GMR WARORA ENERGY LIMITED v. CENTRAL ELECTRICITY REGULATORY COMMISSION

REGULATORY COMMISSION (CERC) [B. R. GAVAI, J.]

“11. We also agree with the High Court [S. Bharat A Kumar v. State of A.P., 2000 SCC OnLine AP 565 : (2000) 6 ALD 217] that the judicial review in a matter with regard to fixation of tariff has not to be as that of an appellate authority in exercise of its jurisdiction under Article 226 of the Constitution. All that the High Court has to be satisfied with is that the Commission has followed the proper procedure and unless it can be demonstrated that its decision is on the face of it arbitrary or illegal or contrary to the Act, the court will not interfere. Fixing a tariff and providing for cross-subsidy is essentially a matter of policy and normally a court would refrain from interfering with a policy decision unless the power exercised is arbitrary or ex facie bad in law.” xxx xxx xxx

123. Recently, the Constitution Bench of this Court in the case of Vivek Narayan Sharma v. Union of India [2023 SCC OnLine SC 1] has held that the Courts should be slow in interfering with the decisions taken by the experts in the field and unless it is found that the expert bodies have failed to take into consideration the mandatory statutory provisions or the decisions taken are based on extraneous considerations or they are ex facie arbitrary and illegal, it will not be appropriate for this Court to substitute its views with that of the expert bodies.”

130Copy pinpoint130. As is indicated in the aforesaid judgments, this Court should be slow in interfering with the concurrent findings of fact unless they are found to be perverse, arbitrary and either in ignorance of or contrary to the statutory provisions. F V. CONCLUSION

131Copy pinpoint131. In the light of our aforesaid findings, we will now consider each of the appeals independently. Civil Appeal No. 11095 of 2018 and Civil Appeal Nos. 11910- G 11911 of 2018

132Copy pinpoint132. In these batch of appeals, insofar as the appeal of DNH- DISCOM is concerned, they are aggrieved by the order of the learned APTEL allowing Busy Season Surcharge and Development Surcharge, MoEF Notification on coal quality and Change in NCDP. They are also H

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A aggrieved by the finding of the learned APTEL with regard to carrying cost.

133Copy pinpoint133. Insofar as the compensation on the ground of Change in NCDP is concerned, as already discussed, the same is squarely covered by the judgment of this Court in the case of MSEDCL v. APML & Ors. B (supra)

134Copy pinpoint134. Insofar as the Busy Season Surcharge and Development Surcharge are concerned, they are issued under the Circulars/Notifications of Indian Railways. The notification on coal quality is issued by MoEF. All these are the instrumentalities of the State, and these would, therefore, amount to ‘Change in Law’.

135Copy pinpoint135. Insofar as rest of the claims, which are concurrently allowed and disallowed by both the CERC and the learned APTEL, are concerned, in view of the judgments of this Court on this issue, as stated above, we do not find any reason to interfere with the same, not noticing any perversity, arbitrariness and/or any contravention of the statutory provisions. The appeals of both the Generator and the DNH-DISCOM are, therefore, liable to be dismissed. Civil Appeal Nos.4628-4629 of 2021

136Copy pinpoint136. The learned APTEL allowed the claim of the Generator only on the ground of Busy Season Surcharge and Development Surcharge E on transportation of coal, and the Carrying Cost.

137Copy pinpoint137. In view of our finding on the issues as above, no error can be found with the finding of the learned APTEL in that regard. We find no merit in the appeals. The appeals are, accordingly, liable to be dismissed. F Civil Appeal Nos. 12055-12056 of 2018

138Copy pinpoint138. The issue of Busy Season Surcharge, Development Surcharge and Port Congestion Surcharge have already been considered by us herein above. All these are charges under the Notifications issued by the Indian Railways, through the Railway Board. As such, no error can be found with the finding of the learned APTEL that they would G amount to ‘Change in Law’ events.

139Copy pinpoint139. Insofar as levy of ‘Forest Tax’ is concerned, the same is levied by the State Government under the statutory provisions.

140Copy pinpoint140. The issue with regard to ‘Carrying Cost’ has also been discussed by us herein above. H

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REGULATORY COMMISSION (CERC) [B. R. GAVAI, J.]

141Copy pinpoint141. In that view of the matter, we do not find any reason to A interfere with the order of the learned APTEL. The appeals are, accordingly, liable to be dismissed. Civil Appeal Nos. 2935-2936 of 2020

142Copy pinpoint142. In addition to the ‘Change in Law’ benefits granted by the State Commission, ‘Coal Terminal Surcharge’, ‘Chhattisgarh Paryavaran B Upkar’ and ‘Chhattisgarh Vikas Upkar’ were also considered to be ‘Change in Law’ events by the learned APTEL.

