the benefit of consumers, and having consciously done so, Tarini cannot now resile from or seek to dilute its own contractual obligation. The observations of the Supreme Court regarding the review of tariff in public interest dictates Page 42 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 in surrounding circumstances. There is no reason whatsoever why the 70% needs to be reviewed.
71. It is further submitted that Tarini has never challenged the said term of the PPA and had only approached the Commission for determination of tariff, and it cannot now, by way of the present Appeal, seek to indirectly challenge or dilute the contractual stipulation. It is a well-settled principle of law that the terms of a PPA are sacrosanct and binding on the parties, as held by the Supreme Court in GUVNL v. Solar Semiconductor Power Company Limited & Anr, (2017) 16 SCC 498. The State Commission, in the Impugned Order, has itself accepted that the stipulation of 70% was a conscious decision of both GUVNL and Tarini and that the Commission cannot interfere with the terms of the PPA.
72. Without prejudice to the contention that Tarini has contractually agreed to a CUF of 70% under the PPA, it is submitted that even on the basis of the principle adopted by the State Commission of considering actual generation data, the appropriate CUF ought to be taken as 70%. The State Commission has recorded that the actual generation is closer to the 70% CUF as agreed and incorporated by the parties in the PPA. Thus, determination of CUF at 66% by the State Commission is erroneous, arbitrary, and unsustainable in law. If the actual generation data as placed on record by GUVNL for the period FY 2010-11 to FY 2016-17 is considered, the average CUF works out to 70.41%, even without accounting for the lower generation in FY 2016. In fact, even as per the data submitted by the Tarini for FY 2010-11 to FY 2016-17, the average CUF is 70.41%. However, the State Commission has erroneously excluded the period FY 2010-11 to FY 2012-13 and has considered only FY 2013-14 to FY 2016-17, thereby incorrectly concluding an average CUF of 66%, which approach is arbitrary and unsustainable.
73. Tarini submitted a misleading calculation to claim an actual CUF of 59% as it has considered the installed capacity of 5.6 MW even for FY 2010-11 to Page 43 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 FY 2012-13, despite actual generation being from 3 MW, and has further taken 365 days for FY 2010-11 and FY 2013-14 without proportionating for commissioning dates of Unit-I (06.08.2010) and Unit-II, thereby artificially depressing the CUF. When correctly computed, Tarini's own data reflects CUF of 91.83% for FY 2010-11, 73.17% for FY 2011-12 and 82.64% for FY 2012-13, as against the substantially lower figures wrongly projected by Tarini. Even as per GUVNL's generation data, the corresponding CUF figures are 91.86%, 73.30% and 82.73% respectively. Further, even on the State Commission's own methodology, the average CUF works out to 68.5%, which is substantially closer to the 70% benchmark stipulated in the PPA.
74. Tarini has sought to place reliance on the judgment dated 10.04.2008 of this Tribunal in Maharashtra State Generating Company Limited v. Maharashtra Electricity Regulatory Commission, Appeal Nos. 86 and 87 of 2009 (Paras 29 to 31), on the issue of Station Heat Rate in cases where the normative SHR is allegedly not achievable. The said reliance is wholly misplaced and of no assistance to Tarini. The State Commission has specifically upheld the application of the PPA terms but has failed to consider the same for CUF.
Submissions urged on behalf of TARINI
75. GERC, by the impugned order, has erroneously determined the Capacity Utilisation Factor (CUF) of the Project at 66%. In terms of Section 61(d) of the Electricity Act, 2003, a generating company is entitled to recovery of its actual cost of generation, which necessarily requires that performance parameters be realistic, actual and achievable, a proposition of law consistently upheld by this Tribunal, including in its judgment dated 10.09.2008 in Maharashtra State Power Generation Co. Ltd. v. MERC and Ors. passed in Appeal Nos. 86 & 87 of 2007. However, in the impugned order, the Commission has failed to consider the actual CUF achieved by Tarini from the date of scheduling of power from both units, namely SHP-I and SHP-II. In Page 44 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 order to demonstrate this, Tarini has placed on record CUF calculations from FY 2014-15 to FY 2023-24, which reflect an average CUF of 63.31%, based on generation figures as per the State Energy Accounts prepared by Gujarat SLDC, in this context it is also submitted that it is new document unsubstantiated by Affidavit.
OUR CONSIDERATION & VIEW
76. The State Commission, in the Impugned Order, has recorded that average CUF for the period FY 2010-11 to FY 2016-17 works out as 70.41 %, in which highest CUF achieved is 91.86% in FY 2010-11 and lowest of 60.54 % in FY 2014-15; however considering the commissioning of Unit No 2 in FY 2013-14, and based on energy generation from both the units during FY 2013-14 to FY 2016-17, a CUF of 66 % has been allowed.
77. It has been contended on behalf of Tarini that the CUF calculations for the period fromFY 2014-15 to FY 2023-24, reflect an average CUF of 63.31%, based on generation figures ( given below) as per the State Energy Accounts prepared by Gujarat SLDC and same should be considered for tariff determination.
2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022- 2023- 15 16 17 18 19 20 21 22 23 24 ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... .....
..... ..... ..... ..... ..... ..... ..... ..... ..... ..... .....
CUF% 60.48 61.93 61.35 58.35 55.75 59.65 72.15 68.20 70.48 64.77
78. Per Contra, GUVNL has contended that CUF of 70% as voluntarily agreed by Tarini in the PPA and Supplementary PPA should only be considered instead of 66 % allowed in the Impugned Order.
Page 45 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
79. Though it is fact that redetermination of tariff involves both capital cost and energy generated (CUF), we take note that in the first round of proceedings, Tarini has prayed for re-determination of tariff only on account of substantial increase in cost on various factors and our attention has not been drawn towards any specific plea with regard to non-feasibility of achieving Minimum Guaranteed Offtake/ CUF of 70% as agreed in the PPA. Accordingly, in the remand proceedings, the issues involved was with regard to capital Cost of the Project, with this Tribunal specifically observing that tariff reflected in PPA, being based on generic tariff has not analysed the Capital Cost. Accordingly, it is relevant to quote the definition of "Minimum Guaranteed Offtake Energy" as per Article 1 of the PPAs dated 29.01.2008 signed between GUVNL and Tarini, "Minimum Guaranteed Offtake Energy" means guaranteed offtake by GUVNL of seventy per cent (70%) of the Contracted Capacity during the Fiscal Year excluding force Majeure period, if any."
80. Further as per clause 4.1 (n) & 4.2 (b) of the PPAs, as reproduced below, Tarini is obligated to supply minimum guaranteed power and GUVNL is obligated to off take Minimum guaranteed power or pay the payment as stipulated in the said clauses in case of variation.
"To supply the Minimum Guaranteed power as specified at Article-1 (qq) or else pay the compensation for difference between Minimum Guaranteed Supply energy and Actual Energy declared available to SLDC/GUVNL at the Rs. 0.60 per kWh within thirty days to GUVNL."
" To offtake the Minimum Guaranteed power as specified at Article - 1 (pp) or else pay the compensation for difference between Minimum Guaranteed offtake energy and Actual Scheduled Energy subject to the Power Producer has made available the Capacity up to Minimum Guaranteed off take at the Rs.0.60 per kWh within thirty days to Power Producer."
