SOUTHERN POWER DISTRIBUTION POWER COMPANY LIMITED OF ANDHRA PRADESH (APSPDCL) vs HINDUJA NATIONAL POWER CORPORATION LIMITED

SOUTHERN POWER DISTRIBUTION POWER  COMPANY LIMITED OF ANDHRA PRADESH  (APSPDCL) vs HINDUJA NATIONAL POWER  CORPORATION LIMITED

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION 
CIVIL APPEAL NO.1844 OF 2020
SOUTHERN POWER DISTRIBUTION POWER 
COMPANY LIMITED OF ANDHRA PRADESH 
(APSPDCL) & ANR.   ...APPELLANT(S)
VERSUS
M/S HINDUJA NATIONAL POWER 
CORPORATION LIMITED & ANR.       .... RESPONDENT(S)
J U D G M E N T 
B.R. GAVAI, J.
1. The   present   appeal   filed   by   the   appellants   –
Distribution   Companies   (hereinafter   referred   to   as   “the
appellants ­ DISCOMS”) challenges the judgment and order
dated 7th January, 2020, passed by the Appellate Tribunal for
Electricity, New Delhi (hereinafter referred to as “the APTEL”)
in Appeal No. 41 of 2018, thereby allowing the appeal filed by
the   respondent   No.1   –   M/s   Hinduja   National   Power
2
Corporation Limited (hereinafter referred to as “HNPCL”).  By
the impugned judgment and order, the APTEL has directed
the   Andhra   Pradesh   Electricity   Regulatory   Commission
(hereinafter referred to as “the State Commission”) to dispose
of O.P. No.21 of 2015 filed by HNPCL for determination of
capital cost and O.P. No.19 of 2016 filed by the appellants –
DISCOMS   for   approval   of   amended   and   restated   Power
Purchase   Agreement   (hereinafter   referred   to   as   “PPA”)
(Continuation Agreement) on merits. 
2. The facts, in brief, giving rise to the present appeal
are as under:
3. The erstwhile Andhra Pradesh State Electricity Board
(hereinafter   referred   to   as   “APSEB”)   entered   into   a
Memorandum  of  Understanding  (hereinafter  referred to  as
“MoU”) with HNPCL on 17th July, 1992.  As per the said MoU,
APSEB transferred all the licenses, approvals, clearance and
permits, fuel linkage, water required for establishment of the
power project at Visakhapatnam in the erstwhile State  of
3
Andhra   Pradesh,   to   HNPCL   to   generate   and   supply   the
electricity to APSEB.  
4. An initial PPA was entered into between APSEB and
HNPCL on 9th  December, 1994.   On 25th  July, 1996, the
Central Electricity Regulatory Commission (CERC) granted a
Techno   Economic   Clearance   for   the   power   project   for   an
estimated cost of Rs.4628.11 crores (Rs. 4.45 crores per MW).
5. Owing to certain change in conditions, the parties
agreed to amend the initial PPA.   Accordingly, an Amended
and Restated PPA dated 15th  April, 1998, was entered into
between APSEB and HNPCL.   Between the years 1998 and
2007, the Amended and Restated PPA, for sale of power by
HNPCL to APSEB, was not implemented.   Subsequently, in
the year 2007, HNPCL approached the Government of Andhra
Pradesh to revive the power project mainly structuring it as a
merchant plant, offering 25% of the power generated to the
State and balance 75% power to third parties.   However, it
appears that there were negotiations between the parties, and
the State Government had offered to purchase 100% power
4
generated from the plant of HNPCL and that HNPCL had
agreed to it.   The same would be clearly evident from the
material   placed   on   record,   to   which   we   will   be   referring
hereinafter. 
6. The material placed on record would reveal that in
the year 2011­2012, the Central Power Distribution Company
of   Andhra   Pradesh   Limited   (hereinafter   referred   to   as
“APCPDCL”) for and on behalf of four Distribution Companies
of Andhra Pradesh (hereinafter referred to as “APDISCOMS”)
had initiated the process for procurement of power under
Case­1   long   term   bidding   route,   to   meet   the   base   load
requirements   of   APDISCOMS   from   the   years   2014­2015
onwards.   In the said bidding process, HNPCL participated
and had successfully emerged as the second lowest bidder (L2   bidder).       After   the   completion   of   the   bidding   process,
APCPDCL   had   filed   O.P.   No.55   of   2013   before   the   State
Commission for approval of the tariffs emerged in the said
bidding process.  However, the State Level Expert Committee
for   evaluation   of   Case­1   bidding   (hereinafter   to   as   “Bid
5
Evaluation Committee”) in its meeting dated 28th September,
2012, had noted that, the State Government had informed
that the entire capacity of HNPCL was encumbered to the
State   of   A.P./APDISCOMS   and   was   not   available   for
consideration   under   the   tender.     Accordingly,   the   Bid
Evaluation   Committee   had   discarded   HNPCL   from   the
bidding process.  
7. In   the   meanwhile,   there   was   a   correspondence
between HNPCL and the State Government in the year 2012,
with regard to the steps to be taken for the development of
the   project   and   requesting   State   support   for   scheduled
commissioning   of   the   project.     In   this   regard,   HNPCL
addressed a letter dated 6th August, 2012 to the then Hon’ble
Chief   Minister   of   the   erstwhile   State   of   Andhra   Pradesh,
thereby conveying its intention to develop the project and
seeking   State’s   support.     Vide   communication   dated   26th
December, 2012, the State Government addressed a letter to
HNPCL accepting its proposal and agreeing to purchase 100%
power from the project of HNPCL as per the Amended and
6
Restated   PPA.     Vide   communication   dated   14th  January,
2013, HNPCL agreed to supply 100% power to the StateDistribution Companies at the tariff to be determined by the
State Commission. 
8. The   HNPCL   vide   communication   dated   16th  May,
2013, addressed to the appellants – DISCOMS,  inter  alia,
provided   therein   the   details   with   regard   to   the   estimated
capital cost of the power project to the tune of Rs.6098 crores
as against Rs.5545 crores that was given in June, 2010.  The
appellants – DISCOMS vide communication dated 17th May,
2013,   expressed   their   reservations   about   the   capital   cost
furnished by HNPCL and reserved their rights to contest the
same before the State Commission.  
9. On   the   same   day,   i.e.,   17th  May,   2013,   a
Memorandum of Agreement (hereinafter referred to as “MoA”)
was   entered   into   between   the   APDISCOMS   and   HNPCL,
thereby deciding to continue the Amended and Restated PPA
dated 15th April, 1998, on the terms and conditions set out
therein.   In pursuance of the aforesaid MoA, a Fuel Supply
7
Agreement (“FSA” for short) dated 26th August, 2013, came to
be entered between HNPCL and Mahanadi Coalfield Limited
for coal supply for the said project. 
10. On 12th March, 2014, a petition being O.P. No.21 of
2015,   came   to   be   filed   by   HNPCL   before   the   State
Commission for determination of capital cost for the project
and for determination of the tariff for such generation and
sale of electricity by HNPCL to APDISCOMS.
11. Thereafter, on 2nd  June, 2014, the Andhra Pradesh
State Reorganisation Act, 2014, (hereinafter referred to as
“Reorganisation   Act”)   came   into   effect   vide   which   the
erstwhile State of Andhra Pradesh was bifurcated into two
States, i.e., the State of Andhra Pradesh and the State of
Telangana.
12. On   28th  July,   2015,   HNPCL   filed   an   Addendum
Application in O.P. No.21 of 2015, thereby enhancing the
capital cost of the project to Rs.8,087 crore.   This capital cost
was disputed by the APDISCOMS.
8
13. On 11th  January, 2016, the first unit of the Power
project (520 MW) was declared Commercial Operation Date
(COD) by HNPCL.  Vide interim order dated 1st March, 2016,
the State Commission fixed the provisional tariff at the rate of
Rs.3.61 per unit for supply of electricity by HNPCL to the
APDISCOMS.  
14. On 30th March, 2016, HNPCL filed I.A. No.5 of 2016
in O.P. No.21 of 2015, for payment of variable charges and
fixed   charges   at   Rs.1.80   per   unit   and   Rs.2.16   per   unit
aggregating to Rs.3.96 per unit at 80% availability.  
15. On   28th  April,   2016,   distinct   Power   Distribution
Corporations   were   created   including   the   appellants   –
DISCOMS i.e. Southern Power Distribution Power Company
Limited of Andhra Pradesh (“APSPDCL”) and Eastern Power
Distribution Company of Andhra Pradesh (“APEPDCL”). These
corporations succeeded the APSEB, which had entered into
the Amended and Restated PPA dated 15th  April, 1998 with
HNPCL.       As   such,   the   Continuation   Agreement   to   the
9
Amended and Restated PPA was entered into between the
appellants – DISCOMS and HNPCL on 28th April, 2016.  
16. On 11th May, 2016, the appellants – DISCOMS filed a
petition   being   O.P.   No.19   of   2016   before   the   State
Commission   for   approval   of   the   Continuation   Agreement
dated 28th April, 2016, read with the Amended and Restated
PPA dated 15th April, 1998.   
17. The   State   Government   vide   order   dated   1st  June,
2016, accorded approval for purchase of 100% power from
HNPCL.   
18. On 3rd July, 2016, the second unit of the HNPCL (520
MW) came to be declared COD by HNPCL.   
19. Vide   order   dated   6th  August,   2016,   the   State
Commission re­determined the provisional tariff at the rate of
Rs.3.82 per unit, payable by the appellants – DISCOMS for
the power supplied by HNPCL.  
20. On   15th  May,   2017,   the   State   Commission   after
hearing the parties on merits, reserved the judgment in both
10
the petitions, i.e., in O.P. No.19 of 2016 and O.P. No.21 of
2015.  
21. It is further to be noted that in the appeal arising out
of interlocutory proceedings, the APTEL vide order dated 1st
June, 2017, directed the State Commission to dispose of O.P.
No.19 of 2016 and O.P. No.21 of 2015 on or before 14th
August, 2017.     The said period came to be extended from
time to time, the last of such extension was granted till 31st
January, 2018, vide order dated 10th January, 2018.  
22. Thereafter, on 4th  January, 2018, the appellants –
DISCOMS  filed  two  Interlocutory  Applications,  viz.,  (i)  I.A.
No.1 of 2018 in O.P. No.19 of 2016 for withdrawal of O.P.
No.19 of 2016 together with initial PPA; and (ii) I.A. No.2 of
2018 in O.P. No.21 of 2015 for disposal of O.P. No.21 of
2015.  
23. Vide   order   dated   31st  January,   2018,   the   State
Commission allowed withdrawal of O.P. No.19 of 2016 filed
by the appellants – DISCOMS seeking approval of PPA and
11
consequentially dismissed O.P. No.21 of 2015 filed by HNPCL
seeking determination of tariff.  