143Copy pinpoint143. The ‘Coal Terminal Surcharge’ was levied by the Indian Railways subsequent to the cut-off date. Similarly, the Government of Chhattisgarh, under Section 8 of the Chhattisgarh Adhosanrachna Vikas C Evam Paryavaran Upkar Adhiniyam, 2005, vide Notification dated 16th June 2015, which is admittedly after the cut-off date, introduced ‘Chhattisgarh Paryavaran Upkar’ and ‘Chhattisgarh Vikas Upkar’. Even the Change in Swacch Bharat Cess at the rate of 0.5% on Service Tax for Operation Period and Change in Krishi Kalyan Cess at the rate of D 5% on Service Tax for Operation Period, which had been granted concurrently by the State Commission and the learned APTEL, were notified by the Union of India after the cut-off date.

144Copy pinpoint144. It could thus be seen that all these additional taxes or cesses were introduced by the instrumentalities of the Government of India or E by the Government of Chhattisgarh. The same are issued under the provisions of the concerned statutes, rules, notifications, orders, etc. It is thus clear that they would amount to ‘Law’ within the meaning of the term ‘Law’ as defined in the PPAs. As such, no error can be found with the order of the learned APTEL. F

145Copy pinpoint145. We, therefore, find no merit in the appeals. The appeals are, accordingly, liable to be dismissed. Civil Appeal No. 3123 of 2019 and Civil Appeal No.5372 of 2019

146Copy pinpoint146. In the present matter, in addition to the claims granted by the G CERC, the learned APTEL also granted the following claims: (i) Change in NCDP (cancellation of Captive Block vis-à-vis tapering linkage), (ii) Busy Season Surcharge and Developmental Surcharge, H

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A (iii) Carrying Cost; and (iv) Add on Premium Price.

147Copy pinpoint147. Insofar as the issue with regard to change in NCDP is concerned, this Court in the case of Energy Watchdog (supra)so also in Adani Rajasthan case (supra) and recently in MSEDCL v. APML B & Ors.(Supra)has held that the change in NCDP would amount to ‘Change in Law’. As such, the finding in that regard warrants no interference.

148Copy pinpoint148. Insofar as Busy Season Surcharge and Development Surcharge are concerned, we have already discussed hereinabove as to C how it would amount to ‘Change in Law’.

149Copy pinpoint149. Insofar as ‘Add on premium price’ is concerned, undisputedly, ‘add on premium’ was required to be paid on account of cancellation of captive coal blocks and inordinate delay on account of Go-No-Go policy. As such, it cannot be said that the reasoning adopted by the learned D APTEL is perverse and arbitrary.

150Copy pinpoint150. Insofar as the issue with regard to ‘carrying cost’ is concerned, we have already discussed the issue at length in the foregoing paragraphs. As such, no interference is warranted on that finding also.

151Copy pinpoint151. Insofar as other claims which were concurrently allowed E and disallowed by the CERC and the learned APTEL are concerned, in view of the concurrent findings, we are not inclined to interfere with the same.

152Copy pinpoint152. The appeals of both DISCOMS as well as Generating Companies are, therefore, liable to be dismissed. F Civil Appeal No. 6641 of 2019

153Copy pinpoint153. This appeal is filed by GKEL, being aggrieved by the concurrent denial of benefits on certain components.

154Copy pinpoint154. As already discussed herein above by us, in view of the concurrent findings recorded by the CERC as well as the learned APTEL G for disallowing the claims, we are not inclined to interfere with the same. The appeal is, accordingly, liable to be dismissed. Civil Appeal Nos. 5583-5584 of 2021

155Copy pinpoint155. In the present case, the benefit is granted on following grounds: H

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(i) Shortfall in domestic coal on account of Change in NCDP; A (ii) Add on premium on account of existing tapering linkage by three years; (iii) Busy Season Surcharge

156Copy pinpoint156. The first issue sands covered by the judgments of this Court B in the cases of Energy Watchdog (supra), Adani Rajasthan case (supra) and MSEDCL v. APML & Ors.(supra) and as such, no interference is warranted.

157Copy pinpoint157. Insofar as Busy Season Surcharge is concerned, apart from there being concurrent findings of facts, we have already given reasons C herein above as to how the same would amount to ‘Change in Law’.