81. It is noted that in the Supplementary PPA dated 11.07.2014, executed after commissioning of the project, Tarini acknowledged its ability to generate higher units, including generation of 6.2 MW against an installed capacity of Page 46 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 5.6 MW, and yet retained the stipulation of 70% Minimum Guaranteed Offtake Energy without raising any issue of water availability or other operational constraints, thereby reaffirming that the project was capable of achieving the said 70% Minimum Guaranteed Offtake Energy.
82. It is therefore clear that Tarini has voluntary agreed for the Minimum Guaranteed Off Take of 70% and agreed for penalties/ payment of charges for not meeting the same in terms of Clause 4.1 of the PPA and thus the Minimum Guaranteed offtake is nothing but the agreed CUF for the project. The State Commission, in the Impugned Order, has also noted the average CUF of 70.41% for the FY 2010-2011 to FY 2016-17, however we find there is no rational for considering the energy data of only FY 2013-14 to FY 2016- 17 to arrive at a CUF of 66% in the Impugned Order to be applicable for tariff determination for the projects of Tarini for the entire operational life.
83. Tarini has placed reliance on the judgement dated 10.09.2008 passed by this Tribunal in Maharashtra State Power Generation Co. Ltd. v. MERC and Ors. in Appeal Nos. 86 & 87 of 2007, wherein it was held that the performance parameters ought to be realistic, actual and achievable; Relevant paragraph of the Judgement is reproduced below:
"31We are of the opinion that if the SHR allowed by the Commission is not achievable, then the same would not be in anybody's interest; entity would suffer by not recovering its reasonable cost of supply of the electricity and the consumers would not get the right signal about the pricing of the product they would be using. It is as much essential for the consumers to know the right price of the product they are using, as much as it is for the entity to recover its cost of operations. Unless the consumer knows the true price of the product, he will not be able to take an informed decision about the quantum of his consumption, particularly the industrial and commercial consumers who recover such costs from their consumers. Determining right price is also essential to send signals to the prospective developers/investors in the sector enabling them to take decision about the investment potential in the sector."Page 47 of 76
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
84. The aforesaid judgement is about is in the context of station heat rate as stipulated and in case it is not achievable then it may not give right signal about the pricing of the product. However, the factual matrix of the said case is clearly distinguishable and is not applicable to the present case. We take note from the energy generation data submitted by the Tarini, though authenticity of same has been questioned by GUVNL as same was not submitted by way of affidavit in their written submissions, that both the projects put together have achieved a CUF of 70 % and above in the FY 2020-21 & FY 2022-23 and for FY 2021-22 at 68.20 %, very close to 70 %. Further, from the data noted in the Impugned Order, CUF above 70% has also been actually achieved in FY 2010-11 : 91.86 %, FY 2012-13 :82.73 %, FY 2013-14 87.74 %. Thus, it can be easily concluded that 70% CUF at M/s Tarini project is realistic and achievable as the same has been actually achieved and thus referred judgement is of no avail to the Tarini.
85. In view of above deliberation, we are of the view that CUF of 70 %, as agreed between the GUVNL & Tarini in the PPAs should be applicable in project specific tariff determination and Impugned Order on this issue is set aside.
ISSUE E : ALLOWANCE OF PREMIUM OF RS 0.23 PER UNIT Submissions urged on behalf of GUVNL
86. The State Commission has erroneously treated the premium/license fee of Rs .23 per unit as a cost of Tarini, despite the specific stand of the Narmada Water Resources Department, which conducted the bid, that the license fee is required to be borne by the Concessionaire, i.e., Tarini, and cannot be passed on to the consumers. The State Commission itself, in the Generic Tariff Order dated 14.12.2016, has held that the premium in small hydro power projects is a commercial decision of the developer and is not to be considered for tariff determination. Permitting such costs to be passed Page 48 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 through in tariff would create a perverse incentive, enabling bidders to quote unreasonably high fees to secure projects on the assurance that such costs would be passed on to consumers. The reliance placed by Tarini on the judgement of this Tribunal dated 09.09.2025 in "Gujarat Urja Vikas Nigam Limited v. Ajanta Energy Private Limited, in Appeal No. 81 of 2020, is distinguishable, inter alia, as that case involved comparable competitive bids, and did not specifically consider the Generic Tariff Order dated 14.12.2016, and did not involve the express stand of the Water Resources Department, all of which are present in the instant case.
Submissions urged on behalf of TARINI
87. In the impugned order, the GERC has correctly allowed the license fee paid by Tarini to GoG/NWR as part of the tariff, which has been challenged by GUVNL in its appeal before this Tribunal. The issue of inclusion of license fee in tariff is no longer res-integra in view of the recent judgment of this Tribunal dated 09.09.2025 in Appeal No. 81 of 2020 in "GUVNL v. Ajanta Energy Private Ltd. and Ors.", wherein this Tribunal upheld the allowance of license fee as part of tariff. Accordingly, the impugned order, to the extent it allows the license fee paid by Tarini to GoG, is correct in law.
OUR CONSIDERATION AND VIEWS
88. The Tarini has quoted a license fee of 0.23 /kwh payable to the NWR, Govt of Gujarat and has been allowed as pass through in the project specific Tariff determination. GUVNL has objected to the pass through of the license fee since it is a commercial decision of Tarini to win the Project. It is profitable to quote, from the judgement of this Tribunal dated 09.09.2025 in Appeal No. 81 of 2020 in GUVNL v. Ajanta Energy Private Ltd. and Ors; 2025 SCC OnLine SC 1602;
"37. It is not in dispute that bids for the power project in question, it was mandatory for the bidders to quote royalty premium even though no minimum Page 49 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 amount was stipulated for the same in the provisions of Gujarat Industrial Development Board Act, 1999. The highest bid received in the bidding for the power project in question carried a royalty premium of Rs 0.90/unit. In order to match the said bid, 1st respondent quoted Rs. 0.91/unit, which is only Rs 0.001 i.e. one paisa higher than the earlier highest bidder Therefore, it is not a case where 1st respondent had quoted royalty premium of Rs. 0.91/unit on its own volition and without any reasonable basis. It was the compulsion of the 1st respondent to quote the said amount of royalty premium in order to outweigh the highest bidder and obtain the power project. In these circumstances, we wonder as to why the requirement of payment of such royalty fee cannot be considered as part of cost of the power project and be permitted as passthrough in tariff.
38. When we enquired from the learned counsel for the appellant as to whether the bids without offering such royalty premium could have been entertained and accepted, the answer was "no". It, therefore, follows that quoting of royalty premium in the bid was mandatory and the same cannot be left out of consideration merely because the successful bidder quotes a higher royalty premium in order to outsmart its rivals."
89. In our considered view, the facts of the present case is not any different from the facts considered in above judgement as in the present case also bidder need to quote licensee fee to NWR, GoG for implementation of the hydro project in terms of bidding carried out by NWR, GoG. In terms of the remand proceedings, the State Commission was to undertake Project Specific Tariff determination. As such, license fee paid by Tarini to NWR, GOG is a cost incurred for generation of electricity from the water received from NWR and can be equated to be the fuel cost for the project. Under project specific determination of tariff, legitimate expenses for generation of electricity incurred is to be considered. In view of above deliberations, we do not find any error in the Impugned Order and same is upheld on this issue.
