Himachal Pradesh High Court
Kundan Hydro (Luni) Private Limited vs State Of Himachal Pradesh Through Its on 10 September, 2024
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
( 2024:HHC:8181 ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No. 7177 of 2024 .
Reserved on: August 21 2024 Decided on: September 10 , 2024 Kundan Hydro (Luni) Private Limited ...Petitioner Versus State of Himachal Pradesh through its Addl. Chief Secretary (MPP & Power) & anr.
...Respondents Coram:
Ms. Justice Jyotsna Rewal Dua, Judge Whether approved for reporting? 1 Yes.
For the petitioner : Mr. Prithu Garg, Mr. Vaibhav Singh Chauhan, Ms. Shradha Karol and Ms. Aastha Kohli, Advocates.
For the respondent : Mr. Anup Rattan, Advocate General with Mr. Dalip K. Sharma, Additional Advocate General, for respondent No. 1-State.
Ms. Sunita Sharma, Senior Advocate, with Mr. Dhananjay Sharma, Advocate, for respondent No. 2 - HPSEBL.
Jyotsna Rewal Dua, Judge
INDEX
Sr. No. Heading Page(s)
No.
1. The Case Para 1 2-3
2. Background Facts Para 2 3-7
3. The Issue Para 3 7-9
1
Whether reporters of Local Papers may be allowed to see the judgment? Yes.::: Downloaded on - 10/09/2024 20:31:51 :::CIS 2
( 2024:HHC:8181 )
4. Relevant Provisions of the Para 4 9-38 Agreements/Regulations/ Statutes & Submissions of the Parties .
5. Consideration Para 5 38-62
6. Conclusion Para 6 62-66
7. The Result & Directions Para 7 66-67 The Case Luni Hydro Electric Project (LHEP) with 3.00 MW capacity was allotted to M/s Subhash Projects & Marketing Limited (SPML).
Implementation Agreement for execution of this Project was executed between respondent No.1-State and SPML on 31.05.2000.
A separate Power Purchase Agreement was entered into between respondent No. 2-HPSEBL & SPML whereunder after adjusting free power, the balance energy was to be sold to respondent No. 2 @ Rs. 2.50/kWh. SPML could not implement the Project. Luni Power Company Pvt. Ltd. entered the arena under a Tripartite Agreement executed on 25.09.2004. A Supplementary Implementation Agreement was executed with it by respondent No. 1 on 01.03.2008.
After undertaking investigations, capacity of the Project was enhanced by Luni Power Company to 4.50 MW. Subsequently, Luni Power Company ran into financial troubles. Pursuant to the order passed by the National Company Law Tribunal on 19.04.2022, its Management underwent complete change and was installed in new management. Supplementary Implementation Agreement for the ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 3 ( 2024:HHC:8181 ) LHEP 4.50 MW was executed by respondent No. 1-State with petitioner Company (under new management) on 06.07.2024.
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The Project is now ready for commissioning. The dispute is about the rate at which its generated electricity is to be sold/purchased. Respondent No. 2 has directed the petitioner on 16.07.2024 to abide by the rate agreed between erstwhile SPML & respondent No. 2 under the Power Purchase Agreement dated 31.05.2000 for LHEP 3.00 MW and to execute a Supplementary Power Purchase Agreement for revised capacity of 4.50 MW in terms of Regulation 17(3) of the HPERC (Promotion of Generation from Renewable Energy Sources and Terms & Conditions for Tariff Determination) Regulations, 2017. This is not acceptable to the petitioner. According to petitioner, it cannot be bound down to sell electricity to respondent No. 2 at the rate mentioned in the Power Purchase Agreement executed on 31.05.2000 between respondent No. 2 and the original Project Developer, hence the writ petition.
2. Background Facts 2(i) An Implementation Agreement (in short the "IA") was executed between respondent No. 1-the State and M/s Subhash Projects & Marketing Limited (in short "SPML) on 31.05.2000 for execution of Luni Hydro Electric Project (in short "LHEP") of 3.00 MW capacity.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 4( 2024:HHC:8181 ) The same day i.e. 31.05.2000 a Power Purchase Agreement was also separately executed between SPML & .
respondent No. 2-HPSEBL for sale and purchase of power generated from LHEP (3.00 MW) at tariff of Rs. 2.50 per Killowatt hour (in short "kWh").
2(ii) SPML incorporated a generating Company by the name of M/s Luni Power Company (P) Ltd. (present petitioner) and requested respondent No. 1-State to transfer/assign all assets, liabilities, obligations, privileges and benefits of the Project under the IA dated 31.05.2000 to M/s Luni Power Company (P) Ltd. (in short "LPC").
The State accepted this request. A Tripartite Agreement was executed on 25.09.2004 between SPML, State and LPC whereunder all assets, liabilities, obligations, privileges and benefits of SPML under the IA dated 31.05.2000 were transferred to LPC.
2(iii) LPC conducted further investigations and enhanced the capacity of the Project to 4.50 MW. A revised Techno-Economic Clearance for the enhanced capacity of the Project was accorded by respondent No. 2 on 20.03.2007.
2(iv) A Supplementary Implementation Agreement (in short "SIA") was executed between respondent No. 1-State & the new Project Developer-LPC on 01.03.2008. This agreement incorporated ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 5 ( 2024:HHC:8181 ) the terms & conditions for implementing the Project having revised capacity of 4.50 MW.
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2(v) Power Purchase Agreement (in short the "PPA") was also required to be executed between respondent No.2 and LPC pursuant to execution of SIA on 01.03.2008. This agreement was however not drawn.
2(vi) LPC ran into financial difficulties during the year 2019.
Corporate Insolvency Proceedings were initiated against it. The matter was decided by the National Company Law Tribunal on 19.04.2022, approving the takeover of corporate debtor - LPC as per resolution plan submitted by M/s Kundan Care Products Limited, resulting in revival of the petitioner Company. An all together new management, was installed in the petitioner Company.
2(vii) Respondents consented to transfer all assets, liabilities etc. incurred by LPC out of SIA dated 01.03.2008 to the petitioner -
M/s Kundan Hydro (Luni) Private Limited under new management.
All share holders of LPC were released from their obligations under the previous Implementation Agreement dated 31.05.2000.
2(viii) A Supplementary Implementation Agreement (SIA) was executed between respondent No. 1 and the petitioner on 06.07.2024 incorporating the terms & conditions pursuant to change in the management of the petitioner's company also scheduling ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 6 ( 2024:HHC:8181 ) therein revised Project milestones. The Scheduled Commercial Operation Date of the Project (in short the "SCOD") was revised to .
31.08.2024.
2(ix) On 08.07.2024, petitioner requested respondent No. 2 to execute a Power Purchase Agreement with it for purchase of power in respect of LHEP 4.50 MW in accordance with respondent No. 1- State's notification dated 15.05.2018 read with the provisions of Swaran Jayanti Energy Policy, 2021. Respondents were also informed that the Project was ready for commissioning. The petitioner followed it up with a reminder dated 10.07.2024.
2(x) Respondent No. 2 vide office letter dated 16.07.2024 stated that a Power Purchase Agreement already existed between SPML and respondent No. 2 for 3.00 MW capacity at tariff of Rs.
2.50/kWh. Petitioner Company would be bound by it. According to respondent No. 2, Supplementary Power Purchase Agreement was required to be executed between the petitioner and respondent No. 2 but only for incorporating change in the name of the Company, amendment in the Project capacity and for inclusion of composite tariff for the revised capacity of the Project from 3.00 MW to 4.50 MW while keeping the binding nature of the PPA dated 31.05.2000 intact for 3.00 MW Capacity. As per this communication, the PPA so executed, was to be filed alongwith joint petition before the HPERC ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 7 ( 2024:HHC:8181 ) for its approval. Office letter dated 16.07.2024 was followed by corrigendum issued by respondent No. 2 on 31.07.2024 correcting .
certain errors in the office letter dated 16.07.2024. For issuing this direction, respondent No. 2 brought into foray Regulation No. 17(3) of the HPERC (Promotion of Generation from Renewable Energy Sources and Terms & Conditions for Tariff Determination) Regulations, 2017 (in short the "HPERC Regulations-2017").
The petitioner feels aggrieved against decision of respondent No. 2 as communicated to it under letter dated 16.07.2024.
3. The Issue Gist of respondents' stand as communicated by them in the letter dated 16.07.2024 is that PPA for LHEP 3.00 MW already existed; The aforesaid PPA for LHEP (3.00 MW) was executed on 31.05.2000; In terms of the PPA dated 31.05.2000, petitioner is bound to sell power to respondent No. 2 @ Rs. 2.50/kWh;
Supplementary PPA though needs to be executed between respondent No. 2 & the petitioner, but that is required only to reflect the change in the Company's name, amendment in the Project capacity and inclusion of composite tariff for the revised Project capacity of 4.50 MW as per provisions of Regulation No. 17 (3) of the HPERC Regulations-2017; The composite tariff has to be ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 8 ( 2024:HHC:8181 ) worked out on normative basis for the net saleable energy corresponding to the enhanced capacity of the Project. Meaning .
thereby, the stand of respondents as also projected by their learned counsel is that tariff for original 3.00 MW capacity of LHEP shall remain Rs. 2.50/kWh in terms of PPA dated 31.05.2000. For enhanced capacity of 1.50 MW, the tariff will be governed by provisions of the HPERC Regulations-2017.
According to the petitioner, it was not privy to the PPA executed on 31.05.2000 between respondent No. 2 and SPML. The aforesaid PPA cannot be thrust upon the petitioner. Petitioner is not obligated to sell its generated electricity to respondent No. 2 at the rate determined 24 years ago (on 31.05.2000). The aforesaid PPA dated 31.05.2000 has to be construed as abandoned by its executants as it was never acted upon for more than two decades.
According to the petitioner, it is ready and willing to file joint petition for determination of tariff for the Project capacity (4.50 MW) as a whole as on date of commissioning of the Project before the HPERC, without being bound by the PPA or the tariff determined in that PPA executed on 31.05.2000 between respondent No. 2 and SPML. According to the petitioner, in case respondent No. 2 -
HPSEBL is not ready to purchase electricity from it in accordance with the rate to be determined by HPERC as on the Scheduled ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 9 ( 2024:HHC:8181 ) Commercial Operation Date, then it be permitted to sell electricity to third parties in accordance with law.