158Copy pinpoint158. We do not find any merit in the appeals. The same are, accordingly, liable to be dismissed. Civil Appeal No. 39 of 2021 D

159Copy pinpoint159. The CERC has granted benefit on the following grounds. i. Shortfall in linkage coal on account of NCDP 2013 and SHAKTI Policy; ii. Change in coal quality pursuant to amendment of the Environment (Protection) Rules, 1986; E iii. Increase in Busy Season Surcharge and Development Surcharge on transportation of coal by Indian Railways; and iv. Carrying cost on allowed ‘Change in Law’ claims. F

160Copy pinpoint160. The view taken by the CERC has been affirmed by the learned APTEL. As such, the appeal arises out of the concurrent findings of fact.

161Copy pinpoint161. Insofar as first issue with regard to benefit of ‘Change in Law’ event on account of NCDP 2013 is concerned, the same is squarely G covered by the judgments of this Court in the cases of Energy Watchdog (supra), Adani Rajasthan case (supra) and MSEDCL v. APML & Ors.(supra).

162Copy pinpoint162. Insofar as the benefit of ‘Change in Law’ on account of SHAKTI Policy is concerned, it is covered by the judgment and order of H

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A the even date of this Court in the case of Civil Appeal No. 5684 of 202110 and in the case of Civil Appeal Nos. 677-678 of 202111.

163Copy pinpoint163. The other components, i.e. change in coal quality pursuant to amendment of the Environment (Protection) Rules, 1986, and increase in Busy Season Surcharge and Development Surcharge on transportation B of coal by Indian Railways, have already been considered by us herein to amount to ‘Change in Law’ events. We have also considered the issue regarding ‘Carrying Cost’. As such, no interference is warranted in the concurrent findings by the learned APTEL, especially in view of the judgments of this Court. The appeal is, accordingly, liable to be dismissed. C Civil Appeal No. 5005 of 2022 and Civil Appeal No. 4089 of 2022

164Copy pinpoint164. The appeals are filed being aggrieved by the order of the learned APTEL granting compensation on account of ‘EFC’ and ‘carrying cost’.

165Copy pinpoint165. Undisputedly, the EFC was imposed by CIL vide its Circular dated 19th December 2017.

166Copy pinpoint166. As discussed herein above, it is not in dispute that EFC has been paid by the Generators while paying the base price, other charges and statutory charges at the time of delivery of coal. As such, no interference is warranted with the said finding.

167Copy pinpoint167. Insofar as ‘carrying cost’ is concerned, we have elaborately discussed the said issue herein above. As such, no interference, therefore, is warranted on the said issue also. F

168Copy pinpoint168. We do not find any merit in the appeals. The same are, accordingly, liable to be dismissed. VI. EPILOGUE

169Copy pinpoint169. Before we part with the judgment, we must note that we G have come across several appeals in the present batch which arise out of concurrent findings of fact arrived at by two statutory bodies having expertise in the field. We have also found that in some of the matters, 10 Uttar Haryana Bijli Vitran Nigam Limited and another v. Adana Power (Mundra) Limited and another 11 Maharashtra State Electricity Distribution Company Limited v. Adani Power H Maharashtra Limited and another

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the appeals have been filed only for the sake of filing the same. We also find that several rounds of litigation have taken place in some of the proceedings.

170Copy pinpoint170. Recently, this Court, in the case of MSEDCL v. APML & Ors.(supra), has noted that one of the reasons for enacting the Electricity Act, 2003 was that the performance of the Electricity Boards had deteriorated on account of various factors. The Statement of Objects and Reasons of the Electricity Act, 2003 would reveal that one of the main features for enactment of the Electricity Act was delicensing of generation and freely permitting captive generation. In the said judgment, we have recorded the statement of the learned Attorney General made in the case of Energy Watchdog (supra) that the electricity sector, having been privatized, had largely fulfilled the object sought to be achieved by the Electricity Act. He had stated that delicensed electricity generation resulted in production of far greater electricity than was earlier produced. The learned Attorney General had further urged the Court not to disturb the delicate balance sought to be achieved by the Electricity Act, i.e. D that the producers or generators of electricity, in order that they set up power plants, be entitled to a reasonable margin of profit and a reasonable return on their capital, so that they are induced to set up more and more power plants. At the same time, the interests of the end consumers also need to be protected. E

171Copy pinpoint171. However, we find that, in spite of this position, litigations after litigations are pursued. Though the concurrent orders of statutory expert bodies cannot be said to be perverse, arbitrary or in violation of the statutory provisions, the same are challenged.

172Copy pinpoint172. It will be relevant to note the following observations of the F CERC in its judgment and order dated 16th May 2019, passed in Petition No. 8/MP/2014, which falls for consideration in Civil Appeal No. 39 of 2021 before this Court: “(d) Approaching the Commission every year for allowance of compensation for such Change in Law is a time-consuming G process. Accordingly, the mechanism prescribed above may be adopted for payment of compensation due to Change in Law events allowed as per PPA for the subsequent period as well.”