24. Aggrieved by the same, an appeal being Appeal No.41
of 2018, came to be filed by HNPCL before the APTEL.  The
said appeal came to be admitted by the APTEL vide order
dated 26th February, 2018.  The APTEL vide order dated 16th
March,   2018,   passed   in   I.A.   No.211   of   2018   in   the   said
appeal, as an ad hoc arrangement, directed the parties to
maintain status quo as prevalent prior to 31st January, 2018.
This was without prejudice to the rights and contentions of
the parties in the main appeal, i.e., Appeal No.41 of 2018.
25. It is also to be noted that the order dated 16th March,
2018, passed by the APTEL in I.A. No.211 of 2018 in Appeal
No.41 of 2018, came to be challenged by the appellants –
DISCOMS before the High Court of Andhra Pradesh by filing
Writ Petition being Writ Petition No.10814 of 2018.  Another
writ petition being Writ Petition No.13689 of 2018 came to be
filed by the appellants – DISCOMS challenging the order of
the APTEL dated 26th  February, 2018, admitting the appeal
12
filed by HNPCL.  The said writ petitions came to be dismissed
by the High Court of Andhra Pradesh vide order dated 2nd
May, 2018.  
26. In the meantime, on 16th  April, 2018, HNPCL had
filed an Execution Petition being Execution Petition No.3 of
2018 before the APTEL seeking execution of the order dated
16th  March, 2018, passed by the APTEL in I.A. No.211 of
2018   in   Appeal   No.41   of   2018.     Certain   directions   were
passed by the APTEL in the said Execution Petition vide order
dated 31st May, 2018.
27. The appellants – DISCOMS had also challenged the
order dated 16th March, 2018, passed by the APTEL, by way
of Civil Appeal No.5772 of 2018 before this Court. This Court
vide order dated 4th June, 2018, refused to interfere with the
said order, since it was an interim order.  However, this Court
directed the appeal to be decided expeditiously without taking
into consideration the observations, in the order impugned
before it, as conclusive.  
13
28. Vide   impugned   judgment   and   order   dated   7th
January, 2020, the APTEL allowed the appeal filed by HNPCL
and directed the State Commission to dispose of O.P. No.21
of 2015 and O.P. No.19 of 2016.  Being aggrieved thereby, the
appellants – DISCOMS have approached this Court by way of
the present appeal.  
29. On 14th July, 2020, this Court passed the following
order in the present appeal:
“The appeal is admitted.  
Until   further   orders,   the   impugned
order passed by the Appellate Tribunal for
Electricity New Delhi in Appeal No. 41/2019
shall remain stayed. 
List for hearing after four weeks.”
30. An   application   being   I.A.   No.67061   of   2020   for
modification of the said order dated 14th July, 2020, came to
be filed by HNPCL.  This Court vide order dated 21st August,
2020, modified the order as under:
“Heard. 
14
By order dated 14.07.2020, we directed
the stay of impugned order passed by the
Appellate   Tribunal   for   Electricity,   New
Delhi, in Appeal No.41/2019. 
We clarify that there shall be no stay of
the order dated 16.03.2018 passed by the
Appellate   Tribunal   for   Electricity,   New
Delhi, providing for interim measure. Order
accordingly. 
The   instant   interlocutory   application
stands disposed of accordingly”
31. It   appears   from   the   record   that   during   the
intervening   period,   certain   Interlocutory   Applications   have
been   filed  from   both   the   sides,  wherein,  the  appellants   –
DISCOMS are seeking vacation of the interim order dated 21st
August, 2020, whereas HNPCL is seeking implementation of
the order dated 21st August, 2020.  The record would show
that the matter has been adjourned from time to time and
was finally heard by this Court on 20th January, 2022.  
32. We   have   heard   Shri   C.S.   Vaidyanathan,   learned
Senior   Counsel   appearing   on   behalf   of   the   appellants   –
DISCOMS and Dr. Abhishek Manu Singhvi and Shri M.G.
15
Ramachandran, learned Senior Counsel appearing on behalf
of HNPCL.
33. Shri   C.S.   Vaidyanathan,   learned   Senior   Counsel
appearing on behalf of the appellants – DISCOMS, submitted
that   the   APTEL   has   grossly   erred   in   holding   that   the
appellants   –   DISCOMS   were   not   entitled   to   apply   for
withdrawal of O.P. No.19 of 2016, filed for grant of approval
of the PPA.  It is submitted that unless there was prohibition
in law, the appellants were very much within their right to
apply for withdrawal of the O.P. filed by them.  In this regard,
Shri Vaidyanathan relied on the following authorities:
(i) Boal Quay  Wharfingers  Ltd.  v. King’s  Lynn
Conservancy Board1 and 
(ii) Hulas Rai Baij Nath v. Firm K.B. Bass and
Co.2
34. Shri Vaidyanathan further submitted that the PPA
was not a valid document until it was approved by the State
Commission   under   Section   86(1)(b)   of   The   Electricity   Act,
1 (1971) 1 WLR 1558 [Court of Appeal, England)
2 (1967) 3 SCR 886
16
2003 (hereinafter referred to as “the Act of 2003”).  He further
submitted   that   under   Section   21   of   The   Andhra   Pradesh
Electricity Reform Act, 1998 (hereinafter referred to as “the
Reform   Act”),   any   agreement   relating   to   generating,
transmitting,  distribution   or  supply   of  energy  without   the
previous consent in writing of the Commission was void ab
initio.   He submitted that by the impugned judgment, the
APTEL has,  in  effect, granted HNPCL a decree of  specific
performance of a contract, which is void ab initio.   He further
submitted   that   MoA   dated   17th  May,   2013   and   the
Continuation   Agreement   dated   28th  April,   2016   were
themselves contrary to the National Tariff Policy issued under
Section 3 of the Act of 2003 and Regulation 5.2(b) of the
Andhra  Pradesh   Electricity  Regulatory Commission  (Terms
and   conditions   for   determination   of   tariff   for   supply   of
electricity by a generating company to a distribution licensee
and   purchase   of   electricity   by   distribution   licensees)
Regulation,   2008   (Regulation   No.1   of   2008)   (hereinafter
referred to as ‘the Tariff Regulations’) issued by the State
17
Commission.     As   such,   the   direction   by   the   APTEL,   to
continue   to   get   the   electricity   supply   from   HNPCL,   being
contrary to the statutory provision, would not be tenable in
law. 
35. Shri   Vaidyanathan   submitted   that   the   present
project does not fall under any of the categories mentioned in
Regulation 5.2 of the Tariff Regulations, which aspect has not
been taken into consideration by the APTEL.  
36. Shri Vaidyanathan further submitted that the finding
of the APTEL, that HNPCL had made huge investments on the
basis of the assurance given by the appellants – DISCOMS
that   they   will   purchase   100%   power   from   it,   is   itself
erroneous.   He submitted that the initial project of HNPCL
was lying in cold storage from 1996 to 2007.  He submitted
that in the year 2007, HNPCL had attempted to revive the
project as a Merchant­power plant.   He submitted that the
project of HNPCL had also attained financial closure in the
year 2010. He further submitted that before the acceptance of
the proposal of HNPCL by the State Government, HNPCL had
18
already completed upto 93% of the project.   It is therefore,
submitted that the finding that huge investments made by
HNPCL were on the basis of the representation by the State
Government is totally erroneous.   In any case, he submits,
that the appellants – DISCOMS are independent authorities
and not bound by the decision of the State.   He submitted
that under the scheme of the Act of 2003, the appellants –
DISCOMS   cannot   purchase   the   power   without   the   prior
approval of the State Commission.  He submits that the State
has no role to play in the said matter.  It is submitted that, in
any case, the appellants – DISCOMS could not be bound by
the representation made by the State Government.   
37. Shri Vaidyanathan further submits that since the reinitiation of the project in the year 2007 by HNPCL is as a
Merchant­power plant, it can very well sell the power to the
third parties in the market.  He submitted that however, the
appellants – DISCOMS cannot be compelled to purchase the
power from HNPCL, which will be at a very high price.   He
submitted that the capital cost of the project, which was
19
initially estimated at Rs.4628.11 crores has now gone up to
Rs.8087   crores,   which   will   have   a   direct   effect   on   the
purchase   price   of   the   electricity   by   the   appellants   –
DISCOMS.   He therefore submits that if the appellants –
DISCOMS are directed to purchase the electricity at such a
high price, the loss would be ultimately to the consumers and
as such, the direction given by the APTEL is also against the
public interest.  
38. Per   contra,   Dr.   Abhishek   Manu   Singhvi   and   Shri
M.G. Ramachandran, learned Senior Counsel appearing on
behalf  of  HNPCL  submitted  that   the  order  passed  by the
APTEL is such, which does not at all harm the appellants –
DISCOMS.     Dr. Singhvi submitted that by the impugned
order, the APTEL has only directed the State Commission to
dispose   of   O.P.   No.21   of   2015   filed   by   HNPCL   for
determination of capital cost and O.P. No.19 of 2016 filed by
the   appellants   –   DISCOMS   for   approval   of   Amended   and
Restated PPA on merits.  
20
39. Dr. Singhvi submits that the APTEL has given sound
and   elaborate   reasons   and   as   such,   no   interference   is
warranted in the present appeal.  
40. Shri M.G. Ramachandran, learned Senior Counsel,
submitted that when withdrawal of an application is sought,
which has the effect of frustrating the contract and defeating
the defendant’s right, the appellants cannot be said to have
the   right   to   withdraw  the   proceedings.     He   relied   on  the
following authorities in support of this proposition.  
(i) Madhu Jajoo v. State of Rajasthan3
(ii) Kiran Girhotra & Ors. v. Raj Kumar & Ors.4
(iii) M.   Radhakrisna   Murthy   v.   Government   of
A.P. & Ors.5
(iv) Smt. Ajita Debi v. Musst. Hossenara Begum6
(v) Mathuralal v. Chiranji Lal7
(vi) The   Registrar,   Manonmaniam   Sundaranar
University v. Suhura Beevi8
41. Shri   Ramachandran   has   further   submitted   that   a
right of withdrawal is not an absolute right and that once the
3 AIR 1999 Raj 1
4 (2009) 164 DLT 483
5 (2001) 3 ALD 330 (DB)
6 AIR 1977 Cal 59
7 AIR 1962 Raj 109
8 AIR 1995 Mad 42
21
judgment is reserved there cannot be any further application
seeking withdrawal.  In support of this proposition, he relied
on the following authorities: 
(i) Arjun Singh v. Mohindra Kumar9
(ii) Bharati Behera v. Jhili Prava Behera10
(iii) Rabia   Bi   Qasim   v.   Countrywide   Consumer
Financial Services Limited11
(iv) Pujya   Sindhi   Panchayat   v.   Prof.   C.L.
Mishra12
(v) Yash Mehra v. Arundhati Mehra13
(vi) Dharani   Sugars   and   Chemicals   Limited   v.
