Karnataka High Court
The Godavari Sugar Mills Ltd. vs The Karnataka Power Transmission ... on 20 November, 2007
Equivalent citations: 2008(1)KARLJ656, 2008 (2) AIR KAR R 1
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDER D.V. Shylendra Kumar, J.
1. Writ petition by a generator of electric energy, which according to the writ petitioner, had been agreed to be supplied to the first respondent Karnataka Power Transmission Corporation Ltd [KPTCL] under an agreement dated 8-10-1999.
2. While the agreement did work well between the petitioner and the Karnataka Electricity Board [KEB], with which the agreement had been entered into and even with its successor - KPTCL -, it appears, certain legislation particularly the enactment of the Karnataka Electricity Reform Act, 1999 [for short, the Act] which was deemed to have been come into effect from 1-6-1999, intervened and had certain adverse effect on the petitioner.
3. It is in the wake of the agreement being not implemented or acted upon by the KPTCL and subsequent development being that KPTCL itself having been bifurcated into a transmission company retaining its original name and a distributor company, which has been added as fourth respondent, not continuing to purchase the power generated by the petitioner in terms of the agreement, which has given cause for filing of this writ petition.
4. It is in this context and particularly in the light of the Karnataka Electricity Regulatory Commission [KERC] put in place under Section 3(1) of the Act, having passed several orders and a failed attempt on the part of the petitioner and the respondents 1 and 4 to enter into a fresh agreement, though on the lines of the earlier agreement dated 8-10-1999, the present writ petition has been presented seeking for the following prayers in terms of the amendment permitted by this Court during the pendency of the petition:
i) Issue a writ of mandamus or similar writ or order or direction, declaring that the power purchase agreement dated 8-10-1999 at Annexure-A is valid and operative, remains in full force and effect in accordance with its terms and has not been rendered invalid or inoperative and has not been impaired or modified by virtue of the provisions of the Reforms Act, 1999 and in particular Section 17 of the Reforms Act, 1999 or by reason of any other fact or matter or any other provisions of the said Reforms Act of 1999;
i(a) Declare that the respondent No 1 is bound in law to observe the power purchase agreement initialed and signed by the petitioner and respondent No 1 and approved by the KERC by its order dated 17th September 2003 and approved in terms of the KERC (Power Procurement from Renewable Sources by Distribution Licensee) Regulations 2004 and the KERC Tariff Order dated 18th January 2005;
i(b) Issue a writ of mandamus in the nature of a writ, order or direction directing the respondent No 1 to withdraw or cancel the order of 26th March 2004 [Annexure-Z-2] by which the petitioner is directed to enter into a fresh power purchase agreement;
i(c) Issue a direction in the nature of writ of mandamus directing the respondent No 1 to implement the tariff in accordance with the initialed and signed power purchase agreement approved by the third respondent from 19th September 2003 by the KERC (Power Procurement from Renewable Sources by Distribution Licensee) Regulations 2004 and the Tariff Order of respondent No 3 of 18th January 2005 and to pay the amounts withheld by respondent No 3 to the petitioner by way of tariff for the power taken by it from the petitioner;
ii) Issue a writ of mandamus or similar writ or order or direction, declaring that the action of the first respondent in disconnecting the power plant of the petitioner from the grid on 2.7.2004 at 12.05 p.m. pursuant to the communication dated 11.6.2004 [Annexure-Z-3] was illegal, invalid and not permissible in law;
iii) Issue a writ of mandamus or similar writ or order or direction to pay to the petitioner the balance amount of Rs. 4.24 crores upto April, 2004 without insisting upon entering into any fresh power purchase agreement.
5. The petitioner though had sought for a writ of mandamus and for declaring that the earlier purchase agreement dated 8-10-199, which is not a disputed factual aspect by the respondents, to be a valid agreement, operates, continues to remain in force etc., on an examination of the legal position, there is no more focus on the prayers relating to the draft agreement as approved by the KERC in terms of its order dated 17-9-2003 [Annexure-Y to the writ petition].