173Copy pinpoint173. It will also be relevant to refer to some of the observations of the learned APTEL in its order dated 21st December 2021, which falls H

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A for consideration in Civil Appeal No.2908 of 2022 before this Court, which read thus: “115. The Standing Committee of Parliament in its Report (dated 07.03.2018) on Energy titled ‘Stressed/ Non-Performing Assets in Electricity Sector’ has recognized the financial stress faced by generating companies on account of delay in recovery of Change in Law compensations and has recommended thus: “The Committee, therefore, recommend that appropriate steps should be taken to ensure that there should be consistency and uniformity with regard to orders emanating from the status of change in law. Provisions should also be made for certain percentage of payments of regulatory dues to be paid by Discoms in case the orders of regulators are being taken to APTEL/ higher judiciary for their consideration and decision”

116. The Report lays stress on the obligation of the distribution companies to pay the approved Change in Law compensation even while Regulatory Commission’s orders are challenged. The Policy directive dated 27.08.2018 E issued in terms of Section 107 of the Electricity Act, 2003 by the Ministry of Power (MoP) to the CERC emphasized on the need to ensure expeditious recovery of Change in Law compensation. The desirability of this was recognized by this tribunal in its judgment dated F 14.09.2019 in Jaipur Vidyut Vitran Nigam Limited vs. RERC & Ors, 2019 SCC Online APTEL 98. It is against such backdrop that Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, notified by MoP on 22.10.2021, providing for timely recovery of compensation on account of occurrence of Change in G Law events have been framed. The MoP, vide notification dated 09.11.2021, put in public domain the policy directive on “Automatic pass through of the fuel and power procurement cost in tariff for ensuring the viability of the power” recognizing that in order to ensure that the H power sector does not face any constraints in maintaining

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assured power supply to meet the demand, all the stakeholders in the value chain of power sector must ensure that there is timely recovery of cost. This involves the cost pass through by the generating companies to the distribution companies.

117. In sharp contrast, it is seen from the factual narrative of the events leading to the appeal at hand that the appellants (Haryana Utilities) have been adopting dilatory tactics which not only defeats the public policy but also has the undesirable fall-out of adding to the burden of the end-consumers they profess to serve on account of increasing Carrying Cost. C

118. Concededly, in compliance with the Taxes and Duties Order dated 06.02.2017, the appellants paid to the generator the taxes and duties for certain period but, thereafter, unilaterally withheld such claims, raising issues (found merit-less) regarding IPT of coal for first time in January 2018. It is after the impugned order was passed that the appellants are stated to have started complying, to an extent, by making payments. It is the case of the first respondent that the appellants have withheld past payments including towards taxes and duties its entitlement to recover corresponding Late Payment Surchage (“LPS”) being over and above the same to be computed after discharge of the former liability. We agree that such withholding is in violation of Articles 11.3.2 and 11.6.9 of the PPAs (quoted earlier) which cast a specific mandate on the procurer (Haryana Utilities) to honor the invoices raised, irrespective of dispute, and impose a specific bar against unilateral deductions/setting off.

119. We find the dilatory conduct of the Haryana Utilities, to delay the implementation of the binding orders concerning compensation on account of coal shortfall and corresponding taxes and duties, detrimental to the interest of end consumers since it burdens the consumers with incremental LPS for delay in making payments to the generator. This cannot be countenanced, given the earlier dispensation on the subject by the statutory regulator and appellate forum(s), since it smacks of approach that is designed to frustrate H

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A the legislative command, and extant State policy, as indeed constitutes abject indiscipline infringing the rule of law. Borrowing THE WORDS OF Hon’ble Supreme Court in SEBI vs. Sahara India Real Estate Corpn. Ltd., (2014) 5 SCC 429 “non-compliance with the orders passed … shakes the very foundation of our judicial system and B undermines the rule of law” which this tribunal is also duty-bound to “honour and protect”, so essential “to maintain faith and confidence of the people of this country in the judiciary”.” [emphasis supplied] C