ISSUE F : HIGHER INTEREST RATE OF 13.2 % FOR LOAN AND WORKING CAPITAL Submissions urged on behalf of GUVNL Page 50 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
90. The State Commission has allowed an interest rate of 13.2% towards interest on loan as well as interest on working capital. The project-specific parameters of Tarini do not justify such a high interest rate, particularly when comparable renewable and hydro projects in the State have been financed at significantly lower rates, including 10.25% and 11.75% during the relevant periods. The State Commission has failed to conduct any meaningful prudence check on this aspect, even though prudence check expressly includes examination of the financing plan. Further, even in the Wind Tariff Order dated 30.01.2010 and the Generic Tariff Order dated 14.12.2016 for Small Hydro Power Projects, the interest rates considered were substantially lower, being around 10.25% to 11.8%, which fact is also noted in the Impugned Order. Accordingly, irrespective of the actual interest claimed by Tarini, for purposes of prudence, the interest rate as per the applicable Wind Tariff Order or the Generic Order dated 14.12.2016 ought to be considered.
91. Without prejudice to the above, it is submitted that, in any event, in respect of interest on working capital, Tarini failed to place any supporting documents on record, as noted in the Impugned Order, not even to substantiate that any loan had in fact been availed. In the absence of such material, the State Commission ought to have applied the normative interest rates as prescribed under the applicable generic tariff orders. Tarini has also failed to furnish any justification whatsoever for adoption of such higher interest rates, rendering the impugned allowance arbitrary and unsustainable. With regard to reliance placed by Tarini upon the judgments of this Tribunal in " MEGTPCL v. MERC in Appeal No. 18 of 2019 dated 28.11.2022, and "DTL v. CERC", in Appeal No. 223 of 2022 dated 04.09.2025, it is submitted that in both the judgments, the findings are founded upon specific provisions of the applicable Regulations; in the present case no such corresponding regulatory provision has been referred to On the contrary, the prudence check contemplated under the GERC MYT Regulations expressly includes examination of the financing plan, which would encompass the rate of Page 51 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 interest, and permits consideration of prevailing industry norms. It is further submitted that in the MEGTPCL case, it was specifically noted that the rate of interest claimed was lower than the prevailing refinancing rate of interest in the open market, which is not the factual position in the present case.
Submissions urged on behalf of TARINI
92. It is submitted that the contention of GUVNL that the State Commission has erroneously allowed interest on loan and interest on working capital at 13.2% per annum, despite the generic tariff orders dated 11.08.2006 and 30.01.2010 providing for interest at 10.25% and 11.75% respectively, is wholly misconceived.
93. The generic tariff was inapplicable to Tarini, as this Tribunal has already held in its judgment dated 31.05.2012, recognizing Tarini's entitlement to project-specific tariff. It is a settled principle of law that interest on loan and interest on working capital must be allowed on the actual basis, as consistently upheld by various judgments of this Tribunal; Appeal No. 18 of 2019 titled as MEGPTCL v. MERC dated 28.11.2022 and Appeal No. 223 of 2022 titled as Delhi Transco Ltd. v. CERC and Ors. dated 04.09.2025.
OUR CONSIDERATION AND VIEWS
94. As already held above that in the project specific tariff determination, the State Commission need to undertake prudence check of the actual cost incurred which shall also include the rate of interest on the loan availed for funding of the project and working capital loan in line with the Regulation. GUVNL has contended that rate of interest availed by Tarini is higher than the rate considered by State Commission in the Generic Tariff order. However, GUVNL has not referred to any Regulations which caps the actual rate of interest availed by Project entity under project specific tariff determination to the interest rate considered in the generic tariff order. It is profitable to reproduce relevant paragraphs of the judgements of this Tribunal Page 52 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 relied upon by the Tarini, wherein it has been held that, in project-specific tariff determination, the actual rate of interest, in terms of Regulation, subject to prudence check, may be considered for the purpose of tariff computation:
Judgement dated 28.11.2022 in Appeal No. 18 of 2019 titled as "MEGPTCL v. MERC"
"58. In the present case, the relevant Regulations provide for considering the actual weightage average rate of interest computed on the basis of actual loan portfolio at the time of trying-up and is applicable for all types of long term loans as the Regulations do not differentiate loans obtained from public sector or private sector or ICDs also, there is no restriction upon the licensee under the regulatory framework to obtain long term finance from group entity 59 Therefore, the claim of the Appellant that the interest on the basis of the actual loan portfolio of the Appellant which also includes the loan availed through ICD Agreement at the rate of 13.25% p.a. in line with the relevant Regulations has merit and is allowed."
Judgement dated 04.09.2025 in Appeal No. 223 of 2022 titled as "Delhi Transco Ltd. v. CERC and Ors."
"63. The weighted average rate of interest on normative loans for the Appellant must be computed on the basis of the Appellant's actual loan portfolio and corresponding weighted average interest rates as submitted and supported by documentary evidence.
64. The Commission is directed to rehear the interest on loan component and determine the interest on normative loan based on the actual weighted average interest rate applicable to the Appellant's borrowings for the relevant tariff period ensuring compliance with the 2014 Tariff Regulations."
95. The present case pertains to project specific tariff determination, accordingly State Commission role is to ensure that tariff is determined in accordance with the extant Regulations. It is interesting to note that neither GUVNL, nor Tarini as well as State Commission has referred to the applicable Regulation while determining rate of interest of Loan or Working capital. We note that GERC (Multi Year tariff) Regulations 2011, applicable for control Page 53 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 period of 5 years from 1 April, 2011 to 31 March, 2016, should be the applicable Regulation for the Tarini Project and its Regulation 39.5 has following provisions with regard to interest on loan:
"39.5 The rate of interest shall be the weighted average rate of interest calculated on the basis of the actual loan portfolio at the beginning of each year applicable to the Generating Company or the Transmission Licensee or the Distribution Licensee:
Provided that if there is no actual loan for a particular year but normative loan is still outstanding, the last available weighted average rate of interest shall be considered:
Provided further that if the Generating Company or the Transmission Licensee or the Distribution Licensee, as the case may be, does not have actual loan, then the weighted average rate of interest of the Generating Company or the Transmission Licensee or the Distribution Licensee as a whole shall be considered."
96. The State Commission in the Impugned order at Para 24 has deliberated in details about the various loans availed by the Tarini and their interest rate and has worked out an average rate of interest as 13.2 %, which has been allowed for the purpose of Tariff determination. In view of above deliberations, considering binding precedents and extant Regulations, we find no error in the Impugned Order with regard to Rate of interest allowed on loan and the Impugned Order is upheld on this issue.
97. With regard to Interest on working capital, it has been noted in the Impugned Order that though no details in support of interest on working capital have been provided, however it is unlikely that working capital being short term loan, lenders would extend working capital loan at a rate better than the rate of interest on term loan considered by Commission as 13.2% and the state commission allowed the same rate for computation of interest on working capital. While we do not find merit in the contention of GUVNL that normative interest rates as prescribed under the applicable generic tariff orders be made applicable for interest rate for working capital, we note that Page 54 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Regulation 41.1 (c) d of GERC (Multi Year tariff) Regulations 2011, contains specific provisions governing the rate of interest applicable to working capital. The said provisions are reproduced hereinbelow:
"(d) Interest on working capital shall be allowed at a rate equal to the State Bank Advance Rate (SBAR) as on 1stApril of the financial year in which the Petition is filed."