6. The brief undisputed facts leading to the petition are that the petitioner had entered into an agreement with the erstwhile KEB in terms of agreement dated 8-10-1999 for supply of power generated by the petitioner at the rate of Rs 2.25 per kwhr for the financial year 1994-95 with escalation at the rate of 5% per annum for a period of ten years. As noticed earlier, the hiccups started because of the legislative intervention in the form of the Act and particularly in the wake of the provisions of Section 17 read with Section 25, particularly provisions of Sections 25(3)(b) and 25(4) of the Act, as the combined effect of these two sections of the Act was rendering null and void all such agreements which had been entered into between the power generators and the licensee and the petitioner's agreement with KEB also being one such, being dated 8-10-1999 and entered into after the coming into force of the Act, being null and void, the first respondent KPTCL, which was the successor of erstwhile KEB, had advised the petitioner on 12-4-2002 to enter into a fresh agreement with the licensee in the background of the order dated 25-2-2002 passed by the KERC indicating, inter alia, that several agreements which the licensee had entered into with various independent power purchasers were all null and void in view of the Section 17 read with Section 25 of the Act and it was required, if the licensee was interested, to enter into a fresh agreement with the prior approval of the KERC and it was for such purpose this communication was addressed to the petitioner also, sounding the petitioner of its inclination to enter into a fresh agreement and to indicate the terms for forwarding the same for the approval of the KERC.
7. It is not necessary to discuss further details of the correspondence between the parties, but suffice to indicate that the petitioner had expressed its willingness to draft an agreement, which was placed before the KERC by the licensee seeking for its approval and which the KERC albeit approved, but nevertheless indicated certain conditions to be added to the agreement, which was within the powers of the KERC to do so. It is the follow-up action which the KPTCL intimated in terms of the order dated 17-9-2003 [Annexure-Y], passed by the KERC that has given cause for the petitioner to file this writ petition. It is thereafter that some difference followed and it appears the writ petitioner was not very happy with the order passed by the KERC and had occasion to address a communication dated 3-10-2003 [Annexure-Z], indicating, inter alia, that toe order dated 17-9-2003 itself had been passed without affording proper opportunity to the petitioner, the petitioner was not happy with all the terms and conditions superimposed by the KERC and sought for a personal hearing and for suitable modified approval and a copy of the same was also forwarded to the first respondent licensee. The petitioner even thereafter addressed a communication to the state government on 11-2-2004 [Annexure-Z(1)] pointing out, inter alia, that the agreement which the petitioner had entered into originally with the then licensee -- KEB - on 8-10-1999 was a valid, tenable, enforceable agreement; that it continues to remain and there was no need or occasion to characterize the agreement as null and void etc.; that it was necessary for the government to intervene in the matter and to ensure that the licensee honour the agreement dated 8-10-1999; that the licensee had also virtually coerced the petitioner to enter into a subsequent agreement on 26-4-2003 on the threat of stopping purchase of power from the petitioner; that the licensee had also been defaulting in making payments to the petitioner; that all these grievances are required to be addressed by the government at the earliest etc.
8. While matters stood thus, the first respondent licensee had forwarded a communication dated 26-3-2004 indicating, inter alia, that the rate at which power generated by the petitioner was to be purchased had been finalized and that the licensee was prepared to buy power from the petitioner at the rate of Rs 2.80 per Kwhr with an annual escalation of 2% on the base tariff of Rs 2.80 per Kwhr from the date on which the power purchase agreement is to be entered into.
9. The petitioner who had reservations even with agreeing to the draft agreement as approved by the KERC, was quite naturally more agitated by this communication and obviously did not enter into any agreement as was proposed, remained sulking and silent and in the wake of all these developments, it appears, the first respondent had addressed one more communication on 11-6-2004 [Annexure-Z(3)] indicating that if the petitioner had not entered into any valid power purchase agreement with the licensee and therefore, the licensee was inclined to disconnect the power line of the petitioner's generator of power from the KPTCL grid on and after 15 days from the date of receipt of the letter. Though petitioner caused a reply to this in terms of its legal notice dated 23-6-2004 [Annexure-Z(4)], that having not worked, thereafter the present petition was filed praying for the relief as indicated in the earlier part of this order.
10. Though the respondents had been put on notice, initially regarding admission and an interim order was passed on 22-7-2004, directing the respondents to keep on purchasing power from the petitioner, subject to the making payment at the rate of Rs 2.80 per Kwhr during the pendency and subject to the result of this writ petition, the petition itself was admitted on 7-9-2007 and has been heard.
11. I have heard Sri P.S. Manjunath, learned Counsel for the petitioner, Sri S.S. Naganand, learned senior counsel appearing for the respondents 1 and 4. While for the state of Karnataka, Sri R.B. Venkataramana, learned Government Pleader has appeared for the third respondent is represented by M/s Dua Assoiates and Sri Rayappa.
12. Statement of objections has been filed on behalf of the respondents 1 and 4 and it is indicated, inter alaia, that the writ petition is not tenable, as the petitioner cannot seek a prayer as sought for in the writ petition and also that there is no merit in the writ petition etc. It is urged that the prayer is virtually in the nature of relief of specific performance of a contract, which is rendered null and void by the operation of the statute; that a prayer of this nature cannot be granted in a petition under Article 226 of the Constitution of India; that even if there should have been a breach of terms of the contract, the relief that the petitioner can claim is only by way of damages and not by seeking enforcement of the contract; that the petitioner cannot seek for a prayer of a declaration in the light of the order passed by KERC on 25-2-2002, without questioning the order independently; that the entire subject matter revolves on the contract and not by the negotiations between the parties; that the respondents cannot be compelled to enter into an agreement with the petitioner unless the respondents themselves are ready and willing to enter into such a contract; that the respondents not having entered into any agreement with the petitioner even though there was a proposal, there was no concluded contract between the parties and therefore there is nothing that is required to be enforced against the respondents even by issue of a writ of mandamus and have therefore sought for dismissal of the writ petition.
13. Appearing for the petitioner, the main contention urged by Sri P.S. Manjunath, learned Counsel for the petitioner, is that the order voiding the agreement dated 8-10-1999 by the KERC cannot be enforced against the petitioner for the reason that it has been passed in violation of principles of natural justice and it cannot bind the petitioner; that the petitioner notwithstanding the order dated 25-2-2002, can nevertheless seek for a declaration of the validity of the agreement dated 8-10-1999 independently and such declaration can be granted in law and therefore the petitioner should be given a declaration in its favour, particularly as the parties had worked on this agreement for considerable time even after the Act had come into force and as the parties themselves had accepted this agreement and were implementing it; that an order passed by the KERC without affording an opportunity to the petitioner could not have revoked the existing arrangement between the parties. It is also submitted that at the time the agreement was entered into between the parties, the KERC was not manned and was not functioning due to non-appointment of members and therefore there was no possibility of the agreement being approved or disapproved by KERC and hence it should be taken in law that there was an approval by KERC and it should not have been invalidated by the KERC in terms of the order without an opportunity to the petitioner.
14. In the alternative, it is submitted by the learned Counsel for the petitioner that the respondents had subsequently given a proposal to the petitioner to enter into a fresh agreement, the petitioner had indicated its inclination; that the agreement was also made subject matter of proceedings before the KERC and such an agreement having been initialed by the parties on 26-4-2003 and also approved by KERC in terms of its order dated 17-9-2003, though with some conditions, it was the bounden duty of the respondents 1 and 4 to give effect to this order of the KERC to have entered into an agreement in terms of the order; that there is a failure on the part of the respondents 1 and 4 in not obeying the order of the KERC and not effecting the approved agreement between the parties and therefore a writ of mandamus should be necessarily issued.
15. In this regard, learned Counsel for the petitioner would submit that though the communication emanating from the petitioner pointed out the deficiencies in the order of the KERC passed on 17-9-2003 and also a further communication was addressed to the state government praying for its intervention and this is put against the petitioner, they are all only by way of clarification and do not amount to the petitioner going back on the draft agreement as had been placed before the KERC for its approval and in fact it had received its approval and therefore even at this point of time, the respondents should be directed to execute the agreement and to abide by the agreement in terms of the order of KERC and as approved by the KERC.
16. Per contra, Sri S.S. Naganand, learned senior counsel appearing for the respondents 1 and 4 draw attention to the provisions of Sections 17 and 25 of the Act and submits that even independent of the order passed by the KERC on 25-2-2002, the legal position is the same; that the KERC has only reiterated the legal position; that in terms of these provisions, any agreement entered into between a licensee and an independent power producer for supply of power to a licensee entered into on and after 1-6-1999 is null and void and therefore the agreement dated 8-10-1999 is rendered null and void by operation of the statue and as such the petitioner can neither seek nor will this Court issue a writ of declaration declaring that the agreement is valid, continues to be enforceable and binding on the parties. It is pointed out that what is rendered null and void by way of operation of statue cannot be resurrected on the premise that the parties acted on such agreement etc.
17. In so far as the prayer for issue of a writ of mandamus for effectuating the order of KERC approving the draft power purchase agreement in terms of the order dated 17-9-2003, learned senior counsel appearing for the respondents 1 and 4 would place reliance on the two communications, which had emanated from the petitioner, one addressed to KERC itself and the other addressed to the state government, as noticed in the earlier part of this order, and submitted that in the light of these communications, it is very clear that the petitioner was not acceptable to the proposal as per the draft agreement as approved by KERC; that the conditions imposed by KERC to the draft agreement were not acceptable to the petitioner; that the petitioner in fact had given many counter proposals to be incorporated into the agreement, if at all an agreement was to be entered into with the licensee. In the wake of such developments, what is urged is that the petitioner virtually has spurned the proposed agreement as approved by the KERC and therefore there was nothing further that was required to be done by the licensee. It is therefore submitted that if the petitioner by its own act and conduct had gone back on the agreement in terms of the order passed by KERC, there is no occasion for this Court to issue a writ of mandamus, on the basis of the order as passed by the KERC. Learned senior counsel while would not concede that a mandamus could have been otherwise issued, would nevertheless points out that in the light of such developments a mandamus can never be issued irrespective of the possibility of issue of a mandamus on the legal contentions urged on behalf of the petitioner.
18. It is also submitted on behalf of the licensee and the distributor that the essential dispute between the parties was one of the rate at which the power was to be purchased and in the wake of the rate as had been fixed initially in the context of the agreement dated 8-10-1999 being on an assessment of the situation by the central government, which had been found unsatisfactory particularly for not involving the state government, the state government as a matter of policy had taken a decision indicating different norms and in terms of these norms, the rate as had been indicated to be offered by the licensee being a different rate, while it was not open to the respondents to agree for the original rate as had been indicated in the draft power purchase agreement, which in itself reflected the rate as per the agreement dated 8-10-1999, the subsequent developments do not allow the respondents to go back to that rate, but KPTCL has to show its awareness and inclination to the current rate. It is submitted that the rate as proposed to the petitioner in terms of the communication dated 26-3-2004 was at the rate of Rs 2.80 per Kwhr, the same rate as had been agreed upon between the licencee and all other independent power purchasers after mutual negotiations and correspondence and therefore KPTCL could not have made a distinction or differentiated in favour of the petitioner alone particularly, as there was no prior concluded contract between the petitioner and the licensee before the finalization of the rates at Rs 2.80 per Kwhr.
19. It is for this reason, learned Counsel for the respondents 1 and 4 submits that a writ of mandamus as sought for cannot be issued in favour of the petitioner notwithstanding a draft agreement having been proposed, which had been agreed to between the parties, and had also been approved by KERC, but as the petitioner had gone back on that due to the conditions imposed by the KERC, a mandamus as sought for should not be issued.