TMN Engineering Industry14
42. Dr.   Singhvi,   learned   Senior   Counsel,   further
submitted that, as a matter of fact, HNPCL desired to start
the project as a Merchant­power plant.  It is however, on the
insistence of the State of Andhra Pradesh that HNPCL was
compelled to supply 100% of power generated to the State. He
further   submitted   that   it   is   evident   from   the   record   that
HNPCL had participated in the competitive bidding process
9 AIR 1964 SC 993
10 W.P. No.26254 of 2013 decided by Orissa High Court on 18.04.2014
11 ILR 2004 KAR 2215
12 AIR 2002 Rajasthan 274 (DB)
13 (2006) 132 DLT 166
14 CRP PD No.3309 to 3312 of 2011 and MP No.1 of 2011 decided by the Madras High Court on
30.08.2017
22
conducted by the APCPDCL.  It was the decision of the Bid
Evaluation Committee, to not consider the bid submitted by
HNPCL on the premise that the entire generation capacity of
HNPCL’s   project   was   already   encumbered   to   the   State   of
Andhra Pradesh under the Amended and Restated PPA of
1998.  He further submitted that not only this but the entire
communication placed on record would show that it was the
State   Government,   which   had   expressed   its   interest   to
purchase   100%   power   from   HNPCL’s   project   as   per   the
Amended and Restated PPA dated 15th April, 1998.  
43. He further submitted that on the reorganisation of
the erstwhile State of Andhra Pradesh and its bifurcation into
two States, i.e., the State of Andhra Pradesh and the State of
Telangana;   though   the   State   of   Telangana   had   demanded
54% of the power from HNPCL’s project, the Government of
Andhra Pradesh insisted HNPCL to supply 100% of the power
to the State of Andhra Pradesh. He therefore submits that the
APTEL has rightly, on appreciation of the material placed on
record, held that it was on the representation of the State
23
Government that the HNPCL had made huge investments for
the   project.     He   submitted   that   the   contention   of   the
appellants – DISCOMS, that if the power generated by the
HNPCL is purchased by them, it will be at a very heavy cost,
is totally erroneous.  He submitted that, as a matter of fact,
when as per the interim orders passed by the APTEL and this
Court, the appellants – DISCOMS could have purchased the
power   from   HNPCL   at   the   rate   of   Rs.3.82   per   unit,   the
appellants – DISCOMS are purchasing the power at a much
higher rate from the generators, which were ranked much
below HNPCL in the merit order. He further submits that the
conduct of the appellants – DISCOMS is totally  mala fide.
When under the interim orders of this Court as well as of the
APTEL, they were bound to purchase the power at much
lesser price than compared to the rate at which they are
purchasing,   they   continued   to   purchase   power   at   much
higher price.   He therefore submits that such an act, apart
from being violative of the order of this Court, is contrary to
the public interest.  
24
44. Dr. Singhvi further submits that on account of mala
fide  attitude of the appellants – DISCOMS, it is not only
HNPCL, but also the public at large, who are the sufferers.
He submits that huge investment of thousands of crores of
rupees is lying idle.   He further submits that apart from
generating   employment   for   more   than   1000   people,   the
generation   project,   which   is   fully   operational,   would   also
provide   electricity   in   the   State   of   Andhra   Pradesh.   He
submitted that the contention of the appellants – DISCOMS
that they had decided to withdraw the application on account
of huge capital cost and the power being available in excess is
also   factually   incorrect.     He   submits   that   recently   the
appellants   have   entered   into   an   MoU   with   SEMBCORP
Energy India in December, 2021 for generation of 625 MW of
electricity.  He submits that insofar as the price at which the
electricity would be purchased by the appellants – DISCOMS
from the generation unit of HNPCL would be determined by
the   State   Commission,   which   will   have   to   take   into
consideration various aspects while approving the capital cost
25
of   the   project   as   well   as   while   doing   the   exercise   of
determination of tariff. The learned Senior Counsel therefore
submits   that   no   interference   is   warranted   in   the   present
appeal. 
45. The   facts   in   the   present   case   are   not   much   in
dispute. It is not in dispute that on 17th July, 1992, an MoU
came to be entered between APSEB and HNPCL, vide which
APSEB had transferred all the licences, approvals, clearance
and permits, fuel linkage, water required for the project to
HNPCL.  It is also not in dispute that on 9th December, 1994,
an   initial   PPA   came   to   be   entered   between   HNPCL   and
APSEB.   On 25th  July, 1996, the CERC granted a Techno
Economic Clearance for the power project for an estimated
cost of Rs.4628.11 crores (Rs.4.45 crores per MW).  It is also
not in dispute that APSEB and HNPCL mutually agreed to
amend 1994 PPA and accordingly, an Amended and Restated
PPA came to be executed on 15th April, 1998.  It is also not in
dispute that from 1996 till 2007, the project remained in cold
storage.     In   the   year   2007,   the   promoters   of   HNPCL
26
approached the then Hon’ble Chief Minister of the erstwhile
State of Andhra Pradesh. It appears that certain discussions
took   place   between   the   then   Hon’ble   Chief   Minister   of
erstwhile   State   of   Andhra   Pradesh   and   the   promoters   of
HNPCL.  On 5th January, 2007, Mr. G.P. Hinduja addressed a
communication   to   the   then   Hon’ble   Chief   Minister   of   the
erstwhile State of Andhra Pradesh.  It will be relevant to refer
to the following excerpt from the said communication, which
reads thus:
 “As per our discussion I am summarizing
herein below our proposal for your ready
reference: 
1. Vizag   Power   project   will   be   mainly
structured   as   a   Merchant   plant   and
implemented in a period manner with
an   initial   capacity   of   1040   MW   and
increasing upto  400 MW in  a  phased
manner. 
2. GoAP will sign a MoU with the Project
Sponsors to provide: 
- Title deeds for 1122.38 acres of land
against balance payment of Rs.16.48
cr.
- Transfer of remaining land of 1921.34
acres against payment of an amount
of Rs. 67.63 cr. 
27
- Infrastructure   support   including   for
construction, power and water. 
- Recommend to GoI mega status for
the project. 
- Revive   the   Coal   supply   and
Transportation Agreements. 
- Facilitate environment clearance from
MOEF. 
- Sanction of all other applicable State
Approvals. 
3. GoAP will have the first right of refusal,
in   the   MoU,   to   purchase   25%   of   the
power at regulated tariff.”
46. It could thus be seen that when HNPCL proposed to
revive the project in the year 2007, it was mainly structured
as   a   Merchant   plant,   wherein   the   Government   of   Andhra
Pradesh was to have the first right of refusal, to purchase
25% of the power at regulated tariff.  
47. It is also not in dispute that APCPDCL on behalf of all
the   four   APDISCOMS   (viz.,   Central   Power   Distribution
Company   of   Andhra   Pradesh   Limited,   Southern   Power
Distribution Company of Andhra Pradesh Limited, Northern
Power Distribution Company of Andhra Pradesh Limited and
Eastern   Power   Distribution   Company   of   Andhra   Pradesh
Limited) had conducted bidding process for procurement of
28
power of 2000 MW +/­ 20% under Case­1 to meet the base
load requirements of APDISCOMS from the year 2014­2015
onwards.   It is also not in dispute that in the said bidding
process, HNPCL had also submitted its bid and successfully
emerged   as   L­2   bidder.     After   completion   of   the   bidding
process, APCPDCL had applied for approval of the tariff at
which the power was to be purchased from the successful
bidders in the said process.   It will be relevant to refer to
paragraph 4(u) of the order dated 13th August, 2013, passed
by the State Commission in O.P. No. 55 of 2013, filed by
APCPDCL on behalf of all the four APDISCOMS, which reads
thus: 
 “u)  In   the   minutes   of   meeting   held   on
28th  September   2012,   the   Bid
Evaluation   Committee   noted   that
"The   Principal   Secretary,   Energy
informed   the   Evaluation   Committee
that   the   entire   capacity   of   Hinduja
National   Power   Corporation   Limited
(HNPCL) is encumbered to the state
of A.P. /DISCOMs of A.P. and hence
not available for consideration under
this tender. Hence, HNPCL must be
taken   out   of   the   bid   process   and
APERC   must   be   informed
29
accordingly.     Hence   the   Committee
took   the   note   of   it   and   decided   to
separate   HNPCL   from   the   bid
process”
48. It   could   thus   be   seen   that   though   HNPCL   had
successfully emerged as the L­2 bidder in the open bidding
process, it was at the instance of the State of Andhra Pradesh
that the Bid Evaluation Committee had discarded the bid of
HNPCL, on the ground that the entire capacity of HNPCL was
encumbered to the State of Andhra Pradesh/APDISCOMS. 
49. It will also be relevant to refer to the following excerpt
from the letter dated 26th December, 2012, addressed by the
Principal Secretary to Government, Energy Department, to
HNPCL:
“This   Is   to   Invite   your   attention   to   the
above   cited   letter   intimating   the
implementation   of   the   coal   fired   power
project   (1040   MW)   by   you   at
Visakhapatnam   and   supply   of   power
therefrom.   In   this   regard,   HNPCL   has
sought   certain   support  so   as  to   achieve
scheduled   commissioning   of   the   Project
commencing   in   July   2013.  On   this
matter I am to clarify that Government
of   Andhra   Pradesh   reiterates   its
30
Interest   in   purchasing   100%   power
(through   APDISCOMs)   from   the   said
project, as already contemplated in the
restated   PPA   entered   into   between
APSEB   and   HNPCL   in   1998   based   on
the   MOU   in   1992   on   the   broad
conditions mentioned in the PPA signed
in 1998, except to the extent they may
stand   modified   due   to   Impact   of
change   in   laws/rules   and   regulatory
standards guiding such power projects
post 1998.
2.  In this background, the Government
of   Andhra   Pradesh   hereby   agrees   to
facilitate the implementation of the power
project to achieve the timeline for schedule
commissioning.  The   Government   has
also  decided   to  direct   the  APDlSCOMs
as   the   successor   entities   of   APSEB   to
enter into a continuation Agreement to
the   PPA   of   1998  With   HNPCL   to   this
effect.”
[emphasis supplied]
50. A   perusal   of   the   said   letter   dated   26th  December,
2012, would reveal that the Government of Andhra Pradesh
has   reiterated   its   interest   in   purchasing   100%   of   power
(through   APDISCOMS)   from   the   said   project,   as   already
contemplated   in   the   restated   PPA   entered   into   between
31
APSEB and HNPCL in 1998 based on the MoU of 1992.  No
doubt that it mentions that the same shall be except to the
extent they may stand modified due to impact of change in
laws/rules   and   regulatory   standards   guiding   such   power
projects post 1998. The said letter would also reveal that the
Government had decided to direct the APDISCOMS as the
successor   entities   of   APSEB   to   enter   into   a   continuation
agreement to the PPA of 1998 with HNPCL to the said effect.
It will also be relevant to note that in the said letter it is
observed that the State Government will take necessary steps
within three months for execution of PPA and provision of
Transmission   System   for   Start­up   Power   and   Power
Evacuation.  In the said letter, the State had also agreed for
providing   assistance   in   obtaining   statutory
clearances/approvals from State/local authorities within the
timeline for scheduled commissioning of Project. 
51. In response to the aforesaid letter, HNPCL addressed
a   communication   dated   14th  January,   2013,   to   the   State
Government,   thereby   expressing   its   concurrence   to   the
32
proposal   given   by   the   Government   of   Andhra   Pradesh   of
procuring entire power from the Project.  Vide the said letter
dated   14th  January,   2013,   HNPCL   requested   the   State
Government to provide all the necessary support required for
taking the requisite approvals from the State Commission for
tariff determination based on the actual project cost.  
52. A further communication dated 16th May, 2013, was
addressed by HNPCL to the appellants ­ DISCOMS.  By the
said letter, HNPCL had estimated the project cost to the tune
of Rs.6098 crores.  The said project cost was worked out on
the basis of the order passed by the CERC dated 4th  June,
2012, providing a Benchmark Capital Cost (Hard cost) model
for   Thermal   Power   Stations   with   Coal   as   Fuel   for   tariff
determined by the Commission under Section 62 of the Act of
2003.
53. The   appellants   –   DISCOMS   vide   communication
dated 17th May, 2013, recorded that the documents of capital
cost of the Project were received without prejudice to the
rights of APDISCOMS to contest the cost of the project on
33
every component before the State Commission at appropriate
stage and that the receiving of the capital cost document did
not constitute that the APDISCOMS had agreed/accepted the
same without demur.  
54. On the same day, i.e., 17th  May, 2013, an MoA for
continuation of the Amended and Restated PPA dated 15th
April, 1998, came to be executed between APDISCOMS and
HNPCL. It will be relevant to refer to clauses E and F of the
said MoA dated 17th May, 2013, which read thus:
“E.   HNPCL   shall   agree   that   the   entire
capacity of the project and all the units
of the power station shall at all times be
for the exclusive benefit of the DISCOMs
and   the   DISCOMs   shall   have   the
exclusive right as well as obligation to
purchase the entire capacity from the
project. HNPCL shall not grant to any
third party or allow any third party to
obtain any entitlement to the Available
Capacity   and/or   scheduled   energy.   In
case DISCOMs do not avail power up to
the   Available   Capacity   provided   by
HNPCL, DISCOMs shall pay to HNPCL
the capacity charges for such unavailed
Available Capacity. 
Notwithstanding   the   above,   in   case
DISCOMS do not avail power up to the
Available Capacity provided by HNPCL,
34
HNPCL   shall   have   the   option   to   sell
such Available Capacity not availed by
DISCOMS to any third party or require
the payment of capacity charges from
DISCOMS   towards   such   unavailed
Available   Capacity   not   sold   to   third
parties. DISCOMs shall not be required
to   pay   capacity   charges   for   such
capacity sold to third parties.
F.   Transmission   line/system   for   start­up
power and power evacuation from the
Project   will   be   provided   by   DISCOMs
through APTRANSCO in time so as to
ensure availability of power evacuation
facility at the time of COD of Unit 1.
DISCOMs assure that power evacuation
shall   be   done   through   APTRANSCO
without any delay.”
55. It could thus be seen that in the MoA dated 17th May,
2013, it was agreed that the entire capacity of the project and
all the units of the power station shall at all times be for the
exclusive benefit of the DISCOMS and the DISCOMS were to
have the exclusive right as well as the obligation to purchase
the   entire   capacity   from   the   project.   Vide   the   said   MoA,
HNPCL was restrained from granting to any third party or
allowing  any  third party to  obtain  any entitlement to the
available capacity and/or scheduled energy.   It was further
35
agreed that in case DISCOMS do not avail power up to the
Available Capacity provided by HNPCL, the DISCOMS were to
pay   HNPCL,   the   capacity   charges   for   such   un­availed
Available Capacity.   No doubt, that in case the DISCOMS
failed to avail power up­to the Available Capacity provided by
HNPCL,   an   option   was   available   to   HNPCL   to   sell   such
Available Capacity, not availed by DISCOMS, to any third
party. It was also agreed that the DISCOMS were not required
to   pay   capacity   charges   for   such   capacity   sold   to   third
parties. As per the said MoA, the Transmission line/system
for start­up power and power evacuation from the project was
to   be   provided   by   DISCOMS   through   Transmission
Corporation of Andhra Pradesh (APTRANSCO) in time so as to
ensure availability of power evacuation facility at the time of
COD of Unit­1.  It is also not in dispute that in pursuance of
the execution of the said MoA, HNPCL entered into an FSA
with Mahanadi Coalfield Limited for supply of coal for the
project. 
36
56. Pursuant   to   the   execution   of   the   said   MoA,   an
application being O.P. No.21 of 2015 came to be filed by
HNPCL before the State Commission on 12th March, 2014, for
determination of Capital Cost of the coal fired power station
of   1040   MW   (2   x   520   MW)   capacity   in   the   district   of
Visakhapatnam.
57. Pursuant   to   these   events,   the   Reorganisation   Act
came into effect on 2nd  June, 2014, thereby bifurcating the
erstwhile State of Andhra Pradesh into the State of Andhra
Pradesh and the State of Telangana.  It is the contention of
HNPCL that after the bifurcation of the erstwhile State of
Andhra Pradesh, though the State of Telangana demanded
54% of the power from the project, the Government of Andhra
Pradesh insisted HNPCL to supply 100% of the power to the
State of Andhra Pradesh.
58. It is not in dispute that HNPCL filed an Addendum
Application in O.P. No.21 of 2015 on 28th July, 2015, thereby
showing the capital cost of the project to have increased to
Rs.8087 crores.  
37
59. When O.P. No.21 of 2015, was listed before the State
Commission on 26th September, 2015, the State Commission
passed the following order:
“Sri   P.   Shiva   Rao,   learned   Standing
Counsel for the respondents filed counter
on behalf for the respondents and sought
for further time to respond to the further
material filed by the petitioner by way of
addendum before the Commission. Sri P.
Shiva Rao, learned Standing Counsel for
the respondents also represented that they
are filing an application to dispense with
the earlier Consultant as the respondents
appointed   their   own   Consultant.   Hence,
for   further   response   of   the   respondents
and   rejoinder   of   the   petitioner   to   the
counter filed by tile respondents and for
further   hearing   on   the   question   of
Consultant including on the application for
dispensing   with   the   earlier   Consultant.
Posted to 03­10­2015 at 11 AM. Both the
learned   counsel   also   represented   that
there is no issue of jurisdiction involved in
the matter.”
60. It is also not in dispute that the first unit of the
power project of HNPCL (520 MW) was declared COD on 11th
January, 2016.
38
61. Further,   it   is   not   in   dispute   that   the   State
Commission by an order dated 1st March, 2016, directed the
appellants – DISCOMS to pay an interim tariff at the rate of
Rs.3.61 per unit to HNPCL.   By the said order, the State
Commission also clarified that such interim tariff was without
prejudice to the rights and contentions of both parties in the
main petition, i.e., O.P. No.21 of 2015.
62. After the bifurcation of the erstwhile State of Andhra
Pradesh into the State of Andhra Pradesh and the State of
Telangana, on 28th  April, 2016, a Continuation Agreement
came to be signed between the appellants – DISCOMS and
HNPCL. A  perusal of the recital  in  the said Continuation
Agreement   dated   28th  April,   2016   would   reveal   that   the
Government of Andhra Pradesh represented by the erstwhile
APSEB had expressed the desire to establish a coal­based
Thermal Power Project at Visakhapatnam and had selected
the   consortium   of   Ashok   Leyland   Limited,   a   company
incorporated   in   India   and   Mission   Energy   Company,   a
California,  USA corporation, to set up a joint  venture for
39
establishing a thermal power station. The said Continuation
Agreement dated 28th April, 2016, also refers to the MoU of
1992   (dated   17th  July,   1992),   PPA   of   1994   (dated   9th
December, 1994), the Amended and Restated PPA of 1998
(dated   15th  April,   1998),   the   correspondence   between   the
State of Andhra Pradesh and HNPCL, and MoA between the
erstwhile State of Andhra Pradesh and HNPCL dated 17th
May, 2013.  It will be relevant to refer to the following part of
the Continuation Agreement dated 28th April, 2016:
“3)  The   Parties   acknowledge   and   agree
that the Procurers have replaced the
APSEB in all respects with regard to
the 1998 PPA and shall execute such
other   or   further   documents   and/or
take   such   steps,   as   are   necessary
and/or incidental, in order to give full
and complete effect to such transfer
of contracts, deeds, agreements and
other instruments of whatever nature
to the Procurers.
4) The Procurers hereby agree that they
are jointly and separately liable for all
obligations under the Agreement.
5) Subject   to   Clause   3   hereof   and
pending the execution of such other
or   further   documents   as   envisaged
under   Clause   3   hereof,   the   Parties
40
hereto   are   entering   into   this
Continuation Agreement to the 1998
PPA   and   confirm,   agree   to   the
following: 
(a) The   1998   PPA   shall   stand
amended   as   mentioned   hereunder
and   as   indicated   in   the   Annexure
attached   hereto,   which   Annexure
shall   constitute   an   integral   part   of
this Continuation Agreement. 
(b) The   1998   PPA   and   the   MoA
shall stand modified or amended to
the extent provided herein. All other
terms and conditions of the 1998 PPA
including   the   obligations   of   the
Parties   as   stated   thereunder   shall
continue to be binding on the Parties.
This Continuation Agreement and the
1998   PPA   shall   together   constitute
one and the same agreement and the
provisions   of   this   Continuation
Agreement shall form an Integral part
of   the   1998   PPA.   However,
notwithstanding the foregoing, should
any   provisions   of   this   Continuation
Agreement   be   at   variance   or   in
conflict with any of the provisions of
the   1998   PPA   or   the   MoA,   the
provisions   of   this   Continuation
Agreement shall prevail.”
63. It could thus clearly be seen that the appellants –
DISCOMS have clearly represented that they had replaced the
41
APSEB in all respects with regard to the 1998 PPA and had
agreed to execute all further documents and take such steps
as are necessary in order to give full and complete effect to
such   transfer   of   contracts,   deeds,   agreements,   etc.     The
appellants – DISCOMS have also clearly agreed that the 1998
PPA (i.e. the Amended and Restated PPA dated 15th  April,
1998)   shall   stand   amended   as   mentioned   in   the   said
Continuation Agreement dated 28th April, 2016.  It has been
specifically averred that the Continuation Agreement and the
1998   PPA   shall   together   constitute   one   and   the   same
agreement.  
64. Immediately after the said Continuation Agreement
was entered into between the appellants – DISCOMS and
HNPCL, the appellants – DISCOMS filed an application being
O.P. No.19 of 2016 under Section 86(1)(b) of the Act of 2003
for grant of approval of PPA.  The said application contained
the entire history narrated herein above leading up to the
execution of the Continuation Agreement dated 28th  April,
2016.  The prayer clause in the said application reads thus:
42
“PRAYER
32. Therefore,   it   is   prayed   that   the
Hon’ble   Commission   may   be   pleased   to
grant   approval/consent   for   the   initialed
Continuation Agreement to the PPA dated
15.04.1998   together   with   Amended   &
Restated   PPA   dated   15.04.1998   of
HNPCL.”
65. The  State   Government  vide   order   dated   1st  June,
2016, accorded approval for purchase of 100% power from
HNPCL. On 3rd  July, 2016, the second unit of HNPCL (520
MW) was declared COD.  Vide order dated 6th August, 2016,
the   State   Commission,   after   hearing   the   counsel   for   the
parties, directed the appellants – DISCOMS to pay an interim
tariff   at   the   rate   of   Rs.3.82   per   unit   to   HNPCL   from   1st
August, 2016 for the power received by them. This was to
operate until further orders passed by the State Commission.
66. It is also not in dispute that after elaborate hearing in
both the petitions i.e. O.P. No.21 of 2015 and O.P. No.19 of
2016, the State Commission reserved the matters for orders
on 15th May, 2017.  It is also not in dispute that in an appeal
between the parties arising out of interlocutory proceedings,
43
the APTEL had directed the State Commission to decide O.P.
No.19 of 2016 and O.P. No.21 of 2015 expeditiously and on
or before 14th  August, 2017.   The said period came to be
extended from time to time, the last of such extension was
granted till 31st January, 2018, vide order dated 10th January,
2018. 
67. At this juncture, the appellants – DISCOMS filed two
Interlocutory Applications on 4th January, 2018, viz., (i) I.A.
No.1 of 2018 in O.P. No.19 of 2016 for withdrawal of O.P.
No.19 of 2016 together with initial PPA; and (ii) I.A. No.2 of
2018 in O.P. No.21 of 2015 for disposal of O.P. No.21 of
2015.
68. Vide order dated 31st January, 2018, passed by the
State Commission, which was impugned before the APTEL,
the State Commission allowed withdrawal of O.P. No.19 of
2016 filed by the appellants ­ DISCOMS and consequently
dismissed O.P. No.21 of 2015 filed by HNPCL.  
69. As discussed herein above, being aggrieved, HNPCL
filed Appeal No.41 of 2018 before the APTEL, which came to
44
be admitted by the APTEL on 26th February, 2018.  It is also
not in dispute that the APTEL passed an interim order dated
16th March, 2018 in I.A. No.211 of 2018 in Appeal No.41 of
2018, on an ad hoc arrangement basis, thereby directing the
parties   to   maintain   status   quo   as   prevalent   prior   to   31st
January, 2018.  It is also not in dispute that both the orders
passed   by   the  APTEL,   i.e.,   order   dated   16th  March,   2018
directing maintenance of status quo as prevalent prior to 31st
January,   2018   and   order   dated   26th  February,   2018,
admitting Appeal No.41 of 2018, were assailed before the
High Court of Andhra Pradesh by way of Writ Petitions being
Writ Petition No. 10814 of 2018 and Writ Petition No.13689 of
2018 respectively.  However, the same were dismissed by the
High Court of Andhra Pradesh by order dated 2nd May, 2018.
  
70. It   is   also   not   in   dispute   that   in   the   meantime,
Execution Petition No. 3 of 2018 was filed by HNPCL before
the APTEL seeking execution of order dated 16th March, 2018,
passed by the APTEL in I.A. No.211 of 2018 in Appeal No.41
of 2018. 
45
71. The appellants – DISCOMS had also approached this
Court by way of Civil Appeal No.5772 of 2018, challenging the
interim order passed by the APTEL dated 16th March, 2018.
However, this Court refused to interfere with the said order
and directed the APTEL to decide the appeal pending before it
expeditiously   without   taking   into   consideration   the
observation in the impugned order as conclusive.   
72. Vide   the   impugned   judgment   and   order   dated   7th
January, 2020, the Appeal No.41 of 2018, filed by HNPCL has
been allowed by the APTEL, the correctness of which is under
challenge in the present proceedings.
73. It could thus clearly be seen that though HNPCL had
initially proposed to revive its project in the year 2007 as a
Merchant­power   plant   and   had   proposed   to   give   the
Government of Andhra Pradesh first right of refusal, in the
MoU, to purchase 25% of the power at regulated tariff, it was
at the instance of the State of Andhra Pradesh that it had
agreed   to   supply   100%   power   to   the   State   through
APDISCOMS.   It could clearly be seen from the record that
46
though   HNPCL   had   participated   in   the   bidding   process
conducted   by   the   APCPDCL   in   the   year   2011­2012   and
though HNPCL had successfully emerged as L­2 bidder in the
said bidding process, it was on account of the decision of the
Bid Evaluation Committee, that HNPCL was discarded from
the bidding process since the entire generation capacity of
HNPCL   was   encumbered   to   the   State   of   Andhra
Pradesh/APDISCOMS.  The minutes of the meeting dated 28th
September, 2012 of the Bid Evaluation Committee, as has
been noticed in the order of the State Commission dated 13th
August, 2013, clarify this position.  
74. It   is   the   State   of   Andhra   Pradesh,   which   had
expressed   its   interest   in   purchasing   100%   power   from
HNPCL, as could be seen from the various documents placed
on record.   The communication addressed by the Principal
Secretary   to   the   Government   of   Andhra   Pradesh,   Energy
Department, to HNPCL dated 26th  December, 2012, clearly
reiterates the intention of the Government of Andhra Pradesh
in   purchasing   100%   power   (through   DISCOMS)   from   the
47
project of HNPCL.  The said communication would also show
that the State has assured to take all necessary steps for
commissioning the project at the earliest including execution
of PPA and for making provision of Transmission system for
start­up   power   and   power   evacuation.     The   said
communication   would   clearly   show   that   the   parties   had
agreed to abide by the conditions mentioned in the Amended
and Restated PPA dated 15th April, 1998, except to the extent
they   may   stand   modified   due   to   impact   of   change   in
laws/rules   and   regulated   standards   guiding   such   power
projects post 1998.  
75. No   doubt,   that   the   documents   placed   on   record
would show that though HNPCL had given its estimation of
project   cost  on   the  basis  of   the   guidelines  issued  by  the
CERC, the same was received by the appellants – DISCOMS
without prejudice to their rights to contest the same on every
component before the State Commission.   The documents
placed on record would clearly show that the State of Andhra
Pradesh has, on more than one occasion, expressed that it
48
was interested in buying 100% power from the project of
HNPCL.  The MoA signed between the appellants – DISCOMS
and HNPCL dated 17th May, 2013, would clearly show that it
was agreed between the parties that the entire capacity of
HNPCL project and all the units of the power stations shall,
at all times, be for the exclusive benefit of the DISCOMS and
the DISCOMS were to have the exclusive right as well as
obligation to purchase the entire capacity from the project.
Not only this, but after the Reorganisation Act came into
effect   and   the   erstwhile   State   of   Andhra   Pradesh   was
bifurcated into the State of Andhra Pradesh and the State of
Telangana, the State of Andhra Pradesh, on more than one
occasion, reiterated its stand of procuring 100% power from
the project of HNPCL.   Perusal of the orders of the State
Commission   dated   26th  September,   2015   and   6th  August,
2016, would clearly reveal that the appellants – DISCOMS
also stood by the position that the 100% power generated in
the power plant of HNPCL was to be purchased by them. Not
only this, but after the bifurcation of the erstwhile State of
49
Andhra Pradesh, the appellants – DISCOMS entered into a
Continuation Agreement dated 28th  April, 2016, reiterating
their stand.  
76. After the Continuation Agreement was entered into
on 28th  April, 2016, the appellants – DISCOMS filed O.P.
No.19 of 2016 for approval of the Continuation Agreement
with the Amended and Restated PPA of 1998 on 11th  May,
2016.     The  State   Government  again   on   1st  June,   2016,
accorded its approval for purchase of 100% power generated
by HNPCL.   It could thus be seen that right from the year
2012 till January, 2018, it was the consistent stand of the
State of Andhra Pradesh as well as the appellants – DISCOMS
and its predecessors that the appellants ­ DISCOMS were to
purchase 100% power generated by HNPCL.  
77. It is also not in dispute that in pursuance of the
MoA, executed on 17th  May, 2013, HNPCL had also entered
into FSA dated 26th  August, 2013 with Mahanadi Coalfield
Limited for supply of coal for the project.  
50
78. It   is   thus   clear   that   the   consistent   stand   of   the
appellants ­ DISCOMS from the year 2012, for the first time,
changed on 4th January, 2018, when they filed Interlocutory
Applications before the State Commission for withdrawal of
O.P. No.19 of 2016 and disposal of O.P. No.21 of 2015.
79. As already observed hereinabove, in the open bidding
process, conducted in the year 2011­2012, HNPCL emerged
as the successful L­2 bidder. It is however on account of the
stand taken by the Bid Evaluation Committee, that it was
discarded from the bidding process.   As such, the stand of
the appellants – DISCOMS, that the revival of the project of
HNPCL was as a Merchant­power plant and therefore, the
appellants   –   DISCOMS   cannot   be   compelled   to   purchase
power from it, is self­contradictory.   On one hand, HNPCL
was discarded from the open bidding process, though it was
the successful L­2 bidder, on the ground that 100% power
generated by HNPCL is encumbered to the State of Andhra
Pradesh/APDISCOMS whereas, on the other hand, it is now
sought to be urged that the appellants – DISCOMS cannot be
51
compelled to purchase the power from HNPCL, since it was a
merchant­power plant.   We have no hesitation to hold that
the APTEL has rightly held that, on account of the assurance
given by the State of Andhra Pradesh/APDISCOMS, HNPCL
had altered its position and as such, it was not permissible
for the appellants – DISCOMS to  withdraw O.P. No.19 of
2016.  The grounds, which are sought to be urged in I.A. No.1
of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018 in O.P.
No.21 of 2015, were very much available when the appellants
– DISCOMS had entered into MoA on 17th May, 2013 and the
Continuation Agreement dated 28th April, 2016.  It is difficult
to   appreciate   how   it   is   permissible   for   the   appellants   –
DISCOMS to withdraw the application for grant of approval of
PPA  on   the  ground   that   it   could   procure   the  power   only
through the competitive bidding process, when in the facts of
the present case, it was the State of Andhra Pradesh, which
had discarded HNPCL from the open bidding process of 2011­
2012, though it had successfully emerged as L­2 bidder in
the said bidding process.  
52
80. Various authorities have been cited at the Bar in
support of the proposition that withdrawal of an application
could not be permissible when such a withdrawal amounts to
frustration of a contract and thereby defeats the rights of the
defendant and that the right of withdrawal is not absolute.  In
this respect, we will refer to the observations made by this
Court in the case of  Arjun  Singh   v.  Mohindra  Kumar  &
Ors.15.  Though the issue involved in the said case is distinct
than the issue involved in the present case, we find that it
will be apposite to seek guidance from the observations made
by this Court, while construing the provisions of Order IX and
Order XX of the Code of Civil Procedure, 1908 (CPC).   The
relevant extract reads thus:
“ ….In the present context when once
the   hearing   starts,   the   Code   contemplates only two stages in the trial of the
suit: (1) where the hearing is adjourned
or (2) where the hearing is completed.
Where,  the  hearing  is  completed the
parties have no further rights or privileges in the matter and it is only for
the convenience of the Court that Or15 (1964) 5 SCR 946
53
der  XX.  Rule  1  permits   judgment   to
be  delivered  after   interval  after   the
hearing is completed. It would, therefore, follow that after the stage contemplated   by   Order   IX.   Rule   7   is
passed   the   next   stage   is   only   the
passing   of   a   decree   which   on   the
terms of Order IX. Rule 6 the Court is
competent   to   pass.  And   then   follows
the remedy of the party to have that decree set aside by application under Order IX. Rule 13. There is thus no hiatus  between  the  two   stages  of   reservation  of   judgment  and  pronouncing
the judgment so as to make it necessary   for   the   Court   to   afford   to   the
party   the   remedy   of   getting   orders
passed on the lines of Order IX. Rule
7.  We are, therefore, of the opinion that
the Civil Judge was not competent to entertain   the   application   dated   May   31,
1958 purporting to be under Order IX.
Rule 7 and that consequently the reasons given in the order passed would not
be res judicata to bar the hearing of the
petition undo Order IX. Rule 13 filed by
the appellant.”
[emphasis supplied]
81. It can be seen that this Court has held that CPC
contemplates two stages of the trial in the suit: (1) where the
hearing is adjourned; and (2) where the hearing is completed.
54
It has been held that where the hearing is completed, the
parties have no further rights or privileges in the matter and
it is only for the convenience of the Court that Order XX rule
1 permits judgment to be delivered after an interval after the
hearing is completed. It has been held that there is no hiatus
between   the   two   stages   of   reservation   of   judgment   and
pronouncing the judgment so as to make it necessary for the
Court to afford to the party the remedy of getting orders
passed on the lines of Order IX rule 7. 
82. The other judgments of various High Courts relied
upon by Shri Ramachandran, follow the line laid down by
this Court in Arjun Singh (supra).  
83. Insofar as the reliance placed by Shri Vaidyanathan,
learned Senior Counsel, on the judgment of Court of Appeal
in   the   case   of  Boal   Quay   Wharfingers   Ltd.  (supra)   is
concerned, the said case arose out of an application made by
the appellant therein to the Licensing Authority for grant of a
license.     It   was   not   an   application   in   a   quasi­judicial
proceeding   where   the   withdrawal   of   an   application   would
55
adversely affect the rights of the other party.  In the said case,
it has been observed that if a person applies for a license,
there   is   no   prohibition   as   to   why   he   is   not   entitled   to
withdraw his application, unless, of course, there is some
provision in law, which would prevent him from doing so.
The proceedings in the aforesaid case did not arise from a lis
between the two parties, but arose out of an application made
by a party to  a licensing  authority under the Docks and
Harbours Act, 1966.
84. Insofar as the reliance placed on the judgment of this
Court   in   the   case   of  Hulas   Rai   Baij   Nath  (supra)   is
concerned, the respondent therein had instituted a suit for
rendition of accounts against the appellant­firm, alleging that
the   appellant­firm   was   the   commission   agent   of   the
respondent and that the accounts between respondent as the
principal and appellant as the agent were not settled. The
claim of the respondent was resisted by the appellant therein,
stating that the claim of the respondent was fully settled and
that the suit was not fit to proceed in accordance with law.
56
In the said suit, after a considerable amount of evidence had
been recorded, an application was presented on behalf of the
respondent­plaintiff for withdrawal of the suit.  The same was
objected to. The trial court overruled the objection of the
appellant­defendant, holding that the plaintiff had a right to
withdraw the suit and that right could be exercised at any
time before judgment.   The defendant could only claim an
order   for   costs   in   his   favour.     The   suit   was   therefore
dismissed   awarding   costs   of   the   suit   to   the   appellantdefendant.  The appellant­defendant filed revision in the High
Court.   The   High   Court   dismissed   the   revision.     Being
aggrieved, the appellant­defendant had approached the Apex
Court.  In this factual background, this Court observed thus:
“2. The short question that, in these circumstances, falls for decision is whether
the respondent was entitled to withdraw
from the suit and have it dismissed by the
application   dated   5th   May,   1953   at   the
stage when issues had been framed and
some evidence had been recorded, but no
preliminary   decree   for   rendition   of   accounts had yet been passed. The language
of order 23 Rule 1 sub­rule (1) CPC, gives
an unqualified right to a plaintiff to with­
57
draw from a suit and, if no permission to
file a fresh suit is sought under sub­rule
(2) of that Rule, the plaintiff becomes liable
for such costs as the Court may award and
becomes   precluded   from   instituting   any
fresh suit in respect of that subject­matter
under sub­rule (3) of that Rule. There is no
provision in the Code of Civil Procedure
which requires the Court to refuse permission to withdraw the suit in such circumstances and to compel the plaintiff to proceed with it. It is, of course, possible that
different considerations may arise where a
set­off may have been claimed under order
8 CPC, or a counter claim may have been
filed, if permissible by the procedural law
applicable   to   the   proceedings   governing
the suit. In the present case, the pleadings
in paras 8 and 11 of the written statement
mentioned above, clearly did not amount
to a claim for set­off. Further, there could
be no counter­claim, because no provision
is   shown   under   which   a   counter­claim
could have been filed in the trial court in
such a suit. There is also the circumstance
that   the   application   for   withdrawal   was
moved at a stage when no preliminary decree had been passed for rendition of account and, in fact, the appellant was still
contending that there could be no rendition of accounts in the suit, because accounts had already been settled. Even in
para 11, the only claim put forward was
that, in case the Court found it necessary
to   direct   rendition   of   accounts   and   any
amount is found due to the appellant, a
decree may be passed in favour of the appellant for that amount. In this paragraph
58
also,   the   right   claimed   by   the   appellant
was a contingent right which did not exist
at   the   time   when   the   written   statement
was filed.” 
85. It could thus be seen that the facts in the aforesaid
case are totally different from the facts in the present case.
This   Court   in   the   aforesaid   case   held   that   there   is   no
provision in the  CPC, which  requires the Court to refuse
permission to withdraw the suit and compel the plaintiff to
proceed with it.  However, this Court itself has clarified that
different considerations could arise where a set­off may have
been claimed under order VIII of CPC, or a counter claim may
have   been   filed,   if   permissible   by   the   procedural   law
applicable to the proceedings governing the suit.     It was
found that from the pleadings in the written statement, it
could be clearly seen that there is no claim for set­off.  It was
further found that there could be no counter­claim, since no
provision was shown under which a counter­claim could have
been filed in the trial court in such a suit. It was further
found   that   the   right   claimed   by   the   appellant   was   a
59
contingent one and did not exist at the time at which the
written statement was filed.  
86. The facts in the present case are totally different,
wherein,   after   execution   of   various   agreements,   an
application being  O.P. No.19 of 2016  came to be filed for
grant of approval of PPA.   Not only this, but the said  O.P.
No.19 of 2016  was clubbed along with  O.P. No.21 of 2015,
which was filed for determination of capital cost of the project
as well as for determination of tariff.  It can further be seen
that in the aforesaid case, an application for withdrawal of
the suit was filed at the stage of leading of evidence.  It is not
as if the application was filed after the suit was closed for
judgment.  
87. In any case, we are of the considered view that the
conduct of the  appellants – DISCOMS, in the present case,
would disentitle them to withdraw the application. 
88. Another argument, that on account of increase of the
capital cost of the project, the appellants – DISCOMS would
be required to purchase power at much higher rate, also does
60
not hold water.  The State Commission while determining the
tariff would be guided by various factors as are required to be
taken into consideration in view of the provisions of Section
61   of   the   Act   of   2003.       In   any   event,   the   appellants   –
DISCOMS have themselves reserved their right to contest the
correctness of the cost on every component at an appropriate
stage   before   the   State   Commission.     As   already   stated
hereinabove, the State Commission, while approving the cost
of   the   project   and   determining   the   tariff   at   which   the
electricity   would   be   purchased   by   the   APDISCOMS   from
HNPCL, would be required to look into various factors as are
stated in Section 61 of the Act of 2003, so also under the
Regulations notified for that purpose.   While doing so, the
State   Commission   would   be   required   to   take   into
consideration the various aspects as well as submissions to
be made by the appellants – DISCOMS and HNPCL.  Merely
because, the cost of the project is estimated by HNPCL at a
particular amount, the State Commission is not bound to
accept the same.  The State Commission would only approve
61
the   cost   as   it   would   feel   appropriate,   as   guided   by   the
provisions   under   Section   61   of   the   Act   of   2003   and   the
Regulations.  In that view of the matter, the argument in this
regard also, is without substance.  
89. The appellants – DISCOMS have heavily relied on the
judgment of this Court in the case of Tata Power Company
Limited   v.   Reliance   Energy   Limited   and   others16,   and
particularly, on paragraph 106 thereof, which reads thus:
“106. The   scheme   of   the   Act,   namely,
the   generation   of   electricity   is   outside
the licensing purview and subject to fulfilment of the conditions laid down under Section 42 of the Act a generating
company   may   also   supply   directly   to
consumer wherefor no licence would be
required, must be given due consideration. The said provision has to be read
with   Regulation   24.   In   regard   to   the
grant of approval of PPA the procedures
laid down in Regulation 24 are required
to be followed.”
90. No doubt, that this Court has held that a generating
company may also supply directly to consumer wherefor no
licence would be required, however, this Court itself observed
16 (2009) 16 SCC 659
62
that the said provision has to be read with Regulation 24 and
with regard to the grant of approval of PPA, the procedures
laid down in Regulation 24 are required to be followed.  
91. It will also be relevant to refer to paragraph 119 of
the said judgment. 
“119. The   2003   Act   even   permits   the
generating company to supply electricity
to a consumer directly. For the said purpose what is necessary is to comply with
the provisions of the Act, the Rules and
the Regulations. Section 14 of the Act
categorically provides for grant of licence
to any person who is transmitting electricity or distributing supply or undertaking   trading   therein,   indisputably,
however, the generator of an electrical
energy, although  is not subject  to the
grant of licence but while supplying electrical energy to a distributing agency, in
turn would be subject to approval and
directions of the Commission.”
92. It can thus clearly be seen that this Court has held
that though the Act of 2003 permits the generating company
to supply electricity to  a  consumer directly, and  that  the
generator of an electrical energy is not subject to the grant of
license, but while supplying electrical energy to a distributing
63
agency,   in   turn,   it   would   be   subject   to   approval   and
directions of the Commission.  
93. We are, therefore, of the view that the said judgment
is of no assistance to the case sought to be advanced by the
appellants – DISCOMS.   On the contrary, we find that the
view that is being taken by us is fortified by the  following
observations   of   this   Court   in   the   case   of  Tata   Power
Company Limited (supra):
“87. ….   The   agreement   of   distribution
(PPA)  being subject  to  approval,  indisputably the Commission would have the
public interest in mind. It has power to
approve   an   MoU   which   subserves   the
public interest. It, while granting such
approval may also take into consideration   the   question   as   to   whether   the
terms to be agreed are fair and just.
*** *** ***
111. Section 86(1)(b) provides for regulation of electricity purchase and procurement process of distribution licensees. In
respect of generation its function is to
determine   the   tariff   for   generation   as
also in relation to supply, transmission
and wheeling of electricity. Clause (b) of
64
sub­section (1) of Section 86 provides to
regulate   electricity   purchase   and   procurement   process   of   distribution   licensees including the price at which the
electricity   shall   be   procured   from   the
generating   companies   or   licensees   or
from other sources through agreements.
As a part of the regulation it can also adjudicate upon disputes between the licensees and generating companies in regard to the implementation, application
or interpretation of the provisions of the
said agreement.”
94. It   is   thus   trite   that,   while   considering   grant   of
approval to the PPA, the State Commission will have to keep
in mind the public interest.   It will have to consider, as to
whether the PPA, which is subject to approval, sub­serves the
public   interest.     It   will   also   be   required   to   take   into
consideration, as to whether the terms agreed are fair and
just while granting approval.  While exercising power under
Section 86(1)(b) of the Act of 2003, the Commission will have
to   regulate   the   price   at   which   the   electricity   would   be
procured from the generating companies.  Undoubtedly, while
doing   so,   the   Commission   will   be   guided   by   the   factors
65
mentioned   in   Section   61   of   the   Act   of   2003   and   the
Regulations concerning the same.   Under Section 86(1)(f) of
the   Act   of   2003,   the   Commission   is   also   empowered   to
adjudicate   upon   the   disputes   between   the   licensees   and
generating   companies,   and   to   refer   any   such   dispute   for
arbitration.
95. Another argument made on the basis of Section 21 of
the Reform Act is also not tenable.   Much reliance is placed
on sub­section (5) of Section 21 of the said Act, which reads
thus:
“(5) Any   agreement   relating   to   any
transaction of the nature described in sub
sections (1), (2), (3) or (4) unless made with
or subject to such consent as aforesaid, shall
be void.”
96. It could thus be seen that any of the agreements
mentioned in sub­sections (1), (2), (3) or (4) of Section 21
would be void unless they are made with the consent of the
Commission   or   subject   to   such   consent.     Undisputedly,
understanding this legal position, O.P. No.19 of 2016 came to
be   filed   by   the   appellants   –   DISCOMS,   so   as   to   obtain
66
approval of the State Commission for the PPA entered into by
them with HNPCL.
97. Insofar as the  reliance placed on the provision  of
Regulation 5.2 of the Tariff Regulations is concerned, the
same deals with approach to determination of tariff.  It could
be seen that, whereas Regulation 5.1 of the Tariff Regulations
provides   that   where   tariff   has   been   determined   through
transparent   process   of   bidding   in   accordance   with   the
guidelines   issued   by   the   Central   Government,   the
Commission shall adopt such tariff in accordance with the
provisions of the Act; Regulation 5.2 of the Tariff Regulations
provides that the provisions specified in Part­II of the said
Regulation shall apply in determining tariff based on capital
cost for supply to a Distribution Licensee. Part­II of the Tariff
Regulations   deals   with   ‘Filing   Details’   and   ‘Tariff
Determination’. Regulation 9 requires that each application
where tariff is to be determined based on capital cost shall
include various details duly accompanied by supporting data
and documentary and other evidence regarding Fixed Costs,
67
Variable Costs and Norms of operation, etc.  Regulation 10 of
the Tariff Regulations requires the tariff to be determined in
accordance   with   the   norms   specified   under   the   said
Regulations,   guided   by   the   principles   and   methodologies
specified   in   CERC   (Terms   and   Conditions   of   Tariff)
Regulations,   2004,   as   amended   from   time   to   time.     The
Regulations contain detailed guidelines, as to what shall be
the component of tariff and as to how the capital cost and
tariff is to be determined.  
98. We find that such an argument at the behest of a
party, which has discarded HNPCL from the bidding process,
though it had emerged as the successful L­2 bidder, does not
hold   water   and   we   have   no   hesitation   to   say   that   the
appellants   –   DISCOMS’   approach   is   of   approbate   and
reprobate.  
99. In any event, we find that the State Commission has
totally erred in dismissing O.P. No.21 of 2015 filed by HNPCL.
Perusal of Section 64 of the Act of 2003 would reveal that
even   a   Generating   Company   is   entitled   to   make   an
68
application for determination of tariff under Section 62 of the
Act   of   2003.   As   such,   irrespective   of   the   question,   as   to
whether an application for withdrawal of O.P. No.19 of 2016
filed   by   the   appellants   ­   DISCOMS   could   have   been
entertained, the State Commission was wholly unjustified in
dismissing O.P. No.21 of 2015 filed by HNPCL. In any case,
we   have   held   that   in   the   facts   of   the   present   case   and,
particularly,   taking   into   consideration   the   conduct   of   the
appellants – DISCOMS, the APTEL has rightly held that the
appellants   –   DISCOMS   could   not   have   been   permitted   to
withdraw O.P. No.19 of 2016.  
100. Undisputedly,   the   appellants   –   DISCOMS   are
instrumentalities of the State and as such, a State within the
meaning of Article 12 of the Constitution of India.   Every
action of a State is required to be guided by the touch­stone
of non­arbitrariness, reasonableness and rationality.   Every
action of a State is equally required to be guided by public
interest. Every holder of a public office is a trustee, whose
highest duty is to the people of the country.   The Public
69
Authority is therefore required to exercise the powers only for
the public good.  
101. We may gainfully refer to the following observations
of this Court in the case of  Kumari  Shrilekha  Vidyarthi
and others v. State of U.P. and others17:
“27. Unlike a private party whose acts uninformed by reason and influenced by personal predilections in contractual matters
may result in adverse consequences to it
alone without affecting the public interest,
any such act of the State or a public body
even in this field would adversely affect the
public interest. Every holder of a public office by virtue of which he acts on behalf of
the State or public body is ultimately accountable   to   the   people   in   whom   the
sovereignty vests. As such, all powers so
vested in him are meant to be exercised for
public good and promoting the public interest. This is equally true of all actions even
in the field of contract. Thus, every holder
of a public office is a trustee whose highest
duty is to the people of the country and,
therefore, every act of the holder of a public
office, irrespective of the label classifying
that   act,   is   in   discharge   of   public   duty
meant ultimately for public good. With the
diversification of State activity in a Welfare
State requiring the State to discharge its
17 (1991) 1 SCC 212
70
wide   ranging   functions   even   through   its
several   instrumentalities,   which   requires
entering   into   contracts   also,   it   would   be
unreal and not pragmatic, apart from being
unjustified to exclude contractual matters
from the sphere of State actions required to
be non­arbitrary and justified on the touchstone of Article 14.
28. Even assuming that it is necessary to
import   the   concept   of   presence   of   some
public element in a State action to attract
Article 14 and permit judicial review, we
have no hesitation in saying that the ultimate impact of all actions of the State or a
public body being undoubtedly on public
interest,   the   requisite   public   element   for
this purpose is present also in contractual
matters. We, therefore, find it difficult and
unrealistic to exclude the State actions in
contractual matters, after the contract has
been made, from the purview of judicial review to test its validity on the anvil of Article 14.”
102. It   will   also   be   apposite   to   refer   to   the   following
observations of this Court in the case of Food Corporation
of India v. M/s Kamdhenu Cattle Feed Industries18:
“7. In contractual sphere as in all other
State actions, the State and all its instru18 (1993) 1 SCC 71
71
mentalities have to conform to Article 14
of   the   Constitution   of   which   non­arbitrariness is a significant facet. There is no
unfettered   discretion   in   public   law:   A
public authority possesses powers only to
use them for public good. This imposes
the duty to act fairly and to adopt a procedure which is ‘fairplay in action’. Due
observance of this obligation as a part of
good administration raises a reasonable
or legitimate expectation in every citizen
to be treated fairly in his interaction with
the State and its instrumentalities, with
this element forming a necessary component of the decision­making process in all
State actions. To satisfy this requirement
of non­arbitrariness in a State action, it
is, therefore, necessary to consider and
give due weight to the reasonable or legitimate expectations of the persons likely to
be affected by the decision or else that
unfairness in the exercise of the power
may   amount   to   an   abuse   or   excess   of
power apart from affecting the bona fides
of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule
of law does not completely eliminate discretion in the exercise of power, as it is
unrealistic, but provides for control of its
exercise by judicial review.
8. The mere reasonable or legitimate expectation of a citizen, in such a situation,
may not by itself be a distinct enforceable
72
right, but failure to consider and give due
weight to it may render the decision arbitrary, and this is how the requirement of
due consideration of a legitimate expectation forms part of the principle of non­arbitrariness,   a   necessary   concomitant   of
the rule of law. Every legitimate expectation   is   a   relevant   factor   requiring   due
consideration   in   a   fair   decision­making
process. Whether the expectation of the
claimant   is   reasonable   or   legitimate   in
the context is a question of fact in each
case. Whenever the question arises, it is
to   be   determined   not   according   to   the
claimant's perception but in larger public
interest   wherein   other   more   important
considerations may outweigh what would
otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in
this   manner   would   satisfy   the   requirement of non­arbitrariness and withstand
judicial scrutiny. The doctrine  of legitimate expectation gets assimilated in the
rule of law and operates in our legal system in this manner and to this extent.”