98. Accordingly, in our view, provisions of Regulations for interest rate on working capital should have been considered in project specific tariff determination. Accordingly, the issue pertaining to the interest rate on working capital is remanded to State Commission to work out the same in terms of applicable Regulations.
ISSUE G &K : ALLOWANCE OF REVISED TARIFF RETROSPECTIVELY & CARRYING COST FOR THE PERIOD PRIOR TO TARIFF DETERMINATION Submissions urged on behalf of GUVNL
99. The State Commission has erred in allowing the revised tariff retrospectively from the date of commissioning of the project, whereas the tariff was amended pursuant to the directions of the Supreme Court and, therefore, could operate only prospectively. There is no statutory power to amend a tariff order with retrospective effect. Further, Tarini's contention that the earlier Tariff Order dated 14.06.2007 is illegal and nonest is wholly erroneous and misconceived, as the said Order was never set aside and, having never been challenged, continues to remain valid and binding. The Supreme Court has also not held that the said Tariff Order is inapplicable, but has only recognised the power of the State Commission to review or amend tariff in appropriate circumstances. Any such amendment, however, can take effect only from the date of the amending the order. In terms of Section 64(6) of the Electricity Act, 2003, a tariff order continues to be in force unless Page 55 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 amended or revoked, and any amendment can operate only prospectively from the date of the order.
100. It is further submitted that the Tarini is not entitled to any carrying cost, and the State Commission has rightly disallowed any such claim. The present proceedings before the State Commission were remand proceedings with a limited scope, pursuant to the directions of the Supreme Court, wherein it was specifically held that the parties shall bear their own costs. In the absence of any direction granting interest or carrying cost, the State Commission could not have exceeded the scope of remand or granted any relief not expressly permitted by the Supreme Court. It is a settled law that in remand proceedings, no relief beyond the scope of the remand order can be granted.
101. GUVNL has at all times duly paid tariff strictly in accordance with the PPA, and until re-determination of tariff, no additional tariff was payable. Admittedly, the direction to raise supplementary invoices arose only pursuant to the order dated 07.05.2018, and there was no default whatsoever on the part of GUVNL in payment of invoices, and therefore no liability to pay any interest can arise. Without prejudice, Tarini had not even sought any relief towards carrying cost or interest before the State Commission, in view of the Supreme Court's directions, no such costs were permissible. It is a well- settled principle that reliefs cannot be granted in the absence of specific pleadings and prayers, as held by the Hon'ble Supreme Court in M/s Trojan & Company v. Rm. N.N. Nagappa Chettiar AIR 1953 SC 235 (Para 22) and "Ram Sarup Gupta v. Bishun Narain Inter College'; (1987) 2 SCC 555 (Para 6). State Commission could not have granted any interest or carrying cost in the absence of any specific prayer, and any such grant would be wholly without jurisdiction and liable to be set aside.
102. Reliance is placed on the decision of the Supreme Court in Nabha Power Limited -v- Punjab State Power Corporation Limited; (2018) 11 SCC 508, wherein the Court recognising that the interest was not claimed at Page 56 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 any stage were not inclined to grant interest. In the present case also, Tarini is raising the issue of carrying cost in the remand proceedings only and when State Commission has not granted any such relief since there was no claim towards it.
103. Reliance placed by Tarini's on the judgement of this Tribunal in "SLS Power Limited v. Andhra Pradesh Electricity Regulatory Commission, Appeal No. 150 of 2011 and batch, is wholly misplaced and inapplicable to the facts of the present case. The said decision predates the judgment of the Supreme Court in the Nabha case and does not consider the said binding precedent. Further, in that case, the issue of interest was specifically raised and the tariff orders were set aside with directions for fresh determination, which is not the position here. In the present case, the Tariff Order dated 14.06.2007 was never challenged, was accepted by Tarini, and was incorporated in the PPA, and it was only thereafter that Tarini sought re- determination. Accordingly, the said decision is distinguishable on facts and law and is of no assistance to Tarini, particularly when the revised tariff is in any event applicable only prospectively. Without prejudice to the above, and in any event, no tariff could have been determined in the absence of complete and requisite information. The decision in SLS Power does not address this aspect. In the present case, I.A. No. 8 of 2016 was filed only on 05.10.2016, pursuant to which Tarini allegedly furnished information for claiming revised tariff. Even in the said I.A., Tarini did not provide all required particulars and Consolidated Volume of Documents were filed only on 05.06.2017, along with revisions in its claim. Thus, even as per Tarini's own case, complete documentation was furnished only in June 2017. In the absence of complete information, there could be no determination of tariff and, consequently, no question of interest or carrying cost can arise. In this regard, reliance is placed on "Punjab State Power Corporation Limited v. Punjab State Electricity Regulatory Commission", Appeal No. 174 of 2013, decided on 22.04.2015. It is further contended that the Tarini has placed reliance upon the decision Page 57 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 in NDPL v. DERC, Appeal No. 153 of 2009. The said judgment pertains to a different factual matrix involving a true-up exercise, which is not the position in the present case. In that matter, DERC had allowed carrying cost, and the issue under consideration was confined to the rate at which such carrying cost was to be granted. In the present case, there is no deferment of costs as was involved therein.
104. Further, Tarini has made no submissions on the applicable interest rate. Without prejudice to the denial of any entitlement to carrying cost, it is submitted that, in any event, the interest contemplated under the PPA and as applied for interest on loan is simple interest only.
Submissions urged on behalf of TARINI
105. It is contended that the GERC, in the impugned order, has failed to grant carrying cost to Tarini, notwithstanding that the PPA tariff is non est in law and that Tarini is entitled to receive tariff as determined by the GERC from the date it commenced supply of power. Consequently, Tarini has been deprived of the actual tariff from the date of commencement of supply, while GUVNL has been paying a tariff of Rs. 3.49 per unit. It is well-settled law that carrying cost must be provided from the date the revised tariff becomes applicable as held in following judgements of this Tribunal:
a) SLS Power Limited v. APERC & Ors., Appeal nos. 150, 166, 168, 172, 173 of 2011, dated 20.12.2012
b) North Delhi Power Ltd. v. Delhi Electricity Regulatory Commission, Appeal No. 153 of 2009, dated 30.07.2010
106. Accordingly, Tarini is entitled to carrying cost in respect of the deferred recovery of the legitimate tariff payable from the date of commencement of power supply, i.e., from 2010, as determined by the GERC. It is further submitted that GUVNL has made a misleading submission that that Tarini is Page 58 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 claiming retrospective tariff and same is wholly misconceived, as no legally valid or sustainable tariff existed for Tarini in terms of Sections 61 and 62 of the Electricity Act, 2003. Therefore, any tariff determined by the GERC under the aforesaid provisions must be applied from the date of commencement of supply, and cannot in any manner be characterized as a retrospective revision of Tarini's tariff.