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In the backdrop of above controversy, the petitioner has preferred this writ petition seeking following substantive reliefs:-
"i. That the Impugned Letter dated 16.07.2024 issued by respondent No. 2 be set aside/quashed. ii. That the impugned PPA dated 31.05.2000 between respondent No. 2 and SPML be declared as non-est and not binding upon the Petitioner.
iii. That Respondent No. 2 be restrained from seeking r to enforce the impugned PPA against the Petitioner/ Project.
iv. That the Respondent No. 2 be directed to execute a Power Purchase Agreement with the Petitioner in respect of the entire Project capacity of 4.5 MW, at the HPERC determined tariffs applicable as on the date of commissioning of the Project, in accordance with law.
v. That the Respondents be directed to not treat the delay in execution of the PPA between the Petitioner and the Respondent No. 2 as a delay/default on the Petitioner's part."
4. Relevant Provisions of the Agreements/ Regulations/Statutes & Submissions made for the Parties:
Since both sides have relied upon different agreements executed in relation to the LHEP, related Regulations, electricity regime in place at the relevant stages and also keeping in view that ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 10 ( 2024:HHC:8181 ) adjudication of the dispute raised also revolves around consideration of these very facets, therefore, to avoid repetition, it will be in place .
to trace the trajectory of relevant provisions of the concerned Agreements/Regulations/Statutes drawn into service by both sides alongwith the submissions advanced by learned Counsel for the parties:-
4(i) Agreements executed on 31.05.2000:
On 31.05.2000, two agreements were executed
concerning LHEP 3.00 MW. One was the Implementation
Agreement and other a Power Purchase Agreement.
4(i)(a) The Implementation Agreement (IA) was executed between respondent No. 1 & SPML. It contained the terms & conditions of the Project. Following portion of Clause 4 of the IA speaks about finalising a Power Purchase Agreement (PPA) within six months from the effective date:-
"4.1 Within six months from the effective date, the Company shall start the construction of the Project after meeting the following requirements, namely:- ......
"b) finalise Power Purchase/wheeling Agreement(s);"
......
The "effective date" of the IA has been defined in Clause 2.1 (j) as the date on which the IA has been signed by the parties i.e. 31.05.2000.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 11( 2024:HHC:8181 ) As per Clause 2.1 (t) of the IA, "Power Purchase/Wheeling Agreement(s)" shall mean the agreement(s) to be signed .
between the Company and the Board/concerned party(ies) as per clauses 13.1 and 15.8 of the IA.
Clause 15.8 of the IA states that subject to provisions of clause 13.1, separate Agreement specifying various modalities of generation, evacuation of power, maintenance of the Project, wheeling charges to be levied by either party for the use of transmission system of the other party to evacuate power, modalities for supply of free power, metering and other issues, will be signed within three months of the agreement. Clause 15.8 reads as under:
"15.8 Subject to provisions made in clause 13.1 separate Agreement, specifying various modalities for the generation, evacuation of power, maintenance of the Project, wheeling charges to be levied by either party for the use of transmission system of the other party to evacuate power, modalities for supply of free power, metering and miscellaneous related technical issues, will be signed within three(3) months of this agreement."
As per Clause 13.1 of the IA, after supplying free energy, the balance energy may be used/sold by the Project ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 12 ( 2024:HHC:8181 ) Developer in the manner prescribed therein. Clause 13.1 reads as under:-
.
"13.1 The royalty in lieu of water usage in the shape of free energy @ 10% of deliverable energy shall be leviable. This royalty is however waived off for a period of 15 years from the COD in case of projects that sell power to Board/ make captive use for their existing/new industry within the State. In case of the projects which make captive use of the power outside the State or make third party sale outside the State, the royalty @ 10% of the deliverable energy shall be leviable from the COD.
Free energy shall be made available by the Company at the interconnection point to the Board and the metering shall be done at this point.
No wheeling/transmission charges shall be payable for free energy from the generating station to the interconnection point.
The balance energy, after adjustment of free energy, may be used/sold by the Company in the following manner:-
a) Sale to the Board, for which the Company shall enter into an agreement with the Board.
b) make captive use for its existing/new industry within the State, for which a separate agreement shall be entered into with the Board. In case the Company with whom the Implementation agreement is entered into by the State Government floats a separate Company exclusively for execution and operation of the project and a tripartite agreement is entered into amongst the Government, original Company and the new generating Company, the ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 13 ( 2024:HHC:8181 ) original Company shall also be entitled to make captive use of power from the project so long as the original company holds equity share of minimum 51% in the new .
generating company. The terms and conditions for such captive use shall be same as applicable to the captive use by the new company executing and operating the project.
c) make captive use outside the State or make third party sale outside the State, with the permission of the concerned stat Government(s) for which the Company shall enter into suitable agreement. For this purpose, the Company shall also enter into an agreement with the Board for transfer of power from interconnection point to the mutually agreed interstate point.
Third party sale within the State will not be allowed."
Thus, in terms of Clause 13.1, SPML - the Original Project Developer and the executant of the IA dated 31.05.2000, could have sold balance power (after adjustment of the free energy) by entering into agreement with respondent No. 2 by; i) selling the energy to respondent No. 2; ii) SPML could have made captive use of the energy within the State by entering into a separate agreement with the Board; iii) It could have also made captive use of the energy outside the State or could have resorted to third party sale outside the State with permission of the State Governments concerned after entering into suitable agreements. Third party sale within the State was not permitted.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 14( 2024:HHC:8181 ) 4(i)(b) On 31.05.2000 itself, respondent No. 2 and SPML executed a Power Purchase Agreement (PPA). This agreement .
was executed in view of above extracted Clauses 4, 13.1 and 15.8 of the IA dated 31.05.2000.
As per the PPA dated 31.05.2000, SPML was to provide respondent No. 2 at the interconnection point, free of cost, 10% of the deliverable energy commencing from the date falling fifteen years from the date on which Company would synchronise the first unit of the Project. It was further agreed between the parties that SPML would sell and respondent No. 2 would purchase the entire electric energy excluding the Government supply received from the Project at the interconnection point.
Article 6.2 of the PPA laid down the tariff of net saleable energy from the Project @ Rs. 2.50/kWh. This Article reads as under:-
"6.2 Tariff for Net Saleable Energy The Board shall pay for the Net Saleable Energy delivered by the Company to the Board at the Interconnection Point at a fixed rate of Rs. 2.50 (rupees two and paise fifty) per Killowatt hour. This rate is firm and fixed and shall not be changed due to any reason whatsoever."::: Downloaded on - 10/09/2024 20:31:51 :::CIS 15
( 2024:HHC:8181 ) Article 15.3 of the PPA stated that the PPA was only for the benefit of the parties thereto and further that nothing in .
the agreement would be construed to create any duty to, any liability to, any person not a party to the agreement.
Further, Article 15.10 of the PPA provided that the PPA will not be assigned by either party other than by mutual agreement between the parties in writing.
In terms of Article 15.12 the PPA was to be binding upon the parties thereto and their respective successors and permitted assigns. Articles 15.3, 15.10 & 15.12 of the PPA read as follows:-
"15.3 Third Parties The Agreement is intended solely for the benefit of the parties hereto. Nothing in the Agreement shall be construed to create any duty to, standard of care with reference to, or any liability to, any person not a Party to the Agreement."
... ...
"15.10 Assignment The Agreement shall not be assigned by either Party other than by mutual agreement between the Parties in writing.
Notwithstanding the foregoing, for the purpose of financing the Project, the Company may assign or create security over its rights and interests under or pursuant to the Agreement. The holder of any security created under ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 16 ( 2024:HHC:8181 ) this Section shall not be prevented or impeded by the Board from enforcing such security in accordance with its terms, including, without limitation, exercising any right it .
may have to reassign the Agreement to a new qualified owner or operator of the Project. The Board shall execute all such consents to assignment and/or acknowledgments of any security created in accordance with this Section as are reasonably requested by the Company to give effect to the foregoing.
Notwithstanding the above, the Board shall have the right to assign the Agreement to any entity assuming all or part of the Board's rights and obligations in connection with the purchase of electrical output provided, however, that such transfer does not materially and adversely affect the ability of the transferee to perform its obligations under the Agreement; and, provided further that the Government Guarantee shall remain in place and shall be effective as to such successor."
... ...
"15.12 Successors and Assigns The Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns."
Article 15.18 of the PPA mandated that in case of an agreement between the parties about incorporating a new public/private limited company for the implementation and operation of the Project and a Tripartite Agreement is accordingly entered whereby all rights and obligations of the ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 17 ( 2024:HHC:8181 ) company under the IA are transferred to the newly formed company, a similar Tripartite Agreement shall also be entered .
into between the respondents, SPML and the newly formed company in respect of PPA as well. The said Article reads as under:-
"15.18 Tripartite Agreement Both the Parties agree that if the Company, in terms of the provisions under Implementation Agreement, considers necessary to incorporate a new public/private limited company for the implementation and operation of rthe Project and a tripartite agreement is entered amongst the Government, Company and the newly formed company, whereby all the rights and obligations of the Company under the Implementation Agreement are transferred to such newly formed company, a similar tripartite agreement shall also be entered into amongst the Board, the Company and the newly formed company in respect of this Agreement."
4(ii) Petitioner's entry in the frame and the agreements executed by it.
4(ii)(a) A Tripartite Agreement was executed on 25.09.2004 between the petitioner, respondent No. 1 & SPML, whereunder LHEP (3.00 MW) was transferred to the petitioner. As per this agreement, petitioner agreed to take over all rights and obligations of SPML under the IA dated 31.05.2000. After undertaking detailed ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 18 ( 2024:HHC:8181 ) interrogation, petitioner enhanced the capacity of the Project to 4.50 MW with due approvals from concerned quarters.
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4(ii)(b) A Supplementary Implementation Agreement (SIA) was executed on 01.03.2008 between respondent No. 1 and LPC.
The relevant Clauses of the SIA may now be noticed:-
Clause 1 of the SIA provided that:-
"Both the parties agree that the Project for the revised capacity of 4.50 MW shall be implemented subject to the terms and conditions mentioned in the already signed Implementation Agreement of 3.00 MW and this Agreement, as per the provisions of the DPR/TEC as approved by the HPSEB/First Party".
Power Purchase/Wheeling Agreement(s) has been defined in Clause 2(t) of the SIA as 'the agreement(s) to be signed between the Second Party and the Board/concerned party(ies) as per clauses 12.1 and 14.10'.
Clause 12.1 of the SIA provides for sale of power as under:-
"12.1 Royalty on water usage in respect of sale of power within the state in the shape of free power (energy) to the State from LUNI SHEP 4.50 MW revised capacity is waived off for a period of 12 years reckoned after 30 months from the actual date of start of work at project site i.e. 15th March, 2006 (irrespective of extension in time period of IA granted to an IPP on any account). Beyond 12 ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 19 ( 2024:HHC:8181 ) years the royalty will be @ 12% for next 18 years and beyond that @ 18% upto the date of taking over of the project by First Party referred to in clause 3.1 of this .
agreement. The 12 years relaxation in royalty shall however not be applicable if the IPP makes captive use of power outside the state or make third party sale outside the State. In that case, the royalty @ 12% reckoned after 30 months from the actual date of start of work at project site i.e. 15th March, 2006 (irrespective of extension in time period of IA ganted to an IPP on any account.). Free energy shall be made available by the Second Party at the interconnection point to the Board and the metering shall be done at this point.
No wheeling/transmission charges shall be payable for free energy from the generating station to the interconnection point.
The balance energy, after adjustment of free energy, may be used/sold by the Second Party in the following manner:-
(a) Sale to the Board, for which the Second Party shall enter into an agreement with the Board.
(b) Make captive use outside the State or make third party sale outside the State with the permission of the concerned state Government(s) for which the Second Party shall enter into suitable agreement. For this purpose, the Second Party shall also enter into an agreement with the Board for transfer of power from interconnection point to the mutually agreed interstate point.
(c) Third party sale within the State shall be allowed in case of those project proposals where cost of generation is ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 20 ( 2024:HHC:8181 ) above Rs. 2.50 per unit. However, it shall be obligatory on the part of IPP to submit the third party sale proposal within the state, wherever, peak load demand exists, duly .
approved by HPERC along with the DPR for accordance of TEC. However, the final tariff rates shall be determined by HPERC after the Financial Closure.
(d) Interfacing including transformers, panels, kiosks, protection, metering, H.T. Lines from the points of generation to the HPSEB's nearest feasible H.T. sub-
station as well as maintenance shall be undertaken by the Developer as per the specifications and requirements of the HPSEB for which the Developer shall bear the entire cost. Alternatively, these works and their maintenance could be undertaken by the HPSEB, at charges to be decided by the HPSEB payable by the Hydro Project Developer.
The Hydro Project Developers shall however be at liberty to erect common dedicated transmission lines for joint evacuation of Power from two or more Projects by way of suitable Consortium Agreements."
As per above extracted Clause 12.1 of the SIA dated 01.03.2008, free energy is to be made available by LPC at the interconnection point to respondent No. 2-HPSEBL. Wheeling/ transmission charges would not be payable for supply of free energy from the generating station to the interconnection point. The balance energy after adjustment of free energy may be used/sold by LPC either by (i) Sale to the Board for which parties will enter ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 21 ( 2024:HHC:8181 ) into agreement; (ii) Make captive use outside the State or make third party sale outside the State with permission of the concerned State .
Governments after entering into suitable agreement; (iii) Third party sale within the State would be allowed in case of those project proposals where cost of generation is above Rs. 2.50 per unit.
Clause 14.10 of the SIA dated 01.03.2008 provided that subject to provisions made in Clause 12.1 (extracted above), separate agreement specifying various modalities for the generation, evacuation of power, maintenance of the Project, would be signed within three months of the execution of the SIA and reads as under:-
"14.10 Subject to provisions made in Clause 12.1 separate agreement, specifying various modalities for the generation, evacuation of power, maintenance of the Project for the 4.50 MW revised capacity wheeling charges to be levied by either party for the use of transmission system of the other party to evacuate power, modalities for supply of free power, metering and miscellaneous related technical issues, shall be signed within three (3) months of this Agreement."
4(ii)(c) Pursuant to the order passed by the National Company Law Tribunal on 19.04.2022, Management of petitioner Company underwent complete change. Instead of Luni Power Company (P) Ltd., it now became Kundan Hydro (Luni) (P) Ltd. Over the period, ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 22 ( 2024:HHC:8181 ) the petitioner completed the Project works. The Project is now stated to be ready for commissioning.
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Respondent No. 1 executed a Supplementary Implementation Agreement with the petitioner (new management) on 06.07.2024 (in short "SIA"). In terms of this SIA, all rights & obligations under the IA dated 31.05.2000 & SIA dated 01.03.2008 shall continue to bind the petitioner. Relevant Clauses of this agreement are as under:-
"i. That the First Party hereby grants its consent to transfer/assign all the assets, liabilities, obligations, privileges, NOCs and the benefits of the project incurred by M/s Luni Power Company Private Limited to the Second Party, arising out of the Implementation Agreement (IA) signed on 31.05.2000 & Supplementary Implementation Agreement (SIA) dated 01.03.2008 with the unequivocal acceptance of the Second Party to accept and take over all the assets, rights, liabilities, obligations, privileges and benefits arising out of above mentioned Implementation Agreement (IA) and Supplementary Implementation Agreement (SIA)."
... ...
"iii. That the Second Party hereby agrees that it shall be
bound and liable for all the liabilities, obligations and operation, maintenance of project on the terms and conditions as specified in the Implementation Agreement singed on 31.05.2000 & Supplementary Implementation Agreement dated 01.03.2008 to the First Party."
... ... ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 23 ( 2024:HHC:8181 ) "viii. That the First Party after considering the request of
Second Party has approved to redefine the milestones in respect of Luni SHEP (4.50 MW) in pursuance to the .
provision of Swaran Jayanti Energy Policy 2021. Accordingly, the SCOD of Luni SHEP is redefined as 31.08.2024"
... ...
"1. Statement of Implementation of Project:
Both the parties agree that the project for the capacity of 4.50 MW has been implemented & operated subject to the terms and condition mentioned in the already signed Implementation Agreement signed on 31.05.2000 & rSupplementary Implementation Agreement dated 01.03.2008 amended to the extent of this Agreement along with other terms & condition of that Implementation Agreement/Supplementary Implementation Agreement & this agreement.
2. Grant of Rights/Permissions by State Goverment:
Existing clause 3.1 of the already signed Supplementary Implementation Agreement dated 01.03.2008 shall stand modified and be read as under:
The First Party agrees to permit the second Party, for the project Luni (4.50 MV) to establish, own, operate and maintain the project for a period of 40 (forty) years and the date shall be reckoned from SCOD of the project in pursuance to the provision of Swaran Jayanti Energy Policy 2021."
4 (iii) Submissions for the parties:
4(iii)(a) According to learned Counsel for the petitioner:- The PPA that was executed on 31.05.2000 between respondent No. 2 & ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 24 ( 2024:HHC:8181 ) SPML is not binding upon the petitioner. Petitioner was not privy to this PPA. Petitioner is a separate entity. In view of Articles 15.3, .
15.10 and 15.18 of the PPA, this agreement cannot be enforced upon the petitioner. Rate of sale and purchase of 3.00 MW of electricity generated in LHEP agreed as per this PPA cannot be foisted upon the petitioner. A new PPA is required to be executed between respondent No. 2 and the petitioner, which recourse had never been adopted by respondent No. 2 despite requests made by the petitioner. Respondent No. 2 cannot direct the petitioner to sell its generated electricity @ Rs. 2.50/kWh as per terms of the PPA dated 31.05.2000.
4(iii)(b) Learned Advocate General appearing for respondent No. 1 and Learned Senior Counsel appearing for respondent No. 2 submitted that:- (i) Petitioner is bound by the PPA dated 31.05.2000;
(ii) Article 15.12 of the PPA dated 31.05.2000 binds the successors and permitted assigns of the Project with terms & conditions of the PPA dated 31.05.2000. Petitioner is only an assignee of LHEP and, therefore, bound by the PPA; (iii) PPA is not a special agreement in itself. It has been executed towards compliance of terms & conditions of the IA dated 31.05.2000. Clauses 4.1 & 15.8 of the IA dated 31.05.2000 provided for drawing a separate agreement regarding generation, evacuation, sale, purchase of power ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 25 ( 2024:HHC:8181 ) generated power from LHEP. It is for this reason that PPA was executed between SPML and respondent No. 2 on 31.05.2000.
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LPC stepped into the shoes of SPML on 25.09.2004 and SIA was executed between respondent No. 1 & LPC on 01.03.2008.
Petitioner is bound by the PPA and consequently is obligated to sell the power to respondent No. 2 in terms of the PPA and at the rate agreed therein.
4(iii)(c) Learned Counsel for the petitioner countered the submissions made for the respondents by drawing support from Clauses of SIA dated 01.03.2008 and submitted that PPA is required to be executed afresh even under the provisions of SIA dated 01.03.2008 executed between respondent No. 1 and LPC; That Clauses 12.1 and 14.10 of the SIA dated 01.03.2008 envisage execution of fresh PPA; That respondents were well aware that Power Purchase Agreement dated 31.05.2000 would not be applicable to the petitioner and it is for this reason Clauses were incorporated in the SIA dated 01.03.2008 for drawing fresh PPA between respondent No. 2 and the petitioner. It was, therefore, contended that PPA dated 31.05.2000 executed between respondent No. 2 and SPML cannot be applied to the petitioner.
4(iii)(d) Learned Counsel for the petitioner also made a submission that the PPA dated 31.05.2000 stands discharged by ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 26 ( 2024:HHC:8181 ) abandonment on account of complete silence and inaction of the parties to the said PPA for over two decades. That if parties to a .
contract remain silent or do not enforce the contract for an inordinate length of time, the contract stands discharged by abandonment and no longer subsists in eyes of law.
4(iv) Regulations relied upon by the Parties & Submissions thereupon:
4(iv)(a) It was submitted for the petitioner that:-
The IA & PPA were executed between the respondents and SPML on 31.05.2000; Execution of the PPA on 31.05.2000 was under the erstwhile Electricity (Supply) Act, 1948; In view of Section 43-A of this Act, PPAs were largely unregulated and parties were free to enter into such agreements subject only to the condition that tariff would be determined in accordance with norms laid down by the Authority; On 25.09.2004, the original Project Developer exited from the picture and LPC made its entry as new Project Developer; By this time (25.09.2004), the HPERC had been set up. The HPERC was actually constituted on 06.01.2001. Henceforth, fresh Power Purchase Agreements could be executed only with the approval of the HPERC; The Electricity Act also came into force in the year 2003. Section ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 27 ( 2024:HHC:8181 ) 86 of the Electricity Act, 2003 delineated functions of the HPERC. The functions included determining tariff for .
generation, supply, transmission, wheeling; wholesale, bulk or retail of electricity and also for adjudicating disputes between licensees and generating Companies and to refer the disputes to arbitration.
The HPERC had issued 'Draft Guidelines' for Small Hydro Projects up to 5 MW capacity on 11.07.2001. These guidelines described the main issues to be covered in preparation of PPAs of Hydro Electric Projects up to 5 MW as also the manner of submission of PPA by the concerned parties for approval to the HPERC. The HPERC also directed respondent No. 2 to prepare a model PPA for its approval to enable the HPERC to issue final guidelines. First Tariff Order was issued by HPERC on 01.11.2001. The HPERC thereafter issued an order on 24.03.2003 for formulation of a draft model PPA for Small Hydro Electric Projects up to 5 MW, pursuant to which draft model PPA was notified & published by the HPERC, which has been subsequently amended from time to time.
On the basis of above corollaries, submissions have been made for the petitioner that after LPC stepped in as Project ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 28 ( 2024:HHC:8181 ) Developer, new electricity regime had come into force. The PPA, therefore, was required to be executed afresh between respondent .
No. 2 & the petitioner, and this fresh PPA could be executed only with the approval of the HPERC. However, no such PPA was either submitted to or approved by the HPERC for the Project in question.
The old PPA dated 31.05.2000 executed between respondent No. 2 and SPML was not binding upon the petitioner and in the attending facts and circumstances had even otherwise lost its validity and efficacy.
4(iv)(b) Learned counsel for the petitioner further submitted that :-
In exercise of its power under the Electricity Act, 2003, the HPERC notified the HPERC (Terms & Conditions for Determination of Tariff) Regulations, 2004 (in short the "2004- Regulations). These Regulations came into force on 10.06.2004. As per these Regulations, a generating Company shall not charge any tariff without the prior approval of the HPERC. The HPERC shall by an order determine the tariff for supply of electricity by a generating Company to a distribution licensee. The above regulations had come into force prior to execution of Tripartite Agreement by the petitioner on 25.09.2004.::: Downloaded on - 10/09/2024 20:31:51 :::CIS 29
( 2024:HHC:8181 ) In 2005, the HPERC notified the HPERC (Conduct of Business) Regulations, 2005 inter alia specifying the .
procedure and requirement for filing petitions for approval of PPAs.
In 2007, the HPERC carved out a separate category for Hydro Projects up to 25 MW capacity under the HPERC (Power Procurement from Renewable Sources and Co-
generation by Distribution Licensee) Regulations, 2007. As per these Regulations, all power generators having renewable energy Projects in the State were to have open access to the transmission system/grid. On application by the generators, the Distribution Licensee was to provide appropriate inter-
connection facilities at the cost and expense of the generator.
Power was to be mandatorily purchased from such Projects by the Distribution Licensee/respondent No. 2. The HPERC by a general order was to determine tariff for purchase of energy from renewable sources & co-generation, by respondent No. 2/Distribution Licensee for Small Hydro Projects up to 5 MW.
There were only two exceptions (1) Cases where a PPA had already been approved by the HPERC prior to coming into force of these Regulations and (2) Cases where tariff had ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 30 ( 2024:HHC:8181 ) been determined through transparent process of bidding in accordance with guidelines issued by Central Government.
.
In view of above Regulations, contention has been raised for the petitioner that when the LHEP Project was transferred to the petitioner, the new regulatory regime had been set in and pursuant thereto sale of power could be made only with prior approval of HPERC in accordance with the guidelines issued by the HPERC.
However, there is no PPA in existence for LHEP 4.50 MW that is approved by HPERC. It has also been submitted for the petitioner that in terms of Hydro Power Policy amended & notified on 15.05.2018, entire power generated from the Projects having capacity up to 10 MW will mandatorily be purchased by HPSEBL at HPERC determined tariff and the aforesaid tariff shall be determined by HPERC with respect to date of achieving SCOD of the Project. In the instant case, SCOD is 31.08.2024. The Project is ready for commissioning. Therefore, tariff has to be determined as on SCOD for 4.50 MW of power. Tariff will not be at the rate mentioned in the PPA dated 31.05.2000.
4(iv)(c) As against above, respondents have fallen back upon the HPERC (Promotion of Generation from Renewable Energy Sources and Terms & Conditions for Tariff Determination) ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 31 ( 2024:HHC:8181 ) Regulations, 2017 (in short the "HPERC Regulations-2017"), in particular, Regulation 17(3) thereof which reads as under:-
.
"17. Capacity enhancement- (1) Where, after the allotment of the original project, the capacity of a small hydro project is enhanced, with the approval of the State Government, the tariff for sale of net saleable energy from such projects, shall be governed by the relevant provisions of sub- regulations (2) to (8), as applicable. (2) XXXX (3) Where, prior to commencement of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017,-
(a) in relation to the original capacity of the project or a part thereof,-
(i) either synchronization of the same with the Grid has taken place at least once, or (ii) a joint petition for the approval of PPA for purchase/ sale of net saleable energy has been filed before the Commission, or
(iii) the PPA for the sale/purchase of net saleable energy from the same, whether under REC mechanism or on long term basis, has been signed by the developer of the concerned project with the Distribution Licensee; and
(b) in relation to the additional capacity of the project or a part thereof,- (i) neither any synchronization of the same, with the Grid has taken place even once, nor (ii) any joint petition for approval of any PPA (or supplementary PPA), in relation for such additional/enhanced capacity, whether under REC mechanism or long term basis, has been filed before the Commission, nor (iii) any PPA, or supplementary PPA, for such additional/enhanced capacity has been signed by the developer of the concerned project with the distribution licensee for such additional/enhanced capacity;
the tariff for the net saleable energy in relation to the original capacity shall be determined as per the provisions of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 32 ( 2024:HHC:8181 ) Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2012 and the same for the additional capacity shall be determined as per the provisions of Himachal .
Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017 as applicable on the date on which the joint petition for approval of PPA in relation to the additional capacity/enhanced capacity is filed before the Commission or on the date on which such additional capacity, or a part thereof, is synchronized with the grid for the first time, whichever is earlier.
(4) Where, prior to commencement of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017,-
(a) no part of the original or enhanced capacity has been synchronized with the grid even once; and
(b) no joint petition for the approval of PPA(s), whether under REC mechanism or long term basis, in relation to any part of the enhanced capacity of the project, i.e. the original capacity and/or for the additional capacity and/or for the enhanced capacity, has been filed before the Commission; and
(c) no PPA, whether under the REC mechanism or on long term basis, for the original capacity or for the additional capacity or for the enhanced capacity or any part thereof has/have been signed by the developer of the concerned project developer with the Distribution Licensee; and
(d) the joint petition(s) for approval of PPA(s) or for the supplementary PPA, in relation to of the original capacity as well as for the additional capacity or for the enhanced capacity is filed before the Commission for the first time only after the commencement of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017;
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 33( 2024:HHC:8181 ) the tariff for the net saleable energy for the relevant capacity/ capacities for which PPA, or supplementary PPA, is sought to be approved shall be fixed in accordance with the norms and Generic .
Levellised rate and other conditions as per the provisions of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017 as applicable on the date(s) of filing such petition(s) or on the corresponding date(s) of synchronization of any such part capacity(ies) with the Grid for the first time, whichever is/are earlier:
Provided that if separate joint petitions are filed on or after the commencement of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017, for approval of PPAs, or the supplementary PPA, before the Commission in relation to the original capacity and the additional capacity, the provisions of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017, as applicable on the respective dates of filing such petitions, or the respective dates of synchronization of the corresponding capacities, whichever are earlier, shall apply.
(5) Where different sets of Commission's regulations as per sub-regulation 3 of this regulation, or different sets of provisions/ norms of Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017 as per the provisions under Sub-Regulations (4) of this regulation, are applicable for the net saleable energy corresponding to the original capacity and for the additional capacity, a composite rate shall be worked out, on normative basis, for the net saleable energy corresponding to the enhanced capacity, as follows, namely;-::: Downloaded on - 10/09/2024 20:31:51 :::CIS 34
( 2024:HHC:8181 )
(i) the generic levellised tariff applicable for the net saleable energy in relation to the original capacity as per the sub regulation (3) or sub regulation (4) as applicable, shall be .
considered for the net saleable energy in relation to the annual energy generation corresponding to 75% dependable year as per the Detailed Project Report for the original capacity, irrespective of the date of signing of the power purchase agreement for the original capacity;
(ii) for the net saleable energy in relation to the annual incremental energy generation due to enhancement of capacity i.e. the annual additional energy generation which is expected to take place in the 75% dependable year as per the detailed project report for the enhanced capacity, the generic levellised tariff applicable for the net saleable energy in relation to the additional capacity as per the provisions of 9 sub-regulation (3) or sub-regulation (4), of this regulation, as applicable, shall be considered:
Provided that the tariffs considered for the respective energy quantums as per clauses (i) and (ii) of this sub- regulation shall be governed by associated terms and conditions as per the respective power purchase agreements and the applicable provisions for respective capacities:
Provided further that in case the applicable provisions for the respective capacities provide for any adjustment of the corresponding tariff, such adjustment(s) shall also be made only for the respective energy quantums as per clauses (I) and (ii) of this sub-regulation under this regulation and the adjusted composite rate shall be calculated accordingly:
Provided further that while computing such composite rate, the free power( in percentage) shall, save as provided in sub-regulation (7), be accounted for as follows, namely:-
A. if no separate rates of free power (in percentage) are provided in supplementary IA for the original capacity ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 35 ( 2024:HHC:8181 ) and for the additional capacity and only composite rate is provided for the enhanced capacity;
Composite rate of free power (in percentage) not .
exceeding the limits specified in regulation 36 of 36-A or 36-B, as the case may be, for the entire capacity i.e. in relation to the original capacity as well as additional capacity;
B. if separate rates for original capacity and for the additional capacity are provided in the supplementary Implementation Agreement;
Separate adjustments in accordance with the limits specified in regulation 36 or 36-A or 36-B, as the case may be, shall be made for the net saleable energy in relation to rthe two capacities i.e. original capacity and additional capacity at corresponding rates of free power (in percentage). In such cases the limits as per regulation 36 or 36-A or 36-B, as the case may be, shall be applicable separately for the to capacities:
Provided further that the composite rate for the entire net saleable energy shall, in no case, be higher than the generic levellised rate applicable under Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from the Renewable energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2017 as on the date of approval of the PPA for the additional / enhanced capacity or the date on which any part of additional capacity is synchronized, whichever is earlier, for the small hydro project category under which the enhanced capacity falls: Provided further that in cases where the incremental capacity is commissioned in phases, the tariff(s) during such interim stages shall be computed based on such incremental energy generation corresponding to the additional capacity installed from time to time.
(6) xxxx xxxx
(7) xxxx xxxx
::: Downloaded on - 10/09/2024 20:31:51 :::CIS
36
( 2024:HHC:8181 )
(8) Where the parties fail to arrive at an understanding for sale/
purchase of energy in the manner specified in sub-regulations (3) to (7), the right of the distribution licensee for the net saleable energy .
as per the original power purchase agreement, duly taking into account the data contained in the Detailed Project Report for the original capacity and power generation on real time basis, shall remain protected and the renewable energy generator shall be eligible to dispose off only the net incremental saleable energy (i.e. after duly adjusting the licensee's first right as aforesaid and the total quantum of free energy for the enhanced capacity of the project):
Provided that in such a case, the renewable energy generator shall also arrive at an understanding with the distribution licensee about the modalities for energy accounting on real time basis as well as on monthly and annual basis and based on the same, the renewable energy generator shall also make the distribution licensee a party to any such agreement for disposal of such incremental energy:
Provided further that in case the licensee and the renewable energy generator mutually agree to purchase/sell the net incremental saleable energy at a specific rate and jointly make an application to the Commission for determination of such rate, the Commission may determine the specific levellised rate for such net incremental saleable energy as per the provisions of this sub-regulation and by taking into account the provisions of the regulations/practices prevalent in the time frame during which the capacity enhancement was permitted by the State Government.
(9) xxxx xxxx"
Respondents' contention is that in terms of the HPERC Regulations-2017, in cases, where the PPA for original capacity of the Project has already been approved by the HPERC prior to the ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 37 ( 2024:HHC:8181 ) commencement of the said Regulations, the tariff for original capacity shall be determined under the provisions of the HPERC .
(Promotion of Generation from the Renewable Energy Sources and Terms and Conditions for Tariff Determination) Regulations, 2012 and the tariff for enhanced capacity shall be governed under the provisions of the HPERC Regulations-2017. Accordingly composite tariff shall be worked out on normative basis for net saleable energy corresponding to enhanced capacity. According to respondents, for computing composite tariff, the tariff to be considered for respective energy quantum's shall be governed by the respective associated terms & conditions as per the respective Power Purchase Agreements & applicable provisions of respective capacities. Hence directions issued in communication dated 16.07.2024 are in line with the HPERC Regulations-2017. It has also been submitted that as per Regulation No. 17(8) of the HPERC Regulations-2017, in a situation where parties fail to arrive at an understanding for sale/purchase of electricity in the manner specified under Sub-
Regulations (3) to (7), the distribution licensee's right to the net saleable energy under the original PPA, taking into account the Detailed Project Report data for the original capacity and real time power generation remains protected. The renewable energy generator is eligible to dispose off only the net incremental saleable ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 38 ( 2024:HHC:8181 ) energy after adjusting licensee's first right and the total quantum of free energy for the enhanced project capacity.
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4(iv)(d) Yet another objection taken concerns maintainability of the writ petition. This has been deliberated upon in Para 5(iii).
5. Consideration 5.1 Regarding enforcement of PPA dated 31.05.2000 against the petitioner vis-a-vis covenants in different agreements:
5(i)(a) The IA and PPA both executed on 31.05.2000, are two separate and distinct agreements. The IA was executed on 31.05.2000 between respondent No. 1 and SPML for LHEP (3.00 MW). It is a specific agreement containing terms & conditions of the Project. One specific term in this agreement is for execution of a separate agreement for purchase of power generated from the Project. Clause 4.1(b) of the IA speaks about executing the PPA within six months from the date of signing of the IA. Clause 15.8 of the IA stipulates that subject to provisions of Clause 13.1 a separate agreement specifying modalities for evacuation of generated power etc. is required to be executed within three months from the date of execution of the IA. Clause 13.1 of the IA also entail execution of a separate agreement concerning modalities of sale/purchase of generated power.::: Downloaded on - 10/09/2024 20:31:51 :::CIS 39
( 2024:HHC:8181 ) It is a matter of record that PPA was actually executed between SPML and respondent No. 2 on 31.05.2000. It is a .
separate & distinct agreement from the Implementation Agreement that was drawn between respondent No. 1 & SPML, though executed in compliance towards one of the conditions of the IA. The executants of both the agreements are also different.
5(i)(b) In terms of the PPA signed between respondent No. 2 and SPML: (i) 10% of the deliverable energy was to be supplied by SPML free of cost to respondent No. 2; (ii) As per Article 6.2 of the PPA, the Project Developer i.e. SPML had agreed to sell and respondent No. 2-HPSEBL had agreed to purchase remaining energy from the Project Developer - SPML at the interconnection point @ Rs. 2.50/kWh.
Respondents' contention that PPA dated 31.05.2000 will be binding upon the petitioner cannot be accepted as :-
In terms of Article 15.3 of the PPA, the PPA is only for the benefit of the executing parties. The PPA is not to be construed to create any duty or any liability upon a person not a party to the agreement. Petitioner is not a party to the PPA.
Further, as per Article 15.10 of the PPA, the PPA cannot be assigned by either party other than by mutual agreement between them and that too in writing. No such mutual ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 40 ( 2024:HHC:8181 ) agreement has been placed on record assigning the PPA upon the petitioner.
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Though Article 15.12 of the PPA talks about binding nature of this agreement upon the executing parties and their respective successors and permitted assigns, however in the given facts and holistic reading of different Clauses of the PPA including 15.3, 15.10, 15.12 & 15.18, petitioner cannot be termed to a successor or permitted assignee of SPML so as to bind it with PPA dated 31.05.2000.
In fact, Article 15.18 of the PPA specifically postulates a situation where a new public/private Ltd. Company gets incorporated for the implementation and operation of the Project and a Tripartite Agreement is entered into amongst the respondents, original Project Developer and the newly formed Company wherein rights and obligations of the Project Developer under the IA are transferred to the newly formed Company. As per this Article, in such situation a similar Tripartite Agreement (relating to power purchase) is required to be entered into afresh amongst the respondents, original Project Developer (SPML) and the newly formed Company (LPC-petitioner). Petitioner came into the picture under the Tripartite Agreement dated 25.09.2004 executed by it, SPML ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 41 ( 2024:HHC:8181 ) and respondent No. 1. Therefore, in view of Article 15.18, a separate PPA was required to be executed between .
respondent No. 2 and the petitioner. The PPA dated 31.05.2000 cannot be held to be binding upon the petitioner.
5(i)(c) Execution of PPA (dated 31.05.2000) was one of the terms & conditions of the IA dated 31.05.2000. Yet, the PPA dated 31.05.2000 is a separate and distinct document creating & enforcing different rights & liabilities upon the executing parties, but not upon petitioner. It is for this reason, that after petitioner's entering the Project, a Tripartite Agreement was executed with it by respondent No. 1 and the original Project Developer-SPML on 25.09.2004. In furtherance thereof, a specific & separate Supplementary Implementation Agreement followed on 01.03.2008 executed between the petitioner & respondent No. 1-the State.
Execution of a separate PPA between the petitioner and respondent No. 2 is also a requirement under the SIA dated 01.03.2008. The implication of provisions of SIA is that the respondents were themselves aware of the legal requirement of execution of a separate PPA with the new entity - the new Project Developer and for this reason several Clauses of SIA dated 01.03.2008 viz. 2.1(t), 4, 12.1, 14.10 etc. - insist upon execution of a separate PPA between respondent No. 2 & the petitioner. Old PPA dated ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 42 ( 2024:HHC:8181 ) 31.05.2000 executed between original Project Developer & respondent No. 2 and the rate of purchase of power mentioned .
therein, therefore, cannot be held against the petitioner. Petitioner is bound by Supplementary Implementation Agreement dated 01.03.2008 whereunder it has agreed to abide by the Implementation Agreement dated 31.05.2000. However, there is no agreement on record or provision thereof that binds the petitioner with the PPA dated 31.5.2000. Therefore, PPA dated 31.05.2000 executed pursuant to Implementation Agreement dated 31.05.2000 cannot be enforced upon it.
5(i)(d) In terms of Clause 4 of SIA dated 01.03.2008 a separate Power Purchase Agreement was required to be executed between respondent No. 2 and the petitioner-LPC. Further, as per Clause 2.1(t) of SIA dated 01.03.2008, the Power Purchase Agreement is the agreement to be signed between LPC and respondent No. 2 in accordance with Clauses 12.1 and 14.10 of SIA. Clause 12.1 provides that after providing free energy in terms of the Agreement to respondent No. 2 at the interconnection point, the balance energy may be used/sold by the LPC either by sale to the Board for which the parties would enter into an agreement or the LPC can make captive use of the remaining energy outside the State or may make third party sale outside the State with the permission of the ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 43 ( 2024:HHC:8181 ) concerned State Governments for which the LPC and the respondents would enter into suitable agreements.
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Despite the existence of above provisions mandating execution of separate PPA between the petitioner-LPC and respondent No. 2, it is an admitted fact that no PPA has been executed between respondent No.2 and the petitioner. Petitioner is not a party to any PPA.
5(i)(e) The SIA executed on 06.07.2024 between the petitioner -
Kundan Hydro (Luni) Pvt. Ltd and respondent No. 1 - State does not contain any Clause pertaining to PPA dated 31.05.2000 or the rate of sale/purchase of electricity agreed therein between SPML & respondent No. 2 - HPSEBL, being binding upon the petitioner. The SIA dated 06.07.2024 only speaks about binding nature of the IA dated 31.05.2000 and SIA dated 01.03.2008 upon the petitioner.
5(i)(f) Different agreements on record & provisions thereof make it evident that the respondents themselves have been aware throughout of the requirement of execution of separate IA and PPA on emerging of a new Project Developer. It is for this reason, after LPC entering as the new Project Developer under the Tripartite Agreement dated 25.09.2004, a separate Implementation Agreement called Supplementary Implementation Agreement was executed between LPC & respondent No. 1 - State on 01.03.2008.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 44( 2024:HHC:8181 ) Under this SIA, petitioner agreed to abide by the original IA dated 31.05.2000. The SIA itself contained provision for executing a .
separate PPA between LPC & respondent No. 2 - HPSEBL. The requisite PPA however has not been executed till date. The PPA dated 31.05.2000 executed between SPML & respondent No. 2 -
HPSEBL cannot be applied against the petitioner. The rights, obligations etc. of sale and purchase of power agreed upon between respondent No. 2 and the original Project Developer -
SPML under PPA dated 31.05.2000 cannot be enforced upon the petitioner. As observed earlier, petitioner was not a party to this PPA.
5(ii) Regulations/Electricity Regime post execution of PPA dated 31.05.2000, Binding nature of PPA dated 31.05.2000:
5(ii)(a) Regulation No. 17(3)(a)(iii) of the HPERC Regulations-
2017 being relied upon by respondent No. 2 to justify the impugned decision dated 16.07.2024 seeking to enforce the PPA dated 31.05.2000 upon the petitioner, is not applicable at all. The said regulation is applicable only where the PPA for the sale/purchase of net saleable energy from the same, whether under REC mechanism or on long term basis has been signed by the developer of the concerned Project with the Distribution Licensee. In the present ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 45 ( 2024:HHC:8181 ) case, the developer of the Project i.e. the petitioer has not signed any PPA with respondent No. 2 - the distribution licensee. Hence .
PPA dated 31.05.2000 cannot be made applicable to the petitioner by taking advantage of the aforesaid Regulations.
5(ii)(b) Significantly, respondents have not disputed that after the execution of PPA dated 31.05.2000, new electricity regime had come in force. Under the new regime, rights/obligations for sale/purchase of power can be created only with prior approval of the HPERC. By the time, petitioner Company donned the role of Project Developer, new electricity regime had been put in place. The Electricity Act, 2003 was in force & the HPERC was also functioning. As per applicable Regulations/Orders issued by the HPERC, execution of PPA with petitioner would not have been possible without the approval of the HPERC. Even assignment of PPA dated 31.05.2000 to the petitioner could be done only with approval of the HPERC. No such approval of the HPERC assigning PPA dated 31.05.2000 to the petitioner has been placed on record.
No PPA executed with the petitioner with approval of HPERC is part of case record. Therefore, it cannot be held that PPA dated 31.05.2000 would automatically bind the petitioner.
It cannot be held that the PPA dated 31.05.2000 would bind the petitioner simply on the alleged ground that the petitioner ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 46 ( 2024:HHC:8181 ) is an assignee. It has already been held that petitioner, in the given facts in view of covenants of agreements cannot be construed as an .
assignee. In Kapilaben & ors. vs. Ashok Kumar Jayantilal Sheth through POA & ors.2, relying upo Khardah Co. Ltd. vs. Raymon &Co. (India) (P) Ltd.3, it was held that obligations under a contract cannot be assigned to a third party without latter's consent. When such consent is given, it is really a novation resulting in substitution of liabilities. The assignment amounts to novation of contract under Section 62 of the Contract Act. It results in formation of a new contract with the assignee having stepped into the role of assignor.
Since any contract for sale/purchase of power between petitioner and respondent No. 2 - HPSEBL could only be as per new electricity regime which had come into force by the time petitioner got into the frame, such assignment/novation of contract cannot be achieved without express consent of the other party/the petitioner.
Neither the original Power Developer-SPML could on its own assign the PPA dated 31.05.2000 to the petitioner nor respondent No. 2 could unilaterally bind the petitioner with this PPA without latter's express consent. No documents are available on record giving out such express consent of the petitioner with respect to assignment of 2 (2020) 20 SCC 648 3 AIR 1962 SC 1810 ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 47 ( 2024:HHC:8181 ) the PPA dated 31.05.2000 or binding nature of PPA upon the petitioner. Petitioner has not taken over the rights and obligations .
of SPML under the PPA dated 31.05.2000, therefore, this PPA cannot be held against the petitioner.
5(iii) Maintainability of Writ Petition 5(iii)(a) Respondents have also questioned the maintainability of the writ petition. According to the respondents, the Electricity Act, 2003 is an exhaustive legislation which provides complete machinery for adjudication of the disputes between the distribution licensee and generating companies or to refer the same for arbitration under section 86(1)(f) of the Act. Being relevant, the Section is extracted hereinafter:-
"86. (1) The State Commission shall discharge the following functions, namely: -
(a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State:
Providing that where open access has been permitted to a category of consumers under section 42, the State Commission shall determine only the wheeling charges and surcharge thereon, if any, for the said category of consumers;
(b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;
(c) facilitate intra-state transmission and wheeling of electricity;::: Downloaded on - 10/09/2024 20:31:51 :::CIS 48
( 2024:HHC:8181 )
(d) issue licences to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State;
.
(e) promote congenration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licence;
(f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid Code specified under clause (h) of sub-section (1) of section 79;
(i) specify or enforce standards with respect to quality, continuity and reliability of service by licensees;
(j) fix the trading margin in the intra-State trading of electricity, if considered, necessary; and
(k) discharge such other functions as may be assigned to it under this Act.
(2) The State Commission shall advise the State Government on all or any of the following matters, namely :-
(i) promotion of competition, efficiency and economy in activities of the electricity industry;
(ii) promotion of investment in electricity industry;
(iii) reorganization and restructuring of electricity industry in the State;
(iv) matters concerning generation, transmission , distribution and trading of electricity or any other matter referred to the State Commission by that Government.::: Downloaded on - 10/09/2024 20:31:51 :::CIS 49
( 2024:HHC:8181 ) (3) The State Commission shall ensure transparency while exercising its powers and discharging its functions.
(4) In discharge of its functions the State Commission shall be .
guided by the National Electricity Policy, National Electricity Plan and tariff policy published under Section 3."
According to the respondents, the issue involved in the matter has to be considered & decided in accordance with Regulation 17 of the HPERC Regulations-2017 by filing appropriate proceedings before the HPERC. Writ petition is therefore not maintainable. Placing reliance upon Noble Resources Ltd. vs. State of Orissa & anr. 4;
State of U.P. & ors. vs. Bridge & Roof Copany (India) Ltd. 5; and New India Assurance Co. Ltd. vs. Vipin Behari Lal Srivastava 6, it has been contended that writ petition stems from a contractual dispute, therefore, is beyond the purview of Article 226 of the Constitution.
Whereas according to the petitioner, plea of non maintainability of the writ petition, is a misconceived contention in view of settled law that existence of an alternate remedy is not a bar on maintainability of the writ petition under Article 226 of the Constitution. The present case involves rank arbitrariness leading to perversity on part of respondents in attempting to enforce a third 4 (2006) 10 SCC 236 5 (1996) 6 SCC 22 6 (2008) 3 SCC 446 ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 50 ( 2024:HHC:8181 ) party contract against a non-signatory, contrary to law & applicable Regulations. The writ petition, therefore, is maintainable.
.
5(iii)(b) Petitioner in the instant case is not seeking to determine tariff for sale/purchase of the electricity generated from LHEP 4.50 MW. The question involved in the lis is as to whether the PPA dated 31.05.2000 can be held to be binding upon the petitioner.
In M.P. Power Management Company Limited, Jabalpur vs. Sky Power Southeast Solar India Private Limited & ors 7 the appellant had challenged the judgment passed by the High Court whereby an order passed by the appellant terminating PPA entered into by the appellant & respondent, was quashed. Hon'ble Apex Court held that PPA is not a statutory contract. The mere fact that relief is sought under a contract which is not statutory will not entitle the State in a case by itself to ward off scrutiny of its action or inaction under the contract, if complaining party is able to establish that such action/inaction is per se arbitrary. It was also held that an action will lie when State's action relates to the stage prior to the contract being entered into. Even after the contract is entered into there can be a variety of circumstances which may provide a cause of action to a party to the contract with the State to seek relief by filing a writ petition. Relevant paras from the judgment are as under:-
7(2023) 2 SCC 703 ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 51 ( 2024:HHC:8181 ) "31. After hearing the learned counsel for the parties, we find that the following points arise for our consideration.
31.1. (1) Whether the PPA in question, is a statutory .
contract?
31.2. (2) What is the scope of judicial review of action by the State in a matter arising from a contract and what is the effect of the contract not being statutory? What is arbitrariness?
31.3. (3) What is the concept of public law in judicial review in a contractual matter?
31.4 (4) ... ...
31.5 (5) ... ...
31.6. (6) Whether the writ petition must be dismissed as the case involves disputed questions of facts?" .. ... ... ... ...
"81 We have already concluded that PPA is not a Statutory Contract. However, that would not be the end of enquiry. Dr. A.M. Singhvi, learned Senior Counsel, would point out that the contract, not being a statutory contract, assumes relevance only for the purpose of deciding as to whether the Court should relegate the writ applicant, to alternate remedies. In other words, while the Court would retain its discretion to entertain the petition or decline to do so, in the facts of each case, there is no absolute taboo against the Court granting relief, even if the challenge to the termination of a contract is made in the case of a contract, which is not statutory in nature, when the offending party is the State. In other words, the contention is that the law in this field has witnessed an evolution and, what is more, a revolution of sorts and a transformatory change with a growing realisation of the true ambit of Article 14 of the Constitution of India. The State, he ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 52 ( 2024:HHC:8181 ) points out, cannot play the Dr. Jekyll and Hyde game anymore. Its nature is cast in stone. Its character is inflexible. This is irrespective of the activity it indulges in. It will continue to be .
haunted by the mandate of Article 14 to act fairly. There has been a stunning expansion of the frontiers of the Court's jurisdiction to strike at State action in matters arising out of contract, based, undoubtedly, on the facts of each case. It remains open to the Court to refuse to reject a case, involving State action, on the basis that the action is, per se, arbitrary.
82. We may cull out our conclusions in regard to the points, which we have framed:
82.1. It is, undoubtedly, true that the writ jurisdiction is a public law remedy. A matter, which lies entirely within a private realm of affairs of public body, may not lend itself for being dealt with under the writ jurisdiction of the Court.
82.2. The principle laid down in Bareilly Development Authority (supra) [(1989) 2 SCC 116], that in the case of a non-
statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal (supra)[(1977) 3 SCC 457], may not continue to hold good, in the light of what has been laid down in ABL (supra) [(2004) 3 SCC 553] and as followed in the recent judgment in Sudhir Kumar Singh (supra) [(2021) 19 SCC 706].
82.3. The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent-State in a case by itself to ward-off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/ inaction is, per se, arbitrary.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 53( 2024:HHC:8181 ) 82.4. An action will lie, undoubtedly, when the State purports to award any largesse and, undoubtedly, this relates to the stage prior to the contract being entered into .
[See R.D. Shetty (supra) (1979) 3 SCC 489]. This scrutiny, no doubt, would be undertaken within the nature of the judicial review, which has been declared in the decision in Tata Cellular vs. Union of India [(1994)6 SCC 651]. 82.5. After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a Writ Petition.
82.6. Without intending to be exhaustive, it may include the relief of seeking payment of amounts due to the aggrieved party from the State. The State can, indeed, be called upon to honour its obligations of making payment, unless it be that there is a serious and genuine dispute raised relating to the liability of the State to make the payment. Such dispute, ordinarily, would include the contention that the aggrieved party has not fulfilled its obligations and the Court finds that such a contention by the State is not a mere ruse or a pretence.
82.7. The existence of an alternate remedy, is, undoubtedly, a matter to be borne in mind in declining relief in a Writ Petition in a contractual matter. Again, the question as to whether the Writ Petitioner must be told off the gates, would depend upon the nature of the claim and relief sought by the petitioner, the questions, which would have to be decided, and, most importantly, whether there are disputed questions of fact, resolution of which is necessary, as an indispensable prelude to the grant of the relief sought. Undoubtedly, while there is no prohibition, in ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 54 ( 2024:HHC:8181 ) the Writ Court even deciding disputed questions of fact, particularly when the dispute surrounds demystifying of documents only, the Court may relegate the party to the .
remedy by way of a civil suit.
82.8. The existence of a provision for arbitration, which is a forum intended to quicken the pace of dispute resolution, is viewed as a near bar to the entertainment of a Writ Petition (See in this regard, the view of this Court even in ABL (supra) (2004)3 SCC 553 explaining how it distinguished the decision of this Court in State of U.P. and others v. Bridge & Roof Co. (India) Ltd. (1996) 6 SCC 22, by its observations in paragraph-14 in ABL (supra)].
82.9. The need to deal with disputed questions of fact, cannot be made a smokescreen to guillotine a genuine claim raised in a Writ Petition, when actually the resolution of a disputed question of fact is unnecessary to grant relief to a writ applicant.
82.10. The reach of Article 14 enables a Writ Court to deal with arbitrary State action even after a contract is entered into by the State. A wide variety of circumstances can generate causes of action for invoking Article 14. The Court's approach in dealing with the same, would be guided by, undoubtedly, the overwhelming need to obviate arbitrary State action, in cases where the Writ remedy provides an effective and fair means of preventing miscarriage of justice arising from palpably unreasonable action by the State.
82.11. Termination of contract can again arise in a wide variety of situations. If for instance, a contract is terminated, by a person, who is demonstrated, without any need for any argument, to be the person, who is completely unauthorised ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 55 ( 2024:HHC:8181 ) to cancel the contract, there may not be any necessity to drive the party to the unnecessary ordeal of a prolix and avoidable round of litigation. The intervention by the High Court, in such a .
case, where there is no dispute to be resolved, would also be conducive in public interest, apart from ensuring the Fundamental Right of the petitioner under Article 14 of the Constitution of India. When it comes to a challenge to the termination of a contract by the State, which is a non-statutory body, which is acting in purported exercise of the powers/rights under such a contract, it would be over simplifying a complex issue to lay down any inflexible Rule in favour of the Court turning away the petitioner to alternate Fora. Ordinarily, the cases of termination of contract by the State, acting within its contractual domain, may not lend itself for appropriate redress by the Writ Court. This is, undoubtedly, so if the Court is duty-bound to arrive at findings, which involve untying knots, which are presented by disputed questions of facts. Undoubtedly, in view of ABL Limited (supra), if resolving the dispute, in a case of repudiation of a contract, involves only appreciating the true scope of documentary material in the light of pleadings, the Court may still grant relief to an applicant. We must enter a caveat. The Courts are today reeling under the weight of a docket explosion, which is truly alarming. If a case involves a large body of documents and the Court is called upon to enter upon findings of facts and involves merely the construction of the document, it may not be an unsound discretion to relegate the party to the alternate remedy. This is not to deprive the Court of its constitutional power as laid down in ABL (supra). It all depends upon the facts of each case as to whether, having ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 56 ( 2024:HHC:8181 ) regard to the scope of the dispute to be resolved, whether the Court will still entertain the petition. 82.12. In a case the State is a party to the contract and a .
breach of a contract is alleged against the State, a civil action in the appropriate Forum is, undoubtedly, maintainable. But this is not the end of the matter. Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (See in this regard Kumari Shrilekha Vidyarthi and others v. State of U.P. (1991)1 SCC 212. However, it must be made clear that every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action.
While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely malafide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and all we intend to lay down is that there is a discretion available to the Court to grant relief in appropriate cases.
82.13. A lodestar, which may illumine the path of the Court, would be the dimension of public interest subserved by the Court interfering in the matter, rather than relegating the matter to the alternate Forum.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 57( 2024:HHC:8181 ) 82.14. Another relevant criteria is, if the Court has entertained the matter, then, while it is not tabooed that the Court should not relegate the party at a later stage, ordinarily, it .
would be a germane consideration, which may persuade the Court to complete what it had started, provided it is otherwise a sound exercise of jurisdiction to decide the matter on merits in the Writ Petition itself.
82.15. Violation of natural justice has been recognised as a ground signifying the presence of a public law element and can found a cause of action premised on breach of Article 14. [See Sudhir Kumar Singh and Others (2021) 19 SCC 706]."
When an action can be said to be arbitrary was explained as under in the aforesaid judgment:-
"75. We would, therefore, sum up as to when an act is to be treated as arbitrary. The court must carefully attend to the facts and the circumstances of the case. It should find out whether the impugned decision is based on any principle. If not, it may unerringly point to arbitrariness. If the act betrays caprice or the mere exhibition of the whim of the authority it would sufficiently bear the insignia of arbitrariness. In this regard supporting an order with a rationale which in the circumstances is found to be reasonable will go a long way to repel a challenge to state action. No doubt the reasons need not in every case be part of the order as such. If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary. A total non- application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action. A wholly unreasonable decision which is little different ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 58 ( 2024:HHC:8181 ) from a perverse decision under the Wednesbury doctrine would qualify as an arbitrary decision under Article 14. Ordinarily visiting a party with the consequences of its breach under a .
contract may not be an arbitrary decision.
76. We may now notice the judgment of this court in Joshi Technologies International Inc. v. Union of India and others (2015) 7 SCC 728, which is also relied upon by the learned Additional Solicitor General. The said case actually involved the complaint of the writ petitioner therein that it was entitled to the benefit of Section 42 of the Income Tax Act, 1961 which provided for certain deductions. The petitioner had entered into an agreement with the respondent, the Government of India. The case of the respondent, inter alia, was one denying the case of the petitioner that the omission of Section 42 was by oversight. The prayer in the writ petition itself inter alia was essentially to declare entitlement to the deduction under Section 42, inter alia."
The Apex Court also held as under:-
"120. At this juncture, we must make certain observations.
121. While the law has evolved from the hands-off approach to one of contracts lending ground for writ courts making a foray into decisions by State and its instrumentalities even in contractual matter, there are certain principles which we have already in fact generally noticed.
122. We have already found that the contract in question, i.e., the PPA, is not a statutory contract. We have also noticed that even if it is a non-statutory contract, there is no absolute bar in dealing with a cause of action based on acts or omission by the State or its instrumentalities even during the course of the working of a contract.::: Downloaded on - 10/09/2024 20:31:51 :::CIS 59
( 2024:HHC:8181 )
123. We again reiterate that a monetary claim arising from a contract may be successfully urged by a writ applicant but the premise would not be a mere breach of contract. Being part of .
public law the case must proceed on the basis of there being arbitrariness vitiating the decision. The matter should not fall within a genuinely disputed question of facts scenario. The dispute which must be capable of being resolved on a proper understanding of documents which are not in dispute may furnish a cause of action in a writ court. Such was the case in ABL (supra).
124. What is this litigation all about? This litigation is not about enforcing a monetary claim. The writ petition lays a challenge to the termination of the contract. A termination of the contract, no doubt, again may not be immune if it is found to be afflicted with the vice of arbitrariness. Interference again may be refused if the court finds that the case really belongs to the small area with unclear contours where it can be appropriated as a private law dispute. The distinction between public law and private law has concededly been reduced to nearly imperceptible terms but the distinction in law remains.
125. As far as the public law aspect is concerned, we are inclined to take the view that in view of what has been laid down in Shri Vidhyarthi Lekha (supra)[(1991) 1 SCC 212], the impact of the action in a contractual matter in the facts by public authority is felt in public domain.
126. We are dealing with the action of the appellant in terminating the contract dealing with the right to generate renewable energy and for supplying it to the consumers. Supply of power and its consumption are imperative and indispensable needs for not only the common man but also for the efficient functioning of trade and industry. Decisions in this domain do ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 60 ( 2024:HHC:8181 ) impinge on public interest. Therefore, we would not be inclined to shut the doors on the first respondent in this matter. We also bear in mind that this is the second round of litigation. As .
noticed already, in the first round, the first respondent did succeed."
Finally, it was concluded as under:-
"139 Once the State enters into the contract, rights are created. If the case is brought to the constitutional court and it is invited to interfere with State action on the score that its action is palpably arbitrary, if the action is so found then an appeal to public interest must be viewed depending on the facts of each case. If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall in the rate of price of the services or goods then this cannot become determinative of the question as to whether court should decline jurisdiction.
In this case, it is noteworthy that the rates were in fact settled on the basis of international competitive bidding and in which as many as 182 bidders participated and the rate offered by the first respondent was undoubtedly the lowest. The fact that power has become cheaper in the market subsequently by itself should not result in non-suiting of the complaint of the first respondent, if it is found that a case of clear arbitrariness has been established by the first respondent."
In the above case, there was a PPA executed between the parties. The writ petition was entertained on the ground of ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 61 ( 2024:HHC:8181 ) arbitrariness in State action. In the instant case, PPA has not even been executed between the petitioner and respondent No. 2. The .
respondents' case is that a PPA executed on 31.05.2000 between respondent No. 2 and SPML is binding upon the petitioner, whereas petitioner disputes this position and contends that a PPA to which it was not a signatory cannot be foisted upon it. In view of the nature of dispute involved, the case stricto-sensu cannot be said to be of post contract stage. It is another matter that even for disputes involving post contract stages, there is no absolute bar for entertaining the writ petition. It will inter alia depend upon nature of dispute raised. Petitioner has put forward a simple case that the PPA dated 31.05.2000 executed between third parties cannot be enforced against it and has raised allegations of arbitrariness & perverse actions on part of the respondents in directing it in the year 2024 to sell its generated power in the Project at the rate settled in the PPA dated 31.05.2000. Writ petition in the attending facts & circumstances is maintainable.
5(iv) Abandonment of the PPA dated 30.05.2000:
An additional plea has been taken by the petitioner that there has been complete silence and inaction of the parties to the PPA for over two decades. This in itself would lead to a conclusion that the contract stood discharged by abandonment and no longer ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 62 ( 2024:HHC:8181 ) exists in eyes of law. Even a subsequent communication between the parties would not revive an abandoned contract. Reliance in .
support of this plea was placed upon Atma Das vs. Suriya Prasad 8 and Pearl Mill Co., Limited vs. Ivy Tannery Co., Limited 9.
Indeed, in the instant case, the respondents in the year 2024 are seeking to enforce a PPA upon the petitioner that was executed in the year 2000. However, petitioner was not a signatory to the aforesaid PPA. The original Project Developer - SPML, which had executed this PPA with respondent No. 2 was permitted to exit from the contract. It has already been held in paras supra that PPA dated 31.05.2000 is not binding upon the petitioner as it was not an executant thereof and also on count of several other factors.
The question as to whether the PPA dated 31.05.2000 was abandoned by the parties thereto i.e. SPML & respondent No. 2, therefore, neither arises for consideration nor is necessary to be gone into.
6. Conclusion Based upon above, following conclusions are drawn:-
a) Implementation Agreement (IA) dated 31.05.2000 and Power Purchase Agreement (PPA) dated 31.05.2000 are two 8 (1969) 3 SCC 616 9 [1919] 1 K.B.78 ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 63 ( 2024:HHC:8181 ) distinct & separate agreements. The IA contains terms and conditions for allotment of the Project, stipulated by the respondent No. 1-State .
and agreed upon by the Project Developer (SPML). The IA does not regulate sale & purchase of the power generated by the Project. It is the PPA that governs the sale and purchase of the power.
b) Petitioner {Luni Power Company (P) Ltd., under new management} was neither a signatory to the IA dated 31.05.2000 The IA executed r to nor the PPA dated 31.05.2000.
c) on 31.05.2000, was between M/s Subhash Projects and Marketing Limited (SPML) and respondent No. 1-State. Whereas, PPA dated 31.05.2000 was entered into between SPML and respondent No. 2-HPSEBL inter alia containing stipulations for sale & purchase of power generated by Luni Hydro Electric Project (LHEP) 3.00 MW @ Rs. 2.50/kWh.
d) Petitioner (LPC) became the new Project Developer for LHEP 3.00 MW on 25.09.2004 upon execution of a Tripartite Agreement between SPML, respondent No. 1-State and the petitioner. It enhanced the capacity of the Project to 4.50 MW.
e) A separate IA was executed on 01.03.2008 (SIA) between respondent No. 1-State and the petitioner (LPC) for LHEP 4.50 MW.
This SIA transferred rights & obligations of SPML under IA dated 31.05.2000 to the petitioner.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 64( 2024:HHC:8181 )
f) Pursuant to the order passed by NCLT, entire management of petitioner Company underwent change. A new SIA .
was executed between petitioner {Kundan Hydro (Luni) Pvt. Ltd.} and respondent No. 1-State on 06.07.2024 transferring to it rights & obligations under IA dated 31.05.2000 and SIA dated 01.03.2008.
g) No agreement has been entered into between the petitioner and respondent No. 2 in respect of purchase of power generated at LHEP 4.50 MW.
h) There is no covenant in the IA dated 31.05.2000, PPA dated 31.05.2000, Tripartite Agreement dated 25.09.2004, SIA dated 01.03.2008 and SIA dated 06.07.2024 that binds the petitioner with PPA dated 31.05.2000.
i) The covenants in the aforesaid agreements envisage execution of a fresh PPA between the new Project Developer & respondent No. 2. It is an admitted fact that fresh PPA has not been executed with the petitioner.
j) PPA dated 31.05.2000 with agreed rate of sale of power generated at LHEP 3.00 MW @ Rs. 2.50/kWh to respondent No. 2- HPSEBL was executed when old electricity regime was in place.
HPERC came into being on 06.01.2001. New Electricity Act was promulgated in the year 2003. In terms of applicable regulations, new PPA under new electricity regime can come into existence only ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 65 ( 2024:HHC:8181 ) with approval of HPERC. No such approval of HPERC is there for assigning the old PPA dated 31.05.2000 upon the petitioner. No .
PPA has been executed between petitioner and respondent No. 2- HPSEBL with approval of HPERC. There is no assignment of the PPA dated 31.05.2000 upon the petitioner.
k) Petitioner has expressed its willingness to have a joint petition prepared with respondent No. 2-HPSEBL alongwith draft PPA for sale/purchase of power generated in the LHEP 4.50 MW at the rate applicable on scheduled commissioning date of the project for approval to HPERC. Such expression of willingness has to be held in accordance with law.
l) Respondents' order to the petitioner in its impugned communication dated 16.07.2024 that petitioner is bound by the PPA dated 31.05.2000 for the original 3.00 MW capacity of the Project and a Supplementary PPA would be signed only for fixing a composite tariff for the revised Project capacity of 4.50 MW is unlawful. The HPERC Regulations-2017 being relied upon respondent No. 2, to foist upon the petitioner an agreement executed 24 years ago, to which petitioner was neither a privy nor had bound itself with its stipulations at any point of time, cannot be held applicable in the given facts. Petitioner cannot be dictated by respondent No. 2 in the year 2024 to sell its generated power to it ::: Downloaded on - 10/09/2024 20:31:51 :::CIS 66 ( 2024:HHC:8181 ) (respondent No. 2-HPSEBL) @ Rs. 2.50/kWh i.e. the rate agreed between third parties in the year 2000.
.
m) In view of nature of dispute raised in the petition that revolves around the question as to 'whether the PPA executed on 31.05.2000 between third parties can be foisted upon the petitioner a separate legal entity', the writ petition is held maintainable.
7. The Result The sum total of above discussions is that this writ petition succeeds. Following directions are issued:-
(i) Impugned communication dated 16.07.2024 is quashed and set aside.
(ii) It is held that Power Purchase Agreement dated 31.05.2000 executed between respondent No. 2-HPSEBL and M/s Subhash Projects & Marketing Limited (Original Project Developer) is not binding upon the petitioner and cannot be enforced against it.
(iii) Respondent No. 2 is directed to execute a Power Purchase Agreement with the petitioner in respect of the entire Project capacity of 4.50 MW at the HPERC determined tariff applicable as on Scheduled Commercial Operation Date of the Project in accordance with law and complete all codal formalities in furtherance thereof without unnecessary delay.
::: Downloaded on - 10/09/2024 20:31:51 :::CIS 67( 2024:HHC:8181 )
(iv) In order to avoid loss of electricity generated at the Project, it is ordered that till the determination of tariff as on the date .
of commissioning of the Project by the HPERC in terms of direction No. (iii) above, the petitioner shall be permitted by the respondents to sell the electricity generated from its Power Project to third parties after adjusting the free power supply to the respondents in accordance with law.
Petition stands disposed of in the aforesaid terms.
Pending miscellaneous application(s), if any, also stand disposed of accordingly.
Jyotsna Rewal Dua, Judge September 10 , 2024 (PK) ::: Downloaded on - 10/09/2024 20:31:51 :::CIS