103. Recently,   this   Court   in   the   case   of  Indian   Oil
Corporation   Limited   and   others   v.   Shashi   Prabha
Shukla and another19
, after referring to earlier judgments of
this Court on the present issue has observed thus:
19 (2018) 12 SCC 85
73
“33. Jurisprudentially thus, as could be
gleaned   from   the   above   legal   enunciations, a public authority in its dealings
has   to   be   fair,   objective,   non­arbitrary,
transparent and non­discriminatory. The
discretion   vested   in   such   an  authority,
which is a concomitant of its power is
coupled with duty and can never be unregulated or unbridled. Any decision or
action contrary to these functional precepts would be at the pain of invalidation
thereof. The State and its instrumentalities, be it a public authority, either as an
individual or  a collective has  to  essentially abide by this inalienable and nonnegotiable prescriptions and cannot act
in   breach   of   the   trust   reposed   by   the
polity and on extraneous considerations.
In exercise of uncontrolled discretion and
power, it cannot resort to any act to fritter, squander and emasculate any public
property, be it by way of State largesse or
contracts,   etc.   Such   outrages   would
clearly be unconstitutional and extinctive
of   the   rule   of   law   which   forms   the
bedrock of the constitutional order.”
104. In   the   present   case,   though   initially,   HNPCL   had
revived its project in the year 2007 as a Merchant­power
plant and offered 25% of electricity to the State, it was the
State, which offered to purchase 100% power from HNPCL.
HNPCL agreed for the said offer of the State Government.  It
74
is clear from the record and, particularly, the letter dated 26th
December,   2012,   that   the   State   had   given   various
facilities/concessions to HNPCL for execution of its power
project.  The documents on record would reveal that the State
has also allotted thousands of acres of land for the project to
HNPCL.  It is not in dispute that in pursuance of the MoA of
2013 (dated 17th May, 2013) and the Continuation Agreement
of 2016 (dated 28th April, 2016), the entire project has been
erected and is operational.  Not only this, but from the year
2016 till 14th July, 2020, the power has been purchased by
the appellants – DISCOMS from HNPCL.   It could thus be
seen that after investment of huge resources including the
land belonging to the State, the project is complete and has
become operational.   The question, at this juncture, would
be, whether to discard such a project is in the public interest
or against it.   At the cost of repetition, it may be reiterated,
that the determination of the capital cost of the project and
the rate of tariff at which the power has to be purchased
would always be subject to regulatory control of the State
75
Commission.   What has been done by the APTEL is only
directing the State Commission to determine the same.    
105. The record would clearly reveal that from the year
2012 onwards till 4th  January, 2018, it was the consistent
stand   of   the   State   of   Andhra   Pradesh   as   well   as   the
APDISCOMS   that   it   would   be   purchasing   100%   power
generated from the project of HNPCL.  Not only an application
being   O.P.   No.21   of   2015   was   filed   by   HNPCL   for
determination of capital cost, but also O.P. No.19 of 2016 was
filed by the appellants – DISCOMS for grant of approval to the
Continuation   Agreement   dated   28th  April,   2016   with   the
Amended and Restated PPA of 1998.  The matters were heard
finally on 15th  May, 2017 and closed for orders.   For some
unknown reasons, exclusively within the knowledge of the
appellants – DISCOMS, things turned topsy­turvy between
15th  May, 2017 and 4th  January, 2018, on which date, the
appellants   –   DISCOMS   did   a   somersault   and   filed
applications   for   withdrawal   of   O.P.   No.19   of   2016   and
disposal   of   O.P.   No.21   of   2015.     As   already   discussed
76
hereinabove, every decision of the State is required to be
guided by public interest and the power is to be exercised for
public   good.     For   reasons   unknown,   the   appellants   –
DISCOMS took a decision to resile from their earlier stand,
due to which, not only the huge investment made by HNPCL
would go in waste, but also valuable resources of the public
including thousands of acres of land would go in waste.  As
already discussed hereinabove, the reasons/grounds, which
are sought to be given in I.A. No. 1 of 2018 in O.P. No.19 of
2016 and I.A. No.2 of 2018 in O.P. No.21 of 2015, filed on 4th
January, 2018, were very much available between 2011 till
15th May, 2017.  It is not as if something new has emerged
between 15th May, 2017 and 4th January, 2018, which would
have entitled the appellants – DISCOMS to resile from their
earlier   stand.     We   have   no   hesitation   to   hold   that   the
appellants – DISCOMS could not be permitted to change the
decision at their whims and fancies and, particularly, when it
is adversarial to the public interest and public good. The
77
record  would  clearly  show   that  the   change  in  decision  is
arbitrary, irrational and unreasonable.  
106. We   may   also   gainfully   refer   to   the   following
observations   of   this   Court   in   the   case   of  Kalabharati
Advertising   v.   Hemant   Vimalnath   Narichania   and
others20:
 “25. The State is under obligation to act
fairly without ill will or malice— in fact or
in law. “Legal malice” or “malice in law”
means something done without lawful excuse. It is an act done wrongfully and wilfully   without   reasonable   or   probable
cause, and not necessarily an act done
from ill feeling and spite. It is a deliberate
act in disregard to the rights of others.
Where malice is attributed to the State, it
can never be a case of personal ill will or
spite on the part of the State. It is an act
which is taken with an oblique or indirect
object.   It   means   exercise   of   statutory
power for “purposes foreign to those for
which   it   is   in   law   intended”.   It   means
conscious violation of the law to the prejudice of another, a depraved inclination
on the part of the authority to disregard
the rights of others, which intent is manifested by its injurious acts. (Vide ADM,
Jabalpur v. Shivakant   Shukla [(1976)   2
20 (2010) 9 SCC 437
78
SCC   521   :   AIR   1976   SC   1207]   , S.R.
Venkataraman v. Union of India [(1979) 2
SCC 491 : 1979 SCC (L&S) 216 : AIR
1979 SC 49] , State of A.P. v. Goverdhanlal Pitti [(2003) 4 SCC 739 : AIR 2003 SC
1941] , BPL Ltd. v. S.P. Gururaja [(2003) 8
SCC   567]   and W.B.   SEB v. Dilip   Kumar
Ray [(2007) 14 SCC 568 : (2009) 1 SCC
(L&S) 860] .)
26. Passing an order for an unauthorised
purpose   constitutes   malice   in   law.
(Vide Punjab   SEB   Ltd. v. Zora
Singh [(2005) 6 SCC 776] and Union of India v. V.   Ramakrishnan [(2005)   8   SCC
394 : 2005 SCC (L&S) 1150] .)”
107. We have no hesitation to hold that I.A. No.1 of 2018
in O.P. No.19 of 2016 and I.A. No.2 of 2018 in O.P. No.21 of
2015 filed by the appellants – DISCOMS, are acts, which have
been done wrongfully and wilfully without reasonable and
probable cause.  It may not necessarily be an act done out of
ill feeling and spite.  However, the act is one, affecting public
interest and public good, without there being any rational or
reasonable basis for the same.  
108. Though serious allegations of  mala fide  have been
made by HNPCL, we do not find it necessary to go in those
79
allegations.   However, in our view, the present case would
squarely fit in the realm of ‘legal malice’ or ‘malice in law’.
109. In any case, we find that the judgment impugned
before us cannot be said to be of such a nature, which can be
said to be prejudicial to the interests of any of the parties.
What has been done by the APTEL is only to direct the State
Commission   to   dispose   of   O.P.   No.21   of   2015   filed   for
determination of capital cost and O.P. No.19 of 2016 filed for
approval   of   Amended   and   Restated   PPA   (Continuation
Agreement) on merits.   On remand, the State Commission
would be bound to take into consideration all the relevant
factors and the contentions to be raised by both the parties
before deciding the said O.Ps. 
110. We   therefore   find   no   reason   to   interfere   with   the
impugned   judgment.   However,   before   parting   with   the
judgment, it is necessary to place on record the conduct of
the appellants – DISCOMS.   Though vide order dated 14th
July, 2020, this Court had stayed the impugned judgment
passed by the APTEL, vide order dated 21st August, 2020, this
80
Court had clarified that there shall be no stay of the order
dated 16th  March, 2018 passed by the APTEL.   It is not in
dispute that in pursuance of the interim order dated 16th
March,   2018,   passed   by   the   APTEL,   the   appellants   –
DISCOMS were purchasing the power at the rate of Rs.3.82
per unit from HNPCL till 14th July, 2020.  It is thus clear that
in view of the order passed by this Court on 21st  August,
2020, the appellants – DISCOMS were required to continue to
purchase the power from HNPCL at the rate of Rs.3.82 per
unit.   Undisputedly, this has not been done.   The reason
given for the same is that the appellants ­ DISCOMS had
already filed an application for vacation of the order dated
21st  August,   2020.     By   merely   filing   an   application,   the
appellants – DISCOMS could not have avoided abiding with
the   order   of   the   APTEL   dated   16th  March,   2018,   as
maintained by this Court vide order dated 21st August, 2020.
It   is   brought   to   our   notice   that   though   the   appellants   –
DISCOMS could have purchased the power from HNPCL at
the rate of Rs.3.82 per unit in view of the orders passed by
81
the APTEL and by this Court, they have chosen to purchase
the power at higher rate from various generators including
KSK Mahanadi from whom the power is being purchased at
the rate of Rs.4.33 per unit.  
111. We ask a question to ourselves, as to whether public
interest, which is so vociferously pressed into service in the
present   matter   by   the   appellants   –   DISCOMS,   lies   in
purchasing the power at the rate of Rs.3.82 per unit from
HNPCL or by purchasing it at the rate of Rs.4.33 per unit
from KSK Mahanadi. We strongly deprecate such a conduct
of the appellants – DISCOMS, which are instrumentalities of
the State.  The appellants – DISCOMS, rather than acting in
public interest, have acted contrary to public interest.   For
defying the orders passed by this Court, we could very well
have initiated the action against the officials of the appellants
– DISCOMS for having committed contempt of this Court, but
we refrain ourselves from doing so.  
82
112. In the result, the present appeal is dismissed with
costs, quantified at Rs.5,00,000/­ (Rupees Five lakh only).
Pending I.As., if any, shall stand disposed of.   
113. Taking into consideration that the issue before the
State Commission is pending since long, we direct the State
Commission to decide O.P. No.21 of 2015 and O.P. No.19 of
2016, as expeditiously as possible, and in any case, within a
period of six months from the date of this judgment. 
114. Needless to say that till O.P. No.21 of 2015 and O.P.
No.19 of 2016 are decided by the State Commission, the
appellants – DISCOMS shall forthwith start purchasing the
power from HNPCL at the rate of Rs.3.82 per unit as per the
orders passed by the APTEL dated 16th March, 2018 and by
this Court dated 21st August, 2020.  
…............................J.
                             [L. NAGESWARA RAO]
         ...............................J.
                                                  [B.R. GAVAI]
NEW DELHI;
FEBRUARY 02, 2022

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

Comments

Popular posts from this blog

संविधान की प्रमुख विशेषताओं का उल्लेख | Characteristics of the Constitution of India

100 Questions on Indian Constitution for UPSC 2020 Pre Exam

भारतीय संविधान से संबंधित 100 महत्वपूर्ण प्रश्न उतर