OUR CONSIDERATIONS & VIEWS
107. It has been contended on behalf of GUVNL that State Commission has erred in allowing the revised tariff retrospectively from the date of commissioning of the project and that the same ought to operate only prospectively; since the earlier Tariff Order dated 14.06.2007 was never set aside and accordingly in terms of Section 64(6) of the Electricity Act, 2003, a tariff order continues to be in force unless amended or revoked, and any amendment can operate only prospectively from the date of suchorder. Per Contra, it has been contended on behalf of Tarini that it has been found that the PPA tariff quoted in the PPA, based on generic tariff is non est in law, and therefore, Tarini is entitled to receive tariff as determined by the GERC from the date of commencement of supply of power. The State Commission in the Impugned Order has allowed the project specific tariff for the Tarini's project at Rs 3.61 /kwh and has made the same applicable from the date of commissioning of the project.
108. It is noted that in the first round of proceedings, Tarini had filled a petition No 1024 of 2010 before the State Commission praying for increase in the power purchase cost up to Rs. 4.70/ kwh, due to steep increase in the cost of steel, cement and custom duty paid towards importing the hydro- Turbines, generators and extension of transmission line of 24 Km and several underwater works and fluctuations in the foreign currency during recession. The said petition was rejected by the State Commission vide its order dated 03.09.2010, holding that the petition was not maintainable as the Commission Page 59 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 could not re-open the PPA and re-determine the tariff by considering escalated cost of the project.
109. The Matter was assailed before this Tribunal by Tarini. This Tribunal, in its order dated 31.05.2012, at para 29 as reproduced in preceding paragraphs, very distinctly noted that after the enactment of the Electricity Act, 2003, there is no scope of framing by the State Commission generic tariff on the basis of pre-Act,2003 guidelines, which hardly carries any force of law. The Power Purchase Agreement has to be subordinated to the Electricity Act, 2003, and if the Power Purchase Agreement is not in conformity with the provision of the Act, 2003 then it loses its legal force. This Tribunal, taking cognizance that the State Commission itself observed that the generic tariff order was passed on 14.06.2007 on the basis of the Government policy and MNRE guidelines without going into the detailed examination of the capital cost, this Tribunal held that in such generic tariff determination did not satisfy the mandate of Section-86 (1) of the Electricity Act,2003, and that, in appropriate circumstances, the Power Purchase Agreement could be reopened.
110. It is an admitted fact that Supreme Court in its judgement dated 05.07.2016, dismissed civil Appeal No. 5875 of 2012 filed by GUVNL and upheld the Judgement passed by this Tribunal dated 31.05.2012
111. Thus, considering the Judgement dated 31.05.2012 of this Tribunal, affirmed by the Supreme Court, it was not a question of review of generic Tariff Order which was made applicable in the PPA, but the project specific tariff determination for the mini hydro projects of Tarini. Thus, we do not find merit in the contention of GUVNL that revised tariff should be applicable from the date of its determination meaning thereby that tariff reflected in the PPA would be applicable while it has been unequivocally held in this Tribunal in its judgement dated 31.05.2012 that tariff reflected in the PPA based on State Commission's generic tariff on the basis of pre-Act,2003 guidelines Page 60 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 hardly carries any force of law. Accordingly, the contention raised by GUVNL with regard to non-applicability of revised tariff from the date of commercial operation of the generating units is rejected. Impugned Order is upheld with regard to applicability of project specific tariff from the commercial operation date of hydro projects of Tarini.
112. GUVNL has placed reliance on the judgement dated 22.04.2015 passed by this Tribunal in "Punjab State Power Corporation Limited v. Punjab State Electricity Regulatory Commission, Appeal No. 174 of 2013, with regard to delay in submitting the detailed information by Tarini. In the referred judgement, delay in submitting details about two financial years (namely FY 2007-08 and FY 2008-09) was noted and had upheld the State Commission decision in disallowing carrying cost for the delayed period. However, in the present case, it is relevant to note that commissioning date of Tarini's first unit is 06.08.2010, and though exact date of filing of petition (No. 1024 of 2010) is not discernable to us, it can be reasonably assumed that same was filed before commissioning of the first unit as State Commission Order has been passed on 03.09.2010, within approximately one month of commissioning of first unit.
113. We also take note of the submissions made by Tarinithat, subsequent to the judgement passed by this Tribunal on 31.05.2012 in Appeal 29 of 2011, which was upheld by the Supreme Court, in its judgement in Civil Appeal No. 5875 of 2012 dated05.07.2016, GERC did not initiate tariff Petition filed by Tarini. It was only subsequent to Tarini filing a Contempt Petition (No. 782 of 2018 in C.A. No. 5875 of 2012) before the Supreme Court, that GERC, before the Supreme Court, submitted that it will take up the tariff Petition of Tarini for determination of tariff. Accordingly, the State commission vide its order dated 04.05.2017 directed the Tarini to issue public notice etc, while initiating the proceedings in the original petition as noted from the Impugned Order and Tarini on 05.06.2017 had submitted Page 61 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 consolidated submissions and in which it claimed tariff of Rs 5.74 per unit and license fee of Rs. 0.23/unit. Significantly, no specific delay on the part of Tarini in furnishing the details, which led to delay in finalizing the tariff petition, have been observed by the State Commission. Thus, in our view also, submissions of consolidated information on 05.06.2017 by Tarini did not have any materialistic effect on Tariff determination in the Impugned Order. The reliance placed by GUVNL on the aforesaid judgment is misplaced and of no assistance to its case. The contention raised in this regard is, therefore, rejected.
114. Tarini is aggrieved by the non- allowance of carrying cost on the differential tariff determined in the Impugned Order, per contra GUVNL has contended that it has duly paid tariff in accordance with the PPA, and that, until re-determination of tariff by the competent authority, no additional tariff was payable and in view of the observation of the Supreme Court that "parties Shall Bear Their Own Costs" and in the absence of any specific direction with regard to carrying cost, the same is not permissible in remand proceedings.
115. The eligibility of Tarini for Carrying cost is dealt in subsequent paragraphs, we however would like to delve on what does the phrase "parties shall bear their own costs" used in the judgement mean, which is referred in the context of denial of carrying cost by GUVNL. In general terms, when a judgment states that "parties shall bear their own costs", it signifies that each party must pay for their own legal expenses (including lawyer's fees, court fees, documentation, etc.) and no party is entitled to recover litigation costs from the other, regardless of who wins or loses. The court often use this phrase when case involves complex issues and both sides had reasonable grounds to litigate; court wants to avoid penalizing either party for bringing the matter to trial and conduct of both parties is such that neither deserves to be burdened with the other's costs. Such a phrase, in our considered view, Page 62 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 pertains exclusively to litigation costs and cannot, by any stretch of interpretation, be construed as a denial of carrying cost arising from tariff determination. Carrying cost is a substantive financial consequence flowing from delayed recovery of legitimate dues and stands on a footing entirely distinct from litigation costs. Accordingly, we find no merit in the contention advanced by GUVNL in this regard.It is well settled that relief must ordinarily be founded on pleadings and that parties cannot travel beyond their case as set up before the adjudicating forum. In "Trojan & Company v. Rm. N.N. Nagappa Chettiar,;(1953) 1 SCC 456", reliance on which has been placed by GUVNL, the Supreme Court held that no relief can be granted on a case not pleaded. The relevant extract of the said judgment is reproduced hereinbelow:
"38. We are unable to uphold the view taken by the High Court on this point. It is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and it is the case pleaded that has to be found. Without an amendment of the plaint the court was not entitled to grant the relief not asked for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case. The allegations on which the plaintiff claimed relief in respect of these shares are clear and emphatic. There was no suggestion made in the plaint or even when its amendment was sought at one stage that the plaintiff in the alternative was entitled to this amount on the ground of failure of consideration. That being so, we see no valid grounds for entertaining the plaintiff's claim as based on failure of consideration on the case pleaded by him. In disagreement with the courts below we hold that the plaintiff was wrongly granted a decree for the sum of Rs 6762-8-0 in respect of the Associated Cement shares in this suit. Accounts settled could only be reopened on proper allegations."
