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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5875 OF 2012

GUJARAT URJA VIKAS NIGAM LIMITED          ...APPELLANT(S)

        VERSUS

TARINI INFRASTRUCTURE LTD. & ORS.      ...RESPONDENT(S)

WITH

CIVIL APPEAL NOS. 1973-1974 OF 2014

J U D G M E N T

RANJAN GOGOI, J.

1. Is  the  tariff  fixed  under  a  PPA  (Power  Purchase

Agreement) sacrosanct and inviolable and beyond review and

correction  by  the  State  Electricity  Regulatory  Commission

which is the statutory authority for fixation of tariff under the

Electricity Act, 2003 (hereinafter for short ‘the Act’).  This is the

short  question  that  arises  for  determination  in  the  present

appeals.   The  Regulatory  Commission  did  not  consider  it

appropriate  to  confer  on  itself  the  said  power  upon  a

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construction of the provisions of the Act and the terms of the

PPA(s) in question.  The Appellate Tribunal disagreed and held

that  the  power  would  be  available  to  the  State  Regulatory

Commission.  This is how the matter has come up before us in

the  present  appeals  filed  at  the  instance  of  the  distribution

licensee which is common in both the cases, namely, Gujarat

Urja Vikas Nigam Limited.

2. A  very  brief  resume  of  the  relevant  facts  would  be

appropriate and would assist a determination of the question

arising identified hereinabove.

The respondent No. 1 in Civil Appeal No. 5875 of 2012,

namely, Tarini Infrastructure Ltd., is a power producer which

has  set  up/installed  two  small  hydro  power  projects  in  the

State  of  Gujarat.   In  January,  2008  the  respondent  No.

1-power  producer  entered  into  a  PPA  with  the  appellant-

distribution licensee for sale of electricity from the generating

stations to the extent of the contracted quantity for a period of

35 years at Rs. 3.29 per KWH subject to escalation of 3% per

annum till date of commercial operation.  In March, 2010, just

before commissioning of the generating station, the respondent

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power producer sought an increase in the tariff to Rs. 4.70 per

unit  on  the  ground  that  though  under  the  Concession

Agreement  power  was  to  be  evacuated  at  the  nearest

sub-station at  Rakholi  under  the  jurisdiction of  the  Gujarat

Electricity  Transmission  Company  (GETCO)  which  was  at  a

distance of 4 Kms from its switch yard, it  was later realized

that  Rakholi  was  in  Dadar  Nagar  Haveli.  Consequently,  the

transmission line was required to be laid up to a point known

as Mota Pondha which involved a total  distance of  23 Kms.

instead  of  the  originally  envisaged  4Kms.   The  additional

infrastructure,  admittedly,  cost about   Rs.  10 crores which

was not envisaged in the Concession Agreement entered into

between the respondent-power producer and Narmada Water

Resources  Department  (respondent  No.  2).   In  these

circumstances,  the  power  producer  applied  to  the  State

Regulatory Commission for a redetermination of the tariff.  The

said  request  was  refused  by  an  order  dated  03.09.2010,

primarily, on the ground that once the tariff was determined

and thereafter incorporated in the PPA there was no scope for

redetermination of  the same at  the unilateral  request of  the

power producer.     

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3. Insofar  as  Civil  Appeal  Nos.  1973-1974  of  2014  are

concerned, the respondent-power producer, namely, Junagadh

Power Projects Pvt.  Ltd.,  has set up a biomass based power

generation plant and had entered into a PPA with Gujarat Urja

Vikas  Nigam  Limited  (distribution  licensee)  on  26.11.2010.

The  tariff  incorporated in the PPA was earlier approved by the

State Regulatory Commission by tariff order dated 17.05.2010

on  the  basis  of  cost  of  biomass  at  Rs.  1600  per  MT  with

escalation  of  5%  per  annum  for  a  period  of  20  years  of

operation.  The Biomass Energy Developers Association sought

revision of the biomass fuel cost to Rs. 3000/- per MT and for

consequential  redetermination of  the  tariff.   The said review

petition was dismissed by the State Commission in November,

2010.  Thereafter, the power producer, on its own, moved the

State Regulatory Commission seeking modification of tariff on

account of air cooled condenser and also seeking increase in

the biomass fuel cost and consequential redetermination of the

tariff on that basis.  The State Regulatory Commission by its

order dated 05.12.2010, while allowing an increase in tariff on

account  of  air  cooled condenser,  rejected the  request  of  the

power  producer  to  review  the  price  of  biomass  fuel  cost,

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primarily, on the ground that the review of the price of biomass

fuel having been earlier rejected in the case of Biomass Energy

Developers  Association,  the  review  of  the  said  price  at  the

request of the power producer cannot now be allowed.  

4. The learned Appellate Tribunal by the impugned orders

overruled the view taken by the State Regulatory Commission

on a consideration of the provisions of the Act and the terms

and conditions of the PPA(s).  The above view of the learned

Appellate  Tribunal  is  primarily  based  on the  reasoning  that

under the Act it is the State Regulatory Commission which has

been statutorily vested with the power to determine the tariff

and that the tariff as may be fixed and incorporated in the PPA

between the distribution licensee and the power producer is

liable  to  be  reviewed  in  the  light  of  changes  in  the

circumstances of a given case.  In the case of Junagadh Power

Projects Pvt. Ltd. the learned Appellate Tribunal even went to

the extent of holding that if in the changed scenario occasioned

by  a  drastic  alteration  of  the  facts  and  circumstances

surrounding  the  determination  of  tariff,  a  review  is

declined/refused the power producer will be left with no option

but to shut down its plants.  Therefore, a review of the tariff in

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exercise of the statutory power vested in the State Regulatory

Commission would be fully justified.  It is the correctness of the

aforesaid view that has been assailed in the present appeals

under Section 125 of the Act.   