174Copy pinpoint174. It could thus be seen that even the Standing Committee of Parliament, in its report, has recommended that there should be consistency and uniformity with regard to orders emanating from the status of ‘Change in Law’. It has also recommended that the provisions should also be made for certain percentage of payments of regulatory dues to be paid by DISCOMS in case the orders of regulators are being taken to learned APTEL/higher judiciary for their consideration and decision. The learned APTEL has also referred to the Policy Directive dated 27th August 2018 issued in terms of Section 107 of the Electricity Act, 2003 by the MoP to the CERC, where it emphasized the need to ensure expeditious recovery of ‘Change in Law’ compensation. The learned APTEL has also referred to the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, notified by MoP on 22 nd October 2021, which provide for timely recovery of compensation on account of occurrence of ‘Change in Law’ events. The learned APTEL found that the Haryana Utilities have been adopting dilatory tactics, which not only defeat the public policy but also have the undesirable fallout of adding to the burden of the end-consumers they profess to serve on account of increasing ‘Carrying Cost’. The learned APTEL further found that withholding of past payments, including towards taxes and duties by the DISCOMS, is in violation of the provisions of the PPAs, which casts G a specific mandate on the procurer to honour the invoices raised, irrespective of dispute, and impose a specific bar against unilateral deductions/setting off.

175Copy pinpoint175. It is further to be noted that this Court, in the case of Uttar Haryana Bijli Vitran Nigam Limited (UNHVNL) and another v. H

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Adani Power Limited and others12, has specifically observed that the A ‘Change in Law’ events will have to accrue from the date on which Rules, Orders, Notifications are issued by the instrumentalities of the State. Even in spite of this finding, the DISCOMS are pursuing litigations after litigations.

176Copy pinpoint176. We find that, when the PPA itself provides a mechanism for B payment of compensation on the ground of ‘Change in Law’, unwarranted litigation, which wastes the time of the Court as well as adds to the ultimate cost of electricity consumed by the end consumer, ought to be avoided. Ultimately, the huge cost of litigation on the part of DISCOMS as well as the Generators adds to the cost of electricity that is supplied to the end consumers. C

177Copy pinpoint177. We further find that non-quantification of the dues by the Electricity Regulatory Commissions and the untimely payment of the dues by the DISCOMS is also detrimental to the interests of the end consumers. If timely payment is not made by DISCOMS, under the clauses in the PPA, they are required to pay late payment surcharges, D which are much higher. Even in case of ‘Change in Law’ claims, the same procedure is required to be followed.

178Copy pinpoint178. Ultimately, these late payment surcharges are added to the cost of electricity supplied to the end consumers. It is, thus, the end consumers who suffer by paying higher charges on account of the E DISCOMS not making timely payment to the Generators.

179Copy pinpoint179. It is further to be noted that the appeal to this Court under Section 125 of the Electricity Act, 2003 is only permissible on any of the grounds as specified in Section 100 of the Code of Civil Procedure,

1908. As such, the appeal to this Court would be permissible only on substantial questions of law. However, as already observed herein, even in cases where well-reasoned concurrent orders are passed by the Electricity Regulatory Commissions and the learned APTEL, the same are challenged by the DISCOMS as well as the Generators. On account of pendency of litigation, which in some of the cases in this batch has been more than 5 years, non-payment of dues would entail paying of heavy carrying cost to the Generators by the DISCOMS, which, in turn, will be passed over to the end consumer. As a result, it will be the end consumer who would be at sufferance. We are of the opinion that such unnecessary and unwarranted litigation needs to be curbed. 12 (2019) 5 SCC 325 H

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180Copy pinpoint180. To a pointed query, the learned counsel for the DISCOMS fairly conceded the position that the prices at which the electricity is purchased from the ‘Independent Power Producers’ is substantially lesser than the power purchased from the ‘State Generating Companies’.

181Copy pinpoint181. We, therefore, appeal to the Union of India through Ministry B of Power (“MoP” for short) to evolve a mechanism so as to ensure timely payment by the DISCOMS to the Generating Companies, which would avoid huge carrying cost to be passed over to the end consumers.

182Copy pinpoint182. The Union of India, through MoP, may also evolve a mechanism to avoid unnecessary and unwarranted litigation, the cost of C which is also passed on to the ultimate consumer.

183Copy pinpoint183. Before we part with the judgment, we place on record our appreciation for the valuable assistance rendered by Mr. Balbir Singh, learned Additional Solicitor General, Dr. A. M. Singhvi, Mr. V. Giri, Mr. M.G. Ramachandran, Mr. C.A. Sundaram, Mr. Maninder Singh, Mr. D Sajan Poovayya and Mr. Niranjan Reddy, learned Senior Counsel, and Mr. Vishrov Mukerjee, Ms. Poorva Saigal, Ms. Anushree Bardhan, and Ms. Poonam Sengupta, learned counsel.

184Copy pinpoint184. In view of the above, all the appeals are dismissed. No costs.

E Divya Pandey Appeals dismissed. (Assisted by : Roopanshi Virang, LCRA)