116. This judgement was in the context of claim of future interest on the decree amount and the Supreme court held as under:
"45. So far as the defendants' judgment-debtors are concerned they had done their part and paid the money to the decree-holder and had thus satisfied the decree. It was open to the Official Assignee, the decree-holder, not to take the money on the condition on which it was Page 63 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 given to him and if he had not taken the money from the defendants he could then justly have claimed future interest on this amount, but having taken the money and kept it, it could not be said that during this period anything was due to the plaintiff from the defendants. The defendants certainly had paid the decretal amount and whether the plaintiff or his predecessor-in-interest was able to use it or not was a circumstance wholly immaterial in considering whether future interest should or should not be allowed."
Thus, the issue, in this judgement pertained to future interest after decree was already served and same is not applicable in the facts of the present case.
117. In "Ram Sarup Gupta (Dead) by LRs. v. Bishun Narain Inter College", (1987) 2 SCC 555" (Para 6), reliance on which has been placed by GUVNL, the Supreme Court reiterated that while necessary and material facts must be pleaded, pleadings ought to receive a liberal construction and undue emphasis should not be placed on technical deficiencies in pleadings, particularly where the parties were fully aware of the real controversy between them and had proceeded to trial on that basis. In "Nabha Power Limited v. Punjab State Power Corporation Limited, (2018) 11 SCC 508, reliance on which has been placed by GUVNL, the Supreme Court declined to grant interest holding that no such claim had been laid at any stage of the proceedings and dispute was with regard to interpretation of contractual clauses itself. Relevant paragraph of the judgement is reproduced below:
"71. Last but not the least is the claim for interest. It is undisputed that no such claim has been laid so far, at any stage. The appellant claims to rely upon Clause 11.3.4 read with Clause 11.6.8. We have extracted the relevant clause aforesaid. No doubt there is a provision for a late payment surcharge in the event of delay in payment of a monthly bill but in the present case it is not as if there are undisputed bills remaining unpaid. There were serious disputes regarding the interpretation of the contractual clauses itself. We do not think that the present one is a fit case where the principle of compensation for deprivation should enure for the benefit of the appellant as a measure of restitution. More so as it has not been claimed by them at any stage. It does appear that this inclusion in the written Page 64 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 synopsis does seem to arise as canvassed by the learned Senior Advocate for the first respondent on account of the Tribunal not finding favour with such claim in the remand proceedings by reason of no claim being laid towards the same. We are, thus, not inclined to grant this claim."
118. The present case stands on an entirely different footing. The claim for carrying cost is not an independent or new substantive relief; rather, it is consequential and restitutive relief flowing from the principal entitlement once the same is adjudicated. This Tribunal in its judgement dated 28.07.2025 in Appeal No 107 of 2020 in "M/s Rosa Power Supply Co. Ltd. v. Uttar Pradesh Power Corporation Limited, has categorically held that carrying cost may be granted even in the absence of a specific prayer, being restitutive in nature. The said principle has since received affirmation by the Supreme Court in "Bangalore Electricity Supply Company Limited v. Hirehalli Solar Power Project LLP & Ors, Civil Appeal nos.7608 of 2021 and 6386 of 2021 dated 27.08.2024 and further reiterated in "Dr. Purnima Advani and Anr. v. Government of NCT and Anr dated 18.02.2025, Civil Appeal No.2643 of 2025, wherein it has been recognized that restitutionary compensation, including interest/carrying cost, flows as a natural consequence once the substantive claim is adjudicated. Therefore, the objection founded on absence of an express pleading for carrying cost is liable to be rejected, as grant thereof is necessary to ensure complete justice and to prevent unjust enrichment. Relevant paragraphs of the judgement are reproduced below:
"62. It is true that the appellant has not made any specific prayer for grant of carrying cost in this appeal. However, we feel that the grant of interest/carrying cost would definitely come in the ambit of "any other order" mentioned in prayer (c) of the appeal.
63. The Supreme Court, in latest judgment dated 27.08.2024 in Bangalore Electricity Supply Company Limited v. Hirehalli Solar Power Project LLP & Ors. Civil Appeal nos.7608 of 2021 and 6386 of 2021 has directed payment of Late Payment Surcharge even though Page 65 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 the same had not been pleaded by the claimants in that case. The relevant portion of the judgment is quoted hereinbelow: -
"14. Lastly, we also reject the appellant's contention that the APTEL's direction to pay late payment surcharge to the respondents is unjustified since the same was not pleaded. As we have already held, the APTEL rightly restored the tariff of Rs. 8.4 per unit and directed the appellant to pay the difference amount. The direction to pay the late payment surcharge on this amount is explicitly rooted in the PPA, and hence, is in furtherance of the intention of the parties. There is no reason to set aside the same."
64. In this context, we also find the following observations of the Hon'ble Supreme Court in a recent judgment dated 18.02.2025 in Dr. Purnima Advani and Anr. v. Government of NCT and Anr. Civil Appeal No.2643 of 2025, very material: -
"25. If on facts of a case, the doctrine of restitution is attracted, interest should follow. Restitution in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order what has been lost to him in execution of decree or order of the Court or in direct consequence of a decree or order. The term "restitution" is used in three senses, firstly, return or restoration of some specific thing to its rightful owner or status, secondly, the compensation for benefits derived from wrong done to another and, thirdly, compensation or reparation for the loss caused to another.
26. In Hari Chand v. State of U.P., 2012 (1) AWC 316, the Allahabad High Court dealing with similar controversy in a stamp matter held that the payment of interest is a necessary corollary to the retention of the money to be returned under order of the appellate or revisional authority. The High Court directed the State to pay interest @ 8% for the period, the money was so retained i.e. from the date of deposit till the date of actual repayment/refund.
27. In the case of O.N.G.C. Ltd. v. Commissioner of Customs Mumbai, JT 2007 (10) SC 76, (para 6), the facts were that the assessment orders passed in the Customs Act creating huge demands were ultimately set aside by this Court. However, during pendency of appeals, a sum of Rs.54,72,87,536/- was realized by way of custom duties and interest thereon. In such circumstances, an application was filed before this Court to direct the respondent to pay interest on the aforesaid amount w.e.f. the Page 66 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 date of recovery till the date of payment. The appellants relied upon the judgment in the case of South Eastern Coal Field Ltd. v. State of M.P., (2003) 8 SCC 648. This Court explained the principles of restitution in the case of O.N.G.C. Ltd. (supra) as under: - "Appellant is a public sector undertaking. Respondent is the Central Government. We agree that in principle as also in equity the appellant is entitled to interest on the amount deposited on application of principle of restitution. In the facts and circumstances of this case and particularly having regard to the fact that the amount paid by the appellant has already been refunded, we direct that the amount deposited by the appellant shall carry interest at the rate of 6% per annum. Reference in this connection may be made to Pure Helium Indian (P) Ltd. v. Oil & Natural Gas Commission, JT 2003 (Suppl. 2) SC 596 and Mcdermott International Inc. v. Burn Standard Co. Ltd. JT 2006 (11) SC 376."