5. We  have  heard  Shri  C.A.  Sundaram,  learned  senior

counsel  appearing  for  the  appellant  and  Shri  Sanjay  Sen,

learned  senior  counsel  appearing  for  the  respondent-power

producers in both sets of appeals.   

6. The  arguments  on  behalf  of  the  appellant-distribution

licensee in both the cases are more or less common. In the case

of Tarini Infrastructure Ltd. it is urged that under Clause 5.2 of

the PPA the appellant is required to pay tariff as determined by

the State Commission which is liable to escalation @ 3% per

annum.  The tariff order has not been challenged by the power

producer. Therefore, the tariff approved by the State Regulatory

Commission and incorporated in the PPA would remain in force

for the period of time agreed upon and the same cannot be

altered unilaterally.  Reliance in this regard is placed on two

recent  decisions  of  this  Court  in  the  case  of  Gujarat  Urja

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Vikas Nigam Limited Vs. EMCO Ltd. & Anr.1 and Bangalore

Electricity Supply Co. Vs. Konark Power Projects Ltd.2. It is

contended that in the said cases it has been held that a PPA

duly entered into and otherwise consistent with the tariff order

of  the State Regulatory Commission cannot be reopened.  A

somewhat  “discordant  note”  struck  by  this  Court  in

Transmission  Corporation  of  Andhra  Pradesh  Vs.  Sai

Renewable Power Pvt. Ltd.3 has been sought to be explained

by the appellant by contending that in the PPA involved in that

case there was a specific  clause  that  the tariff  would be as

revised  by  orders  of  the  State  Regulatory  Commission  from

time to time.   

Specifically in the case of Junagadh Power Projects Pvt.

Ltd. (respondent No. 1 in Civil Appeal Nos. 1973-1974 of 2914)

it  is  urged  that  the  demand  raised  by  Biomass  Energy

Developers  Association  for  redetermination  of  the  tariff  by

enhancing the fuel cost to Rs. 3000 per MT had been dismissed

earlier  and the  issue has attained finality  in  law.   The PPA

stood novated to the extent of modification of tariff allowed on

account of the issue of air cooled condenser is concerned and

1 2016 (2) SCALE 75 2 2015(5) SCALE 711 3 (2011) 11 SCC 34

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no further, it is urged. For clarity it may be noted that in an

earlier proceeding a higher tariff had been allowed to biomass

based power plants with air cooled condensers.   

7. On the other hand, on behalf of the power producers it is

argued that determination and fixation of tariff are  instances

of the exercise of the statutory powers of the State Regulatory

Commission under Section 62 read with Section 86(1)(a) of the

Act.  The mere incorporation of the tariff in a PPA between the

generating  company and the  distribution licensee  would not

make  the  tariff  a  consensual  decision  by  and  between  the

contracting  parties  which,  can  only  be  altered  by  the

Commission with the mutual consent of the parties.   

8. The decisions relied upon in Gujarat Urja Vikas Nigam

Limited  Vs.  EMCO  Ltd.  &  Anr.  (supra) and  Bangalore

Electricity  Supply  Co. Vs.  Konark  Power  Projects  Ltd.

(supra)  have  sought  to  be  distinguished  by  reference  to  the

facts  in the context  of  which the same have been rendered.

The observations of this Court in Transmission Corporation

of  Andhra  Pradesh  Vs.  Sai  Renewable  Power  Pvt.  Ltd.

(supra) (para 64) with regard to the role and authority of the

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Regulatory Commission in the matter of fixation of tariff have

been  relied  upon.   Furthermore,  the  language  appearing  in

Section 86(1)(b) of the Act has been specifically relied upon to

contend that the said provision of the Act confers on the State

Regulatory  Commission  the  power  “to  regulate  the  price  at

which  electricity  shall  be  procured  from  the  generating

companies or licensees …….. through agreements for purchase

of power for distribution and supply within the State.”  Reliance

has  also  been placed on the  decisions  on this  Court  in  Sri

Venkata  Setaramanjaneya  Rice  &  Oil  Mills  and  Ors.  Vs.

State of A.P.4,  K. Ramanathan  Vs.  State of T.N. & Anr.5

and D.K. Trivedi & Sons Vs. State of Gujarat & Ors.6  with

regard to wide meaning of word “regulate”.  It is further pointed

out that power production for purposes of supply on the terms

envisaged in the PPA is commercially  not viable resulting in

closure  of  the  Junagadh Power  Projects  Ltd.  for  the  past  3

years and the possible loss of the huge investment made.  

9. The  Electricity  Act  of  2003  has  been  enacted  to

consolidate  and  upgrade  the  existing  laws  relating  to

4 AIR 1964 SC 1781 5 (1985) 2 SCC 116 6 (1986) Supp. SCC 20

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generation,  transmission,  distribution,  trade  and  use  of

electricity;  for  taking  measures  conducive  to  development  of

electricity as an industry; to promote competition therein and

to  protect  the  interest  of  consumers;  rationalize  tariff  and

promote  efficient  and  environment  friendly  policies  besides

creating different regulatory and appellate bodies to deal with

highly  complex  technical  issues  with  regard  to  production,

distribution and sale of electricity including fixation of tariff.  A

reading of the provisions of the 2003 Act would go to show that

apart from fixation of tariff in a “situation of open access” or in

a situation of competitive bidding covered by Section 63 of the

Act, determination and fixation of tariff is a statutory function

to  be  performed  by  the  State  Regulatory  Commissions

constituted under the Electricity Regulatