Appellate Tribunal For Electricity
Acme Dayakara Solar Power Private ... vs Telangana State Electricity ... on 13 April, 2026
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL No. 322 of 2021
Dated: 13.04.2026
Present: Hon'ble Ms. Seema Gupta, Officiating Chairperson
Hon'ble Mr. Virender Bhat, Judicial Member
IN THE MATTER OF:
ACME Dayakara Solar Power Private Limited
Through its Authorised Signatory
Having its registered office at
Plot No. 152, Sector 44,
Gurugram - 122 002, Haryana
[email protected] ... Appellant
Versus
1. Telangana State Electricity Regulatory Commission
Through its Secretary,
5th Floor, Singareni Bhawan,
Red Hills, Lakdi-ka-pul,
Hyderabad - 500004
Email: [email protected]
2. Southern Power Distribution Company of Telangana Limited
Through its Managing Director
Corporate Office, #6-1-50,
Mint Compound,
Hyderabad - 500063
Email: [email protected] ... Respondent(s)
Counsel for the Appellant(s) : Sujit Ghosh Sr. Adv.
Mannat Waraich
Ananya Goswami
Ashabari Basu Thakur
Himani Yadav
for App. 1
_______________________________________________________________________________
Appeal No.322 of 2021 Page 1 of 37
Counsel for the Respondent(s) : Somanadri Goud Katam
for Res. 1
D. Abhinav Rao for Res. 2
JUDGMENT
PER HON'BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
1. The present appeal arises out of the order dated 04.10.2021 passed by 1st respondent Telangana State Electricity Regulatory Commission (hereinafter referred to as "the Commission") in petition no.22 of 2020 filed by the appellant herein whereby the Commission while dismissing the petition, has held that the introduction of Entry Tax under the Telangana Tax on Entry of Goods into Local Areas Act, 2001 (hereinafter referred to as the "Entry Tax Act") does not qualify as "Change in Law" in terms of Article 1.12 of the Power Purchase Agreement (PPA) dated 03.03.2015 executed between the appellant and 2nd respondent Southern Power Distribution Company of Telangana Limited.
Brief conspectus of the case:
2. The facts and circumstances of the case, stated briefly, along with the dates and description of the important events relevant for the disposal of instant appeal are given hereunder.
_______________________________________________________________________________ Appeal No.322 of 2021 Page 2 of 37
3. On 16.10.2001, the Government of Andhra Pradesh enacted Andhra Pradesh Tax on entry of Goods into Local Areas Act, 2001. Its vires were challenged before the High Court of Andhra Pradesh by way of writ petition nos.615 of 2006 and batch titled Sree Rayalseema Alkalies and Alied Chemicals Limited v. State of Andhra Pradesh & Ors. Vide judgment dated 31.12.2007, the batch of writ petitions was allowed and the levy of Entry Tax vide sections 3 & 4 of the said Act was held as unconstitutional.
4. The State of Andhra Pradesh assailed the said judgment dated 31.12.2007 of the High Court of Andhra Pradesh before the Supreme Court by way of Civil Appeal Nos.8036-8060 of 2016. Similar issues had arisen in several other States also and diverse orders were passed by different High Courts. All those orders were challenged before the Supreme Court. All those appeals were tagged together, the lead appeal being Jindal Stainless Steel Limited & Anr. v. State of Haryana and Ors. The Supreme Court found it expedient to refer the matter to a nine-Judge Bench which heard the reference and vide judgment dated 11.11.2016 upheld the validity of Entry Tax Law on the ground that it was in public interest.
5. We may note here that Telangana was carved out of erstwhile Andhra Pradesh as a new 29th State of India on 2nd June, 2014 and the aforesaid _______________________________________________________________________________ Appeal No.322 of 2021 Page 3 of 37 enactment was known as "Telangana Tax on Entry of Goods into Local Areas Act, 2001" in the State of Telangana.
6. Meanwhile, a Request for Selection (RfS) document was issued by Northern Power Distribution Company of Telangana Limited to procure 500MW of power through tariff based competitive bidding. It was issued on 27.08.2014. Appellant also submitted its financial bid on 13.10.2014 and a letter of intent dated 23.01.2015 was issued to it for implementation of the project. Accordingly, the appellant entered into a PPA dated 03.03.2015 with the Telangana Discom to set up 30MW solar power project.
7. The Chief Tax Officer (CTO) issued a show cause notice dated 02.01.2020 to the appellant for levy of Entry Tax under the Telangana Enry Tax Act, 2001. Subsequently, the CTO passed two separate assessment orders dated 11.02.2020 imposing Entry Tax to the tune of Rs.77,59,769/- and Rs.5,84,83,022/- on the goods against the appellant for the Financial Years (FYs) 2015-16 and 2016-17.
8. The appellant challenged the levy of Entry Tax before the Telangana High Court by way of writ petition nos.4921/2020 and 4922/2020. Initially, vide interim order dated 04.03.2020, the High Court directed interim stay on the recovery of the said tax amount subject to payment of 20% of the sum as demanded by CTO, which was complied with by the appellant. _______________________________________________________________________________ Appeal No.322 of 2021 Page 4 of 37
9. Subsequently, appellant issued Change in Law notice dated 03.04.2020 upon the 2nd respondent on the basis of the judgment dated 11.11.2016 of the Supreme Court, show cause notice dated 02.01.2020, issued by CTO and the assessment orders issued by the CTO.
10. Thereafter, the appellant approached the Commission by way of petition no.22/2020 claiming, inter alia, following reliefs: -
"b) Hold and declare that imposition of Entry Tax for Entry of Goods in the State of Telangana through Telangana Tax on Entry of Goods into Local Areas Act, 2001 read with Judgment dated 11.11.2016 titled "Jindal Stainless Limited & Anr. v. State of Haryana & Ors and Batch (Civil Appeal Nos. 3453 of 2002) read with Show Cause Notices dated 02.01.2020 issued by Commercial Taxes Department, Government of Telangana and Assessment Orders dated 11.02.2020 pronounced by Commercial Tax Officer, Mahboobnager Circle, Nalgonda Division, Telangana read with Hon'ble Telangana High Court Orders dated 04.03.2020 qualify as a Change in Law Event as per Article 12 of the PPA; and _______________________________________________________________________________ Appeal No.322 of 2021 Page 5 of 37
c) Direct the Respondent to reimburse the petitioner for the corresponding increase in the project cost on account of imposition of the entry tax as and when paid by the petitioner no later than seven (7) days of claim(s), as one time lump amount, submitted by the petitioner."
11. The petition was dismissed by the Commission vide impugned order dated 04.01.2021, thereby denying the reliefs claimed by the appellant.
12. In these circumstances, the appellant has approached this Tribunal by way of instant appeal seeking setting aside of the said impugned order of the Commission.
13. Thus, the core issue which arises for our consideration in this appeal is whether the levy of Entry Tax under the Telangana Tax on Entry of Goods into Local Areas Act, 2001 ("Entry Tax Act") read with the decision of the Hon'ble Supreme Court in case of Jindal Stainless Steel Limited & Anr. v. State of Haryana & Ors. (2017) 12 SCC 1 (in short Jindal Steel judgment) would qualify as a change in law event within the framework of PPA dated 03.03.2015 entered into between the appellant and 2nd respondent.
14. We have heard learned counsel for the appellant and the learned counsel for the 2nd respondent. We have perused the impugned order as _______________________________________________________________________________ Appeal No.322 of 2021 Page 6 of 37 well as the written submissions and also the citations filed by the learned counsels.
15. Before adverting to and considering the rival submissions made by the learned counsels, we deem it appropriate to extract hereunder the relevant provision of the PPA dated 03.03.2015, which were referred to by the learned counsels during the course of hearing.
16. Article 1.12 of the PPA defines "Change in Law" as under: -
"1.12 "Change in Law" means any change or amendment to the provisions of electricity law in force, regulations, directions, notifications issued by the competent authorities and Government of Indian (GoI), Government of Telangana State (GoTS) including the erstwhile Government of Andhra Pradesh (GoAP) from time to time."
17. Article 1.39 specifies the meaning of "quoted tariff" as under: -
"1.39 "Quoted Tariff" means charges for each year of supply of power as per the terms of the Agreement, quoted by the SPD as a part of the Financial Bid submitted on 13th October 2014 in response to the Rfs _______________________________________________________________________________ Appeal No.322 of 2021 Page 7 of 37 TSSPDCL/02/LTSPP/2014 issued by TSSPDCL on 27/08/2014."
18. The term "tariff" is defined in Article 1.49 of the PPA to have the same meaning as prescribed in clause 2.2 of the agreement.
19. Articles 2.2 and 2.3 of the PPA reads as under: -
"2.2 The DISCOM shall pay Tariff of Rs. 6.848 per unit to the Solar Power Developer as per the tariff quoted by the Solar Power Developer in the Bid.
i. The Bidder has opted for Tariff Option -1 as specified in the Financial Bid Format 6.10 (B) of Rfs, then Tariff for all Tariff Years for the entire term of the Agreement shall be the Quoted Tariff;
2.3 The Tariff payable by the DISCOM shall be inclusive of all taxes, duties and levies or any other statutory liability, as applicable from time to time."
20. Article 6.1 of the PPA describe the responsibility of the solar power developer i.e. the appellant herein. Clause (iv) of the said Article is relevant and quoted hereinbelow: -
_______________________________________________________________________________ Appeal No.322 of 2021 Page 8 of 37 "6.1 The Solar Power Developer shall be responsible:
..........
(iv) for making all payments on account of any taxes, cess, duties or levies or any statutory obligation imposed by any government or competent statutory authority on the land, equipment, material or works of the Project or on the energy generated or consumed by the Project or the Solar Power Developer or on the income or assets of the Solar Power Developer."
SUBMISSIONS ON BEHALF OF THE PARTIES: -
(a) Submissions on behalf of the appellant: -
21. Learned counsel for the appellant submitted that the impugned order of the Commission is erroneous and cannot be sustained. He would argue that the PPA does not contain any explicit provision restricting the appellant from claiming relief on account of Change in Law events that have resulted in increased expenditure for the appellant. Accordingly, in the absence of any such express stipulation, respondent discom cannot read any restriction or construe such silence to the prejudice of appellant so as to deny relief under Change in Law clause. He argued that mere definition of Change in Law, in _______________________________________________________________________________ Appeal No.322 of 2021 Page 9 of 37 the absence of any specific restrictive provision, cannot by itself lead to the denial of restitutionary relief as claimed by the appellant. It is his submission that as per the explicit terms of the PPA, the tariff payable to the appellant in future by the 2nd respondent is to include taxes as applicable from time to time, which were not factored at the time of bid submission, including the levy of Entry Tax which came into force after the last date of bid submission. The learned counsel conceded that the PPA does not contain the typical Change in Law clause as contained in the standard PPAs. However, he submitted that the term "Change in Law" which has been defined under Article 1.2 of the PPA does not by itself create any embargo for claiming relief on account of imposition of new taxes and duties. He would further submit that the definition of "Change in Law" also includes within its ambit the change in regulations, directions and notifications issued by the competent authorities which ought to be construed in a broad and judicious manner to include imposition of Entry Tax pursuant to the judgment passed by the Hon'ble Supreme Court. In this regard, the learned counsel also submitted as under: -
"(i) Interpretation of the term Regulations: The expression "Regulations", as referred to in Clause 1.12 of the PPA, must be interpreted broadly so as to encompass any statutory levy having legal force and effect. In this _______________________________________________________________________________ Appeal No.322 of 2021 Page 10 of 37 context, the levy of Entry Tax originates from the Telangana Tax on Entry of Goods into Local Areas Act, 2001 and is administered by a competent authority.
Accordingly, the said levy squarely falls within the ambit of change in law arising from a change in the applicable Regulations. Further, the previous National Tariff Policy issued under Section 3 of the Electricity Act and notified on 06.01.2006, as amended on 31.03.2008, 20.01.2011 and 08.07.2011, did not contain an express change in law provision. The previous National Tariff Policy was subsequently amended, and the effect of the said amendment was that a change in law provision was inserted in the Tariff Policy. The said provision is present in Clause 6.2.4 of the National Tariff Policy, 2016, which the Appellant is relying on for the present case. This insertion of a change in law provision in the National Tariff Policy, 2016, also qualifies as a change in law under the ambit of Clause 1.12 of the PPA.
(ii) Interpretation of the term Directions: The expression "Directions" as employed in Clause 1.12 of the PPA must be construed to include decisions rendered by the Hon'ble Supreme Court, which have _______________________________________________________________________________ Appeal No.322 of 2021 Page 11 of 37 binding force under Article 142 of the Constitution of India. Since the Jindal Stainless Judgment is a decision of the Hon'ble Supreme Court, it squarely falls within the ambit of change in law. Consequently, any alteration in the levy of entry tax pursuant to and subsequent to the Jindal Stainless Judgment would also constitute a change in law."
22. Referring to Article 2.2 read with Articles 1.39 and 1.49 of the PPA, the learned counsel argued that these clauses cannot be treated as determinative of the entire tariff payable by the 2nd respondent year-on-year to the appellant. He submitted that while providing and agreeing upon the terms of the PPA, the draftsman in his wisdom consciously agreed upon a different terminology to determine the tariff payable by the appellant in future which is evident from the perusal of clause 2.3 as opposed to the tariff as mentioned in Article 2.2 read with Article 1.49 and 1.39. He pointed out that Article 2.3 provides that "tariff payable" by the discom shall be inclusive of taxes, duties and other levies as applicable from time to time. While Article 2.2 lays down the obligation of the discom to pay "tariff" based on the option as exercised by the bidder. According to the learned counsel, the terms "shall pay" and "payable" used in Articles 2.2 and 2.3 are in contradiction to each other, the former placing an obligation to pay whereas the latter deals _______________________________________________________________________________ Appeal No.322 of 2021 Page 12 of 37 with the actual tariff payable by the discom in future. He further argued that if Article 2.3 ought to be read in the same manner as provided in Article 2.2, then Clause 2.3 would have used the phraseology "Tariff as quoted above is inclusive of all taxes without any alteration irrespective of any change in law", instead of stating "Tariff payable shall be inclusive all taxes, duties... as applicable from time to time". In other words, if the terms of the PPA had contemplated an explicit restriction in relation to restitution for future levies and taxes, then such restriction indeed would have to be respected by both parties. However, where such restriction has not been contemplated and instead the terms of the PPA clearly point towards the different terminology used in relation to the 'tariff payable' in the future, then such intention should be given effect to.
23. The learned counsel cited judgment of Delhi High Court in Satya Developers Pvt. Ltd. v. Pearey Lal Bhawan, 2015 SCC OnLine Del 12756 and judgment of the Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. & Ors. (2023) 10 SCC 60 to buttress his submissions.
24. It is, further argued by the learned counsel that since the imposition of Entry Tax pursuant to Jindal Steel judgment constitutes a fresh levy, which was neither contemplated nor envisaged by the appellant at the time of _______________________________________________________________________________ Appeal No.322 of 2021 Page 13 of 37 submission of the bid, the same would squarely fall within the ambit of "tariff payable" used in Article 2.3 of the PPA. Therefore, the tariff payable by the discom would include the agreed tariff of Rs.6.848/unit i.e. the quoted tariff along with additional Entry Tax. He submitted that if the parties had intended to exclude any relief on account of levy of taxes in future like the levy of Entry Tax which is the bone of contention between the parties in this appeal, the same would have been expressly provided for in the PPA. In the absence of any such express exclusion in the PPA, it cannot be assumed that relief on account of imposition of taxes in future including Entry Tax was expressly restricted. In this regard, reliance is placed by the learned counsel on the judgment of Patna High Court in Nathuni Sah v. Satyanarain Prasad and Ors., AIR 1961 Pat 11.
25. Referring to recitals 7 and 9 of the PPA, the learned counsel pointed out that these provisions in the PPA indicate that the project would be "subject to" the Electricity Act as also applicable Indian laws. Citing the judgment of Supreme Court in Printers (Mysore) Ltd. v. M.A. Rasheed and Ors. (2004) 4 SCC 460 wherein it was held that "subject to" would imply that the laws and regulations that are in addition to and not in derogation of the prevalent laws, would be applicable. The learned counsel argued that "subject to" appearing in recital 9 of the PPA would imply that the Electricity Act would be treated as supplementary to and not inconsistent with the _______________________________________________________________________________ Appeal No.322 of 2021 Page 14 of 37 existing PPA. Hence, the regulations and policies that draw force from the Electricity Act would also be required to be read into the PPA.
26. The learned counsel also invoked clause 4.2.4 of the National Tariff Policy, 2016, which provides that after the award of bids, in case, there is a change in duties or cess leviable by any Government Instrumentality leading to financial impact that sum needs to be provided as passthrough unless otherwise provided in the PPA. He argued that since the National Tariff Policy has been issued under the aegis of Section 3 of the Electricity Act, 2003, the provisions of the said Policy have to be read into the PPA. In this regard, the learned counsel cited the judgment of Supreme Court in Energy Watchdog v. CERC (2017) 14 SCC 80 in which it has been held that the tariff policy is a statutory document issued under Section 3 of the Electricity Act, 2003, and therefore, has the force of law.
27. The learned counsel also referred to Section 64A of Sale of Goods Act which provides that where, after entering into contract, a tax is imposed, increased or decreased or remitted, then the seller may add to the contract price an amount equivalent to the increase in tax. However, this provision is applicable only where there is no express negative covenant in the agreement. Thus, it is submitted by the learned counsel that since in the present case, Entry Tax was imposed after the submission of the bid it implies that said tax was not factored in while determining the tariff for the _______________________________________________________________________________ Appeal No.322 of 2021 Page 15 of 37 power to be supplied from the appellant's power project and there being no express provision disentitling the appellant from recovering such tax from the discom along with the tariff, the appellant is entitled to increase the contract price to the extent of Entry Tax payable by it.
28. On these submissions, the learned counsel has sought setting aside of the impugned order of the Commission.
(b) Submissions on behalf of the 2nd respondent: -
29. The learned counsel for the 2nd respondent, per contra, argued that the Commission has correctly interpreted the Article 1.12 of the PPA and has rightly dismissed the petition holding that the introduction of Entry Tax does not amount to Change in Law. He submitted that on a plain reading of Article 1.12, it is clear that "Change in Law" has been given a restricted meaning and has been confined to any change or amendment to the provisions of electricity laws in force, regulations, directions, notifications etc. and does not cover within its ambit the introduction/imposition of any tax. He also pointed out that in terms of Article 6 of PPA, the appellant has unconditionally agreed to make all payments on account of taxes, cess, duties or levies or any statutory obligations imposed by the government or competent statutory authority, and therefore, on a combined reading of _______________________________________________________________________________ Appeal No.322 of 2021 Page 16 of 37 Article 1.12 with Article 6, it is clear that introduction of tax or change in the quantum of tax does not qualify as Change in Law event.
30. As regards to Articles 2.2 and 2.3 of the PPA, the learned counsel submitted that parties have agreed to a fixed tariff of Rs.6.84/unit for the entire term of the agreement i.e. 25 years and Article 2.3 specifically mentions that tariff payable by the discom will be inclusive of taxes. According to the learned counsel, conjoint reading of Article 1.12, Article 2.2, Article 2.3 and Article 6.1 of the PPA clearly reveals that introduction of Enry Tax does not qualify as Change in Law.
31. It is further argued by the learned counsel that a commercial document cannot be interpreted in a manner that is at odds with the original purpose and intendment of the parties. In this regard, he has cited the judgment of the Supreme Court in Bangalore Electricity Supply Company Limited v. E.S. Solar Power Pvt. Ltd. (2021) 6 SCC 718 and Transmission Corporation of A.P. Ltd. v. GMR Vemagiri Power Generation Ltd. (2018) 3 SCC 716. He submitted that the prayer of the appellant seeking declaration of Entry Tax as Change in Law goes against the express language of the PPA, and therefore, is patently impermissible.
32. The learned counsel further pointed out that the PPA was amended on 29.10.2016 and pertinently no amendment was carried out to Articles 1.12, _______________________________________________________________________________ Appeal No.322 of 2021 Page 17 of 37 2.3 and 6.1 which are crucial to the determination of issue which arises in the instant appeal. He submitted that at no stage has the appellant issued any objection regarding these Articles, and therefore, going by the plain reading of these Articles, the relief given by the appellant cannot be granted as the same would be at odds with the plain language of the PPA.
33. On these submissions, the learned counsel sought dismissal of the appeal.
Our Analysis:
34. We have considered the rival submissions of the learned counsels and have perused the impugned order of the Commission, the written submissions filed by the learned counsels as well as the entire record.
35. The issue which has arisen for our consideration in this appeal is whether the levy of Entry Tax under the Entry Tax Act, 2001 read with decision of Hon'ble Supreme Court in the case of Jindal Steel (supra) would qualify as a Change in Law event within the framework of PPA dated 03.03.2015 entered into between the appellant and the respondent no.2.
36. The Commission, in the impugned order, has held the imposition/levy of such tax not to be constituting Change in Law event on the following reasoning: -
_______________________________________________________________________________ Appeal No.322 of 2021 Page 18 of 37 "28. It is a settled proposition of the law that the bidding documents and subsequent agreement thereof are vital to the rights and liabilities of the parties. Inasmuch as the petitioner in this case had bid the project based on RfS notified by the respondents and consciously entered into an agreement binding itself to specific conditions thereof.
The petitioner is required to assess and consider all the aspects and the likely intervening circumstances before appending its approval to the agreement. Nothing stopped the petitioner from agitating any issue at the first instance, if any, of the conditions or terms set out in the bid (RfS) documents as also in the agreement are detrimental to it. As such, the petitioner cannot circumvent its grounds on the terms and conditions at a belated stage merely because some legal action has resulted in burdening it with additional costs, in this case, payment of Entry tax.
29. It is trite to state that the petitioner has acted and agreed to the conditions with its eyes open, as such, it cannot turn round upon happening of certain events to allege that it is being put to loss. In fact, the bid documents as also the agreement is not merely making of the respondents, as it in fact stood approved by this Commission then only they were notified. In that view of the matter, the Commission is constrained to interfere with the bid documents and the agreement at the belated stage, as it would amount to reviewing its own prudent decision taken earlier to allow the licensees to procure power through the bidding route on the premise of the _______________________________________________________________________________ Appeal No.322 of 2021 Page 19 of 37 terms and conditions placed before it which were also approved by the Commission. It is also worth mentioning here that the petitioner's case cannot be termed as generic issue, as it has not been stated that several generators under the same bidding process are being mulcted with similar levy under the Entry Tax.
30. The concept of business efficacy would survive if and only if the petitioner had placed on record the probable financial hardship specifically quantified and the consequent loss that it would sustain upon the levy of such tax, if the same were to be a pass through under the tariff. Inasmuch as the petitioner itself chose to bind itself with the clause that the tariff payable to it is 'inclusive of all taxes'. It also did not provide for any way out to mitigate a strict construction set out therein. .......
36. Law as subsisting on the day of agreement would have to be complied with by the parties to the agreement. In the instant case, it is noticed that the parties have bound themselves to specific conditions in the agreement, as such, it cannot be said that subsequent events would change the provisions of the agreement. The levy of tax consequent upon upholding the Entry tax cannot be said to be a 'Change in Law' in the context of the provisions agreed upon by the parties to the agreement signed by them.
37. Pursuant to the above discussions, the Commission is of the considered view that the petitioner _______________________________________________________________________________ Appeal No.322 of 2021 Page 20 of 37 is not entitled to any relief. The petitioner, having agreed to static tariff, cannot now at this point of time seek to convert the same into a dynamic tariff, thereby resulting in payment of additional amounts beyond the amount agreed by the parties. The petitioner, having opted to the proposals in the RfS as quoted tariff, cannot now seek to change the option after the agreement has worked out itself consequent upon certain developments regarding levy of taxes."
37. Article 2.2 of the PPA makes the discom i.e. the 2nd respondent liable to pay tariff @ Rs.6.848/unit to the solar power developer i.e. the appellant as per the tariff quoted by the appellant in the financial bid submitted during the bidding process in pursuance to the RfS document dated 27.08.2014. It also states that since the bidder i.e. the appellant has opted for tariff option- 1, tariff for all tariff years of the entire term of the agreement shall be the quoted tariff.
38. Article 2.3 provides that the tariff payable by the discom shall be inclusive of all taxes, duties and other levies as applicable from time to time. It is pertinent to note here that Article 2.3 uses the term "tariff payable" and not the term "quoted tariff". Thus, while Article 2.2 places an obligation upon the discom to pay tariff as quoted by the power developer in the bid i.e. "quoted tariff", Article 2.3 specifies as to what shall constitute the actual tariff payable by the discom to the power developer and states that the same shall _______________________________________________________________________________ Appeal No.322 of 2021 Page 21 of 37 include all the taxes, duties and levies or any other statutory liability as applicable from time to time.
39. There does appear a minor but significant dichotomy between these two Articles of the PPA and these have to be read in conjunction as well as harmony with each other and not de hors each other. We concur with the submissions of the appellant's counsel that if the intention of the parties was to read Article 2.3 in the same manner as provided in Article 2.2, the phraseology used in Article 2.3 would have been "tariff as quoted above is inclusive of all taxes without any alteration irrespective of imposition of any new tax/levy", instead of stating "tariff payable shall be inclusive of all taxes, duties ............ as applicable from time to time".
40. With regards to the interpretation of commercial contracts, we find it apposite to advert to the well settled canons of construction of contracts by Lord Hoffmann in Investors Compensation Scheme Limited v. West Bromwich Building Society (1998) 1 WLR 896 which have been taken note of by the Supreme Court in Bangalore Electricity Supply Company Limited v. E.S. Solar Power Pvt. Ltd. (supra), which was cited by learned counsel for the 2nd respondent. These are:
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable _______________________________________________________________________________ Appeal No.322 of 2021 Page 22 of 37 person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
_______________________________________________________________________________ Appeal No.322 of 2021 Page 23 of 37 (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax:
see Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require Judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B., AC at p. 201: (AC p. 201) _______________________________________________________________________________ Appeal No.322 of 2021 Page 24 of 37 '... if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.' "
41. The Apex Court further observed in the said judgment as under: -
"17. The duty of the court is not to delve deep into the intricacies of human mind to explore the undisclosed intention, but only to take the meaning of words used i.e. to say expressed intentions (Kamla Devi v. Takhatmal Land). In seeking to construe a clause in a contract, there is no scope for adopting either a liberal or a narrow approach, whatever that may mean. The exercise which has to be undertaken is to determine what the words used mean. It can happen that in doing so one is driven to the conclusion that clause is ambiguous, and that it has two possible meanings. In those circumstances, the court has to prefer one above the other in accordance with the settled principles. If one meaning is more in accord with what the court considers to be the underlined purpose and intent of the contract, or part of it, than the other, then the court will choose the former or rather than the latter. Ashville Investments Ltd. v. Elmer Contractors Ltd. The intention of the parties must be understood from the language they have used, considered in the light of the surrounding circumstances and object of the contract. Bank of India v. K. Mohandas. Every contract is to be considered with reference to its object and the _______________________________________________________________________________ Appeal No.322 of 2021 Page 25 of 37 whole of its terms and accordingly the whole context must be considered in endeavouring to collect the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated clause.
Bihar SEB v. Green Rubber Industries."
42. Another judgment cited by learned counsel for the 2nd respondent is Transmission Corporation of A.P. Ltd. v. GMR Vemagiri Power Generation Ltd. (supra) in which the Apex Court has held as under: -
"21. In the event of any ambiguity arising, the terms of the contract will have to be interpreted by taking into consideration all surrounding facts and circumstances, including correspondence exchanged, to arrive at the real intendment of the parties, and not what one of the parties may contend subsequently to have been the intendment or to say as included afterwards, as observed in Bank of India v. K. Mohandas: (SCC p. 328, para 28) "28. The true construction of a contract must depend upon the import of the words used and not upon what the parties choose to say afterwards. Nor does subsequent conduct of the parties in the performance of the contract affect the true effect of the clear and unambiguous words used in the contract. The intention of the parties must be ascertained from the language they have used, considered in the light of _______________________________________________________________________________ Appeal No.322 of 2021 Page 26 of 37 the surrounding circumstances and the object of the contract. The nature and purpose of the contract is an important guide in ascertaining the intention of the parties.
.........
26. A commercial document cannot be interpreted in a manner to arrive at a complete variance with what may originally have been the intendment of the parties. Such a situation can only be contemplated when the implied term can be considered necessary to lend efficacy to the terms of the contract. If the contract is capable of interpretation on its plain meaning with regard to the true intention of the parties it will not be prudent to read terms on the understanding of a party, or by the court, with regard to business efficacy as observed in Satya Jain v. Anis Ahmed Rushdie, as follows: (SCC pp.143-44, paras 33-35) "33. The principle of business efficacy is normally invoked to read a term in an agreement or contract so as to achieve the result or the consequence intended by the parties acting as prudent businessmen. Business efficacy means the power to produce intended results. The classic test of business efficacy was proposed by Bowen, L.J. in Moorcock. This test requires that a term can only be implied if it is necessary to give business efficacy to the contract to _______________________________________________________________________________ Appeal No.322 of 2021 Page 27 of 37 avoid such a failure of consideration that the parties cannot as reasonable businessmen have intended. But only the most limited term should then be implied - the bare minimum to achieve this goal. If the contract makes business sense without the term, the courts will not imply the same. The following passage from the opinion of Bowen, L.J. In the Moorcock sums up the position: (PD p.68) '... In business transactions such as this, what the law desires to effect by the implications is to give such business efficacy to the transaction as must have been intended at all events by both parties who are businessmen; not to impost on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.' "
43. We find it relevant to refer on this issue to the judgment of the Hon'ble Supreme Court in Nabha Power Limited v. Punjab State Power Corporation Limited (2018) 11 SCC 508, wherein the apex court had the occasion to interpret the terms of the commercial contract by looking inter alia into the definition clause and has laid down guiding principles on how the terms of commercial contracts should be interpreted. It has been held:-
_______________________________________________________________________________ Appeal No.322 of 2021 Page 28 of 37 "It should certainly not be an endeavour of commercial courts to look to implied terms of contract. In the current day and age, making of contracts is a matter of high technical expertise with legal brains from all sides involved in the process of drafting a contract. It is even preceded by opportunities of seeking clarifications and doubts so that the parties know what they are getting into. Thus, normally a contract should be read as it reads, as per its express terms. The implied terms is a concept, which is necessitated only when the Penta-test referred to aforesaid comes into play. There has to be a strict necessity for it."
44. The "Penta-test" as referred by the Hon'ble Supreme Court in the above judgment to ascertain implied terms while interpreting commercial contracts is as under: -
"(1) it must be reasonable and equitable;
(2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression;
(5) it must not contradict any express term of the contract."
45. In the instant case, it is necessary to keep in mind that the Entry Tax was levied by Government of Andhra Pradesh by way of Entry Tax Act, 2001 _______________________________________________________________________________ Appeal No.322 of 2021 Page 29 of 37 which was notified on 16.10.2001. Upon challenge to its vires, the High Court of Andhra Pradesh held such levy of Entry Tax vide Sections 3 and 4 of the said Act as unconstitutional vide judgment dated 31.12.2007 in writ petition no.615 of 2006 and batch. The State of Andhra Pradesh assailed the said judgment dated 31.12.2007 of the High Court before the Supreme Court by way of Civil Appeal nos.8036-8060 of 2016. It is during the pendency of these appeals before the Supreme Court that RfS document in this case was issued by Northern Power Distribution Company of Telangana on 27.08.2014. Appellant had submitted its financial bid on 31.10.2014 and Letter of Intent was issued to it on 23.01.2015 for implementation of the project. Subsequently, PPA dated 03.03.2015 was executed between the appellant and 2nd respondent for sale of power to be generated in the said 30MW solar power project by appellant to 2nd respondent.
46. Subsequently, vide judgment dated 11.11.2016 pronounced by the Supreme Court on the above noted batch of writ petitions (Jindal Steel judgment) the validity of Entry Tax law was upheld on the ground that it was in public interest.
47. Therefore, manifestly, there was no enactment in force for levy of Entry Tax by the Government of Andhra Pradesh in the year 2014-15 when appellant had submitted its financial bid for the power project in pursuance to the RfS document dated 27.08.2014 and when Letter of Intent dated _______________________________________________________________________________ Appeal No.322 of 2021 Page 30 of 37 23.01.2015 was issued to the appellant. In such situation, there was no reason or occasion for the appellant to consider and factor in the Entry Tax while preparing and submitting its financial bid for the power project as levy of such Entry Tax was held unconstitutional by the Andhra Pradesh High Court vide judgment dated 31.12.2007, which had not been stayed by the Supreme Court. It was after the Chief Tax Officer (CTO) passed two separate assessment orders dated 11.02.2020 imposing Entry Tax to the tune of Rs.77,59,769/- and Rs.5,86,83,022/- on the goods against the appellant for Financial Years 2015-16 and 2016-17 that the appellant issued Change in Law notice dated 03.04.2020 to the 2nd respondent and thereafter approached the Commission for appropriate relief in this regard by way of petition no.22 of 2020.
48. In case, the interpretation sought to be given to the Article 2.2 and 2.3 read with Article 6.1(iv) of the PPA on behalf of the appellant that the tariff quoted in the bid by the appellant would include all future taxes and levies also to be imposed by the Government or any other competent authority during the subsistence of the PPA, is accepted then at one point of time, the power developer may have to spend the major part of tariff receivable by it from discom in paying fresh taxes/levies imposed after the execution of the PPA. That, clearly, would not have been the intendment of the parties at the time of execution of the PPA and also, by no stretch of imagination makes _______________________________________________________________________________ Appeal No.322 of 2021 Page 31 of 37 any business sense. Such an interpretation would make the PPA absolutely inequitable, unconscionable as well as unreasonable, and therefore, the provisions in the PPA related to the tariff payable by 2nd respondent to the appellant i.e. Articles 2.2, 2.3 and 6.1(iv) need to be interpreted in such a manner as to lend business efficacy to the PPA in accordance with the real intention of the parties at the time of its execution.
49. A meaningful perusal of these Articles of the PPA would lead to inevitable conclusion that the intention of parties at the time of execution of the PPA was that the actual tariff payable by the discom shall be quoted tariff in the bid document plus the taxes/duties/levies imposed after the execution of the PPA by the government or any competent authority. Such an interpretation is not only justified in the facts and circumstances of the case at hand but also would lend business sense to the PPA. It would also satisfy the Penta-test laid by the Supreme Court in Nabha Power case (supra). Any contrary interpretation would not only flout business common sense but also would be contrary to the contemplation of the parties as well as their real intendment at the time of execution of the PPA. The expression "Tariff for all tariff years for the entire term of the Agreement shall be the Quoted Tariff"
used in Article 2.2 of PPA upon which learned counsel for respondent no.2 laid much emphasis, needs to be taken to convey that tariff for entire term of PPA remains the Quoted Tariff in case no extra financial burden is placed upon the power developer on account of any unforeseen event or a Change _______________________________________________________________________________ Appeal No.322 of 2021 Page 32 of 37 in Law event other than usual increase in input cost, wear and tear of machinery, increase in operation and maintenance cost etc. Where the increased financial burden is due to a Change in Law event, a force majeure event or any other event which could not have been anticipated during the bidding process by the parties, its impact cannot be denied to the power developer.
50. Further, when we read the Articles 2.2 and 2.3 of the PPA in conjunction with Article 1.12 (Change in Law clause) the argument on behalf of the 2nd respondent that the introduction of tax or change in the quantum of tax does not qualify as Change in Law event, gets repelled. In case the intendment of the parties at the time of execution of the PPA was that imposition of a new tax or any change in the quantum of tax would not constitute Change in Law event, there was no reasons or occasion for engrafting Article 1.12 in the PPA at all. The mere fact that Article 1.12 (Change in Law clause) exists in the PPA is indicative of the fact that the parties knew at the time of execution of the PPA that there may be circumstances on account of which additional financial burden may be incurred by the power producer for which it would be entitled to be compensated by way of restitution.