119. In view of above deliberation, we are of the considered opinion that Tarini is entitled to get carrying cost on the differential amount arising between the revised tariff to be worked out by State Commission based on present judgement and tariff paid by GUVNL, since commissioning of the Project. Accordingly, the matter is remanded to the State Commission for the limited purpose of determining the appropriate rate of interest applicable for carrying cost, and for adjudicating whether such interest shall be computed on a simple or compound basis, in accordance with law.
ISSUE H : DISALLOWANCE OF COST OF FOR STEEL LINERS ( Rs 3 Crore);
Submissions urged on behalf of TARINI
120. In the impugned order, GERC has denied the cost of Rs. 3 Crore incurred by Tarini for providing steel liners. It is submitted that Tarini's contractual obligation to construct the hydro power project commenced only from the integration point at the dam toe, and Tarini was required to construct the penstock and the power plant downstream of the said integration point. In terms of Clause 1.2.2 of the revised DPR, Tarini's only obligation was to Page 67 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 ensure anchoring of the steel penstock of the power plant with the RCC duct of the Daman Ganga Dam for SHP-II by inserting the steel penstock into the RCC duct, which did not, and could not, imply any obligation to insert a steel liner into the entire RCC duct of the dam. After completion of the works for SHP-I and SHP-II on 06.08.2010, as certified by the independent engineer appointed by GoG/NWR under Clause 5.8.1 of the Concession Agreement, during the test runs of SHP-II in 2010, certain structural anomalies were discovered inside the RCC duct, which is a box-type structure with construction/expansion joints at every 10-meter interval and was originally designed for free-flow conditions and not for pressurized power flow. Taking note thereof, Respondent No. 3 directed stoppage of test runs and commissioning of SHP-II, resulting in suspension of generation from 2010 till November 2013. GoG/NWR vide letter dated 10.06.2013, for the first time, a requirement of a "steel liner/penstock with expansion joint" was stipulated, a requirement which was conspicuously absent from the earlier letter dated 28.07.2006 issued by the Central Design Organisation (CDO) of GoG. A plain reading of the CDO letter demonstrates that there was no requirement to lay a steel liner with expansion joint inside the RCC barrel of the Daman Ganga Dam, as the reference therein was only to proper anchorage of the steel penstock to protect against hoop stress at the junction of penstocks, and not to lining the entire RCC duct.
121. Upon inspection of the RCC duct structure, Respondent No. 3/NWR concluded that the construction joints, being attributable to the old and non- monolithic design of the RCC duct, necessitated isolation of the structure, and accordingly, subsequent to completion of the Project, directed Tarini to lay 110 meters of steel liner in the concrete barrel/RCC duct of the dam, which constituted a clear post-completion change in scope of work. It is pertinent to note that the dam itself was constructed by GoG, and under the bid, Tarini had undertaken only the construction of the hydro power project and not the dam. Although the Appellant had submitted various proposals to the Central Page 68 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Design Organisation (CDO), the same remained unresponded to, and it was only in 2013 that Respondent No. 3 granted approval for insertion of the steel liner vide letter dated 10.06.2013. The said additional work, namely installation of a 110-meter long steel liner of 2.6 meter diameter and 16 mm thickness, was neither envisaged in the approved project report nor part of the original scope, and was imposed as a post-completion requirement by Respondent No. 3/NWR. Accordingly, the contention of NWR that Tarini was required to insert the steel liner at the initial stage pursuant to alleged recommendations of the Central Design Organisation is wholly misplaced, as a bare perusal of the DPR 2006 and the approved DPR 2007 unequivocally establishes that the requirement of laying a 110-meter steel liner in the RCC duct constitutes a subsequent change in scope after completion of the Project.
122. It is reiterated that under a cost-plus tariff determination, each and every legitimate expense is required to be allowed to the generating company in terms of Section 61(d) of the Electricity Act, 2003. Accordingly, the reliance placed by GUVNL on the affidavit filed by NWR before the GERC to contend that Tarini is not entitled to costs which were allegedly within its knowledge at the DPR stage, including the cost of inserting steel liners in the RCC duct of the dam, is fundamentally misconceived, particularly when the said affidavit does not aver that the works undertaken by Tarini were not required for construction and operation of the hydro project. It is pertinent to note that Tarini is only claiming capital cost in respect of the works carried out for insertion of steel liners in the RCC dam duct of SHP-II and is not claiming any additional expenditure towards IDC or IEDC for the period between 2010 and 2013 in relation thereto.
Page 69 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 Submissions urged on behalf of GUVNL
123. It is submitted that the State Commission has rightly refused the cost of steel liners amounting to Rs 3 crore, as the said cost was not an additional expenditure but was already envisaged in the DPR. Further, Tarini's own conduct in not providing the steel liners at the construction stage, despite the requirement, and installing them only after completion of the works, resulted in avoidable escalation of costs and was, therefore, imprudent. Although Tarini claimed that the cost of steel liners was an additional cost not contemplated in the DPR. Despite being fully aware of these issue, Tarini neither refuted nor explained its position, and even during the hearing dated 03.04.2018 before State Commission, when GUVNL specifically pointed out the absence of any reply and sought a direction for Tarini to file a response with supporting documents, Tarini merely made a vague statement that all details had already been submitted and declined to make any specific submissions. Accordingly, it is evident that Tarini had no substantive response to the objections raised, justifying the Commission's decision to disallow the claimed cost.
124. The Revised DPR dated July 2007 was prepared subsequent to the letters dated 28.07.2006 and 01.08.2006 and, therefore, Tarini would have necessarily incorporated the requirement of steel lining, which is further established by the fact that the same is stated to have been approved vide letter dated 14.08.2013, which approval would not have been accorded had steel liners not been contemplated therein.
125. With regard to the contention of Tarini that the steel liners required in 2006-2007 were different from those allegedly required at a later stage including reference to 110 meters, it is submitted that such a contention finds no mention in any pleading before the State Commission or before this Tribunal, nor it is supported by any evidence or substantiation. Despite the Page 70 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 issue of steel liners having been raised before the State Commission, Tarini neither advanced any such case nor produced any material to establish a new or different requirement. At this stage, Tarini is clearly precluded from introducing a wholly new plea or factual assertion. In any event, the letter issued by the CDO dated 01.05.2013 clearly demonstrates that the requirement referred to therein was identical to that communicated in 2006. Although Tarini had sought to rely upon a letter dated 12.07.2011. In any case, the record conclusively establishes that the DPRs of 2006 and 2007 expressly incorporated steel liners, as is further corroborated by contemporaneous correspondence.
126. Tarini had agreed to install steel liners; however, during the execution of the project, it failed to do so, and the subsequent installation of steel liners after completion of construction works led to avoidable escalation in costs, which cannot be permitted. The delayed installation also resulted in corresponding delays, and the costs attributable to such delay are likewise liable to be disallowed. While the State Commission rightly disallowed Tarini's claim for additional cost of Rs 3 crores towards steel liners, it failed to consider the further disallowance of costs arising from the belated installation of steel liners and the consequent delay in commissioning.
OUR CONSIDERATION AND VIEW
127. The cost of Rs. 3 Crore claimed by Tarini on account of Steel liners have been disallowed by the State Commission in the Impugned Order placing reliance upon the communication issued by NWR dated 15.06.2017; t the State Commission has recorded that the provision of steel lining formed part of original concession agreement and that, instead of providing any steel lining in the RBHR barrel, Tarini had joined the penstock directly to the HR concrete barrel and ultimately steel liners were to be provided and hence the faulty design of the Petitioner resulted in the increase of capital cost which should not be allowed.
Page 71 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
128. Per Contra, Tarini has contended that only obligation on Tarini was to ensure the anchoring of the penstock of power plant with the RCC duct of the Daman Ganga Dam for SHP II and for such anchoring it was required to insert a steel liner into the entire RCC duct and it does not mean that steel liners were to be inserted in the entire duct and only during the test run of the SHP II, in the year 2010, some anomalies were observed inside the dam RCC duct structure and post completion of the project, that NWR directed Tarini to lay 110 meters of steel liners in the concrete barrel/ RCC duct of the dam and based on various proposals submitted by Tarini, approval for insertion of steel liners was eventually granted by NWR only in the year 2013, vide letter dated 10.06.2013.
129. From the submissions made by the parties and the findings recorded in the Impugned Order, it emerges that the necessity of steel liners within the RCC duct has not been disputed by either sideand thus it can be considered that requirement of steel liners inside the duct is technically required. The contention put forth on behalf is GUVNL is with regard to timing of implementation of steel liners i.e M/s Tarini has been advised to do provide steel liners way back in 2006, and would have factored the same in the DPR and as such they did not undertake the same during initial construction and accordingly additional cost on this account has been rightly rejected by the State Commission. We have already held in the previous paragraphs, that under project specific tariff determination, the State Commission is required to undertake the prudence check of the cost incurred and accordingly the contention of restricting the cost only to DPR is noted to be rejected. It is further noted that the State Commission in the Impugned Order considered the reply furnished by NWR and since M/s Tarini chose not to reply/contest the submissions made by NWR, the State Commission, relying upon the said reply, recorded its observations and declined to approve the additional capital cost claimed on account of steel liners, observing as under:
Page 72 of 76Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 "We note that the Petitioner despite being given an opportunity to file its response on the affidavit filed by the Narmada Water Resources Water Supply Department, Government of Gujarat did not file any Rejoinder. Under the circumstances, the commission is constrained not to consider such additional expenditure and decide to disallow the same."
130. We do not find fault with the observation of the State commission in the Impugned Order insofar as the disallowance of cost of steel liners is concerned, particularly in the absence of any response of M/s Tarini to the submissions made by NWR. However, in view of our decision to remand the matter for undertaking a comprehensive prudence check of the capital cost incurred by Tarini, and in the previous paragraphs we have limited the entitlement towards IDC & IEDC only up to SCOD in terms of PPA, we deem it appropriate that the expenditure incurred towards steel liners be subject to a prudence check by the State Commission. Itt has been submitted by Tarini no IDC & IEDC has been claimed beyond the year 2010. Accordingly, the issue relating to the disallowance of cost of Steel liners is remanded to the State Commission for the limited purpose of undertaking a prudence check of the cost incurred in providing the steel liners, in accordance with law.
CONCLUSION
131. In view of above deliberations, decision on all the issues is summarized as under:
Issue Issue Decision
A Capital cost of the Project Issue remanded to State
Commission to undertake
prudence check of the Cost
incurred by M/s Tarini
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Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
B Higher Cost for construction of Issue remanded to State
Transmission Line; Commission to undertake
prudence check of the Cost
incurred by M/s Tarini
C &I Non consideration of IDC & IEDC : Impugned Order
implications of delay in
Interfered. M/s Tarini is not
commissioning of the units.
entitled to IDC & IEDC beyond
IDC&IEDC
scheduled date of commercial
operation as per PPA signed
with GUVNL. Issue remanded to
State Commission to ascertain
IDC & IEDC up to SCOD as per
PPA
Liquidated Damages Liquidated Damages :
Impugned Order upheld
D&J Capacity Utilisation Factor Impugned Order Interfered.
(CUF) Capacity Utilisation factor of 70
% to be considered as agreed in
the PPA between GUVNL & M/s
Tarini
E Consideration of Impugned Order upheld
premium/licence fee of Rs. 0.23
per unit;
F Allowance of interest rate for Impugned Order upheld
loan at 13.2%;
Interest rate on working capital
Allowance of interest rate for on normative basis in terms of
working capital loan at 13.2%; GERC MYT Regulation 2011.
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Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
Issue remanded to State
Commission to work out the
same
G Allowance of the tariff Impugned Order upheld
&K retrospectively instead of
prospectively
Carrying Cost for the period Tarini is entitled for carrying
prior to tariff determination
Cost. Issue remanded to State
Commission to decide rate of
interest for carrying cost as well
as whether it should be simple or
Compound
H Disallowance of additional cost Impugned order interfered. Issue
of Rs 3 Crores in regard to remanded to State Commission
Steel liners;
to undertake prudence check of
the Cost incurred by Tarini
132. Before parting with the matter, we deem it necessary to add that we have taken serious note of the fact that, notwithstanding the passing of the Impugned Order dated 07.05.2018, wherein the tariff for the projects of M/s Tarini's was determined at Rs. 3.61/kWh with effect from the date of commissioning of the projects, GUVNL continued to make payment at the tariff stipulated in the PPA, despite there being no stay operating against the Impugned Order as submitted on behalf of M/s Tarini. It is pertinent to note that GUVNL, vide IA No. 1087 of 2018 in Appeal No. 221 of 2018, had sought stay of the Impugned Order, while Tarini, vide IA No. 72 of 2019, prayed for clearance of outstanding dues amounting to Rs. 4.19 Crore (as on 31.10.2018) and payment of current invoices at the tariff of Rs. 3.61/kWh in Page 75 of 76 Judgement in Appeal Nos. 221 of 2018 & 298 of 2018 terms of the Impugned Order, pending disposal of the Appeal. This Tribunal, by order dated 06.03.2019, having observed that the balance of convenience lies in favour of Tarini, declined to grant stay of the Impugned Order and directed GUVNL to pay a sum of Rs. 1.32 Crore, which amount, we are informed, has since been duly paid.
133. Considering the protracted nature of the litigation, we hereby direct the State Commission to expeditiously pass appropriate orders preferably within a period of three months from the date of receipt of this Order. M/s Tarini shall furnish any additional information or material that may be required by the State Commission without delay. GUVNL is further directed to make payment of the amounts so determinable within four weeks from the date of receipt of the invoice, strictly in terms of the order so passed by the State Commission.
134. The subject appeals and associated IAs, if any, are hereby disposed of in the above-mentioned terms.
PRONOUNCED IN THE OPEN COURT ON THIS 11th day OF March, 2026.
(Virender Bhat) (Seema Gupta)
Judicial Member Officiating Chairperson
REPORTABLE / NON-REPORTABLE
pr/dk/ag
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