20. Though Sri P.S. Manjunath, learned Counsel for the petitioner would join issue contending that the KERC itself in terms of its subsequent orders had saved the prior agreements and rates as indicated in the prior agreements to its order dated 18-1-2005, what is pointed out is that there was no such prior concluded agreement/contract between the petitioner and the licensee and therefore such orders by KERC approving the rates as per the earlier agreements will not be of any avail to the petitioner.
21. While Sri R.B. Venkataramana, learned government pleader, appearing for the second respondent-state supports the action of the licencee And adopts the submissions made on behalf of the respondents 1 and 4, Sri Rayappa, learned Counsel for the third respondent-KERC submits that the commission has acted correctly; that there is no error in the order passed by it. It is also submitted by Sri Rayappa that the petitioner had been given ample opportunity before the KERC and it is not correct to say that KERC has passed the order without hearing the petitioner etc.
22. I have given my anxious consideration to the pleadings and the rival submissions at the Bar. While a writ of declaration cannot be issued in respect of any prayer and the only situation where this Court can exercise writ jurisdiction granting a declaratory writ is in respect of legislation found wanting on the touchstone of the Constitution, therefore a writ of declaratory writ cannot be sought for, a writ for declaration in favour of a private person for declaring that the agreement entered into is valid, whether between a government authority or non-government agency is not issued by this Court in exercise of writ jurisdiction. While a writ of certiorari can be sought for quashing any orders or any action of a quasi-judicial authority or even an administrative authority, in the present writ petition, all prayers are only for mandamus. A prayer for mandamus in respect of the agreement dated 8-10-1999 in principle cannot be granted, as even the law comes in the way, as it is a void agreement in terms of Section 17 read with Section 25 of the Act, which sections read as under:
17. Regulation of generating companies and stations: (1) A licensee or bulk purchaser or any other person may enter into a contract with a generating company for purchase of electricity in the manner approved by the Commission and such approval granted by the commission shall have the effect of the consent given by the state government in terms of Section 43-A of the Electricity (Supply) Act 1948:
Provided that, the approval granted by the Commission under this sub-section shall not in any manner affect the requirements to obtain approvals and sanctions of the state government or any other authority under any other law, rule or regulations.
(2) The provisions of Section 44 of the Electricity (Supply) Act 1948 shall apply in regard to the applications for consent to the establishment or acquisition of a new generating station or to extend or replace any major unit or plant or works pertaining to generation of electricity in a generating station, to meet the applicant's need for the electricity, subject to the following conditions:
(a) the applicant shall apply for and obtain prior consent in writing of the commission in place of the Board;
(b) the Commission shall record the reasons for grant or refusal of the consent.
(3) No generating company or generating station, except to the extent of the business of sale of electricity to the bulk purchaser or licensee or to such other person specifically authorized by the commission, shall engage in the business of sale or supply of electricity or transmission of electricity in the state.
(4) No generating company or generating station shall, at any time, without the previous consent in writing of the commission, acquire by purchase or otherwise the license or the undertaking, transmitting, distribution or supply of energy is concerned, any other licensee or person transmitting, supplying or intending to transmit or supply electricity.
Provided that before granting consent the commission may publish such notices inviting objection as the commission may specify by regulations.
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25. General restriction on the licensees: (1) No licensee or generating company shall, at any time, without the previous consent in writing of the commission, acquire by purchase or otherwise the license or the undertaking of, or associate himself with, so far as the business of generating, transmitting, distribution or supply of energy is concerned, any other licensee or person generating, transmitting, supplying or intending to generate, transmit or supply electricity.
Provided that before granting consent the commission may publish such notices inviting objection and hear such persons or authority as the commission may consider appropriate and specify by regulations.
(2) The licensee shall not, at any time, assign his license or transfer his undertaking or any part thereof, by sale, mortgage, lease, exchange or otherwise without the previous consent in writing of the commission.
(3) A holder of a supply or transmission license may, unless expressly prohibited by the terms of its license, enter into arrangements for the purchase of electricity from
(a) the holder of a supply license which permits the holder of such license to supply energy to other licensees far distribution by them; and
(b) any person or generating company with the consent of the commission.
Any agreement relating to any transaction of the nature described in Sub-section (1), (2) or (3) unless made with or subject to, such consent as aforesaid, shall be void.
and it leaves one with no doubt that such an agreement is rendered void due to the operation of the provisions of Sections 17 and 25 of the Act.
23. In so far as the prayer for a mandamus in terms of the approved draft agreement signed between by the parties as on 26-4-2003 is concerned, while the possibility of issue of a mandamus to compel respondents 1 to 4 for performing its statutory duty if they had gone through some more motions of entering into an agreement pursuant to the statutory provisions under the Act and as modified by the KERC could have been examined, but even that question is avoided in this writ petition for the reason that the petitioner on facts and because of its conduct has not pursued for this relief diligently without wavering and was not accepting the agreement as modified in terms of the order passed by the KERC, on the strength of which a writ of mandamus is sought for.
24. I say so for the reason that the communication addressed to the commission as well as to the state government, though is not a communication addressed directly to the licensee, and only copies of them were sent to KPTCL, even the communication indicating that the order of the commission is bad for any reason and it is required to be suitably modified, is a clear intention on the part of the petitioner not to abide by the order, not to take advantage of the order, but to seek something at variance with the order. The order of the KERC adding further terms to the draft agreement was not to the liking of the petitioner and the petitioner asking for the additional terms to be added to the agreed draft or seeking for deletion of the conditions imposed by the KERC, the communication of the petitioner is virtually one for a modification of the terms of the agreement. That means, the petitioner is not interested in the enforcing of the agreement as approved by the KERC. If the petitioner had itself not evinced interest and had not pursued the matter, the petitioner cannot at a later point of time turn round and complain of inaction on the part of the respondents for seeking a writ of mandamus. The conduct of the petitioner, which is clearly one of evincing intention for modifying the agreement as approved by KERC, a writ of mandamus cannot be issued and it is for this reason the prayer for issue of a mandamus to compel the respondents to implement the order and to execute the agreement in terms of the order passed by the KERC is declined and therefore the writ petition has to be inevitably dismissed.
25. The respondents had been directed to continue to purchase the power generated by the petitioner as an interim measure at the rate of Rs 2.80 per Kwhr. Sri P.S. Manjunath, learned Counsel for the petitioner would point out that while the power was being purchased at this rate, there was also an escalation of 2% as had been initially proposed by the licensee and as was being paid by the licensees to other generators of power and therefore, it is fair that the petitioner is not put to disadvantage only because the petitioner had approached this Court and the purchase was through a compelling interim order by this Court.
26. Though Sri S.S. Naganand, learned senior counsel appearing for the respondents 1 and 4, would submit that as per the provisions of the Act, a licensee is bound to get prior approval for all tariff payments to any generator, while that will be the case generally, the present situation cannot be compared to a normal situation of getting approval of KERC for payment of tariff to a generator, as power had been purchased by the licensee under a compelling interim order and payment was subject to the final orders to be passed in this petition, I am of the view that it is proper that payment for power purchased pursuant to the interim order is finalized in terms of this very order and not left to the discretion or further orders any other authority or commission. I am of the firm view that in the light of the very offer that had been made by the licensee initially and in the light of the fact that the other power generators are being paid, at the rate of Rs 2.80 per Kwhr initially with an annual escalation of 2%, it is only fair and proper that the licensee pays the petitioner also at this rate from the date of the interim order till the power supply is received by the respondent-licensee and till alternative arrangements are made, if they so choose to receive power from the petitioner. In respect of all other prayers, this writ petition stands dismissed.
27. Writ petition is dismissed accordingly, parties to bear their own costs.