51. It is argued on behalf of the 2nd respondent that Article 1.12 of the PPA gives a restricted meaning to the term "Change in Law" and confines it to _______________________________________________________________________________ Appeal No.322 of 2021 Page 33 of 37 any change or amendment to the provisions of electricity laws in force, regulations, directions, notifications etc and does not cover within its ambit the introduction/imposition of any new tax. We do not find any force in these submissions. Prior to the enactment of Entry Tax Act on 16.10.2001 by the Government of Andhra Pradesh, there was no law/regulation/rule/notification etc. for levy of Entry Tax on the entry of goods into the local areas of State of Andhra Pradesh. Even though it was held as unconstitutional by the Andhra Pradesh High Court vide judgment dated 31.12.2007, its validity was upheld by the Apex Court vide judgment dated 11.11.2016. Therefore, in our considered opinion, such imposition/levy of Entry Tax would definitely tantamount to change in the regulations/directions/notifications within the ambit of Article 1.12 of the PPA. The said levy of Entry Tax would squarely fall within the four corners of Article 1.12 of the PPA for the reason that it reflects change in the appliable regulations/directions/notifications. Any change or amendment to the regulations/directions/notifications as envisaged under Article 1.12 of the PPA necessarily include within its ambit the imposition/levy of a new tax by way of a fresh enactment. We do not find it justified or pragmatic to give a narrow interpretation to the provisions of Article 1.12 by excluding from its ambit the imposition/levy of any new tax by way of a fresh enactment, as sought to be given on behalf of the 2nd respondent.
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52. Learned counsel for the 2nd respondent had also argued that in the absence of any provision in the PPA specifying the consequential restitutionary entitlement on account of any Change in Law event as specified in Article 1.12, the appellant is precluded from claiming any relief under the said Article. The argument has been noted only to be rejected. It does appear that the draftsman, while drafting the PPA, has omitted to insert a clause entitling any party to the PPA to restitutionary reliefs on account of a Change in Law event as specified in Article 1.12. However, it is also to be noted that there is no provision in the PPA providing that the parties cannot claim any relief in case of any Change in Law event as specified in Article 1.12. Therefore, in the absence of any such express stipulation, we cannot read any restriction in this regard in the PPA. In other words, absence of any such clause in the PPA cannot be held to the prejudice of the appellant so as to deny relief to it under Change in Law clause. Had the real intention of the parties at the time of execution of the PPA been that none of them would be entitled to any restitutionary relief on account of any Change in Law event, there was no reason or occasion to have Article 1.12 in the PPA. Any such interpretation, as sought to be given by the 2nd respondent, would render the Article 1.12 redundant. Once any event constitutes a Change in Law event in terms of Article 1.12, as a natural corollary, the party affected by such event would be entitled to restitutionary relief and absence of any such specific provision in the PPA dealing with restitutionary relief would not _______________________________________________________________________________ Appeal No.322 of 2021 Page 35 of 37 disentitle the affected party from the same. Any contrary interpretation would render the entire PPA unworkable as well as unbusinessmanlike.
53. We may also note that clause 4.2.4 of the National Tariff Policy, 2016 provides that after the award of bids, in case, there is a change in duties or cess leviable by the government instrumentality leading to financial impact, that sum needs to be provided as passthrough unless otherwise provided in the PPA. The Supreme Court, in Energy Watchdog v. CERC (2017) 14 SCC 80 has held the National Tariff Policy to be a statutory document having been issued under Section 3 of the Electricity Act, 2003, and therefore, having force of law. Thus, the provisions of the said policy have to be read into the PPAs executed between the power generators and the discoms. Therefore, the appellant cannot be denied the consequential restitutionary relief on account of Change in Law event i.e. imposition/levy of Entry Tax Act by the Government of Andhra Pradesh, even if there is no such express provision in the PPA.
Conclusion:
54. Having regard to the above discussion, we are unable to sustain the impugned order of the Commission. The same is hereby set aside. We hold the imposition of Entry Tax in the State of Telangana through Telangana Tax on Entry of Goods into Local Areas Act, 2001 read with _______________________________________________________________________________ Appeal No.322 of 2021 Page 36 of 37 judgment dated 11.11.2016 of the Supreme Court in appeal no.3453 of 2002 Jindal Stainless Steel Limited & Anr. v. State of Haryana and Ors. and Batch constitutes a Change in Law event in terms of Article 1.12 of the PPA thereby entitling the appellant to consequential restitutionary relief.
55. Accordingly, we remand the case to the Commission on the limited aspect of deciding the extent of restitutionary relief to which the appellant is entitled on account of such Change in Law event. The Commission shall, after obtaining requisite material in this regard from the parties, provide opportunity of hearing to them and pass necessary orders within two months from the date of this judgment.
56. The appeal stands allowed in the above terms.
Pronounced in the open court on this the 13th day of April, 2026.
(Virender Bhat) (Seema Gupta)
Judicial Member Officiating Chairperson
✓
REPORTABLE / NON-REPORATBLE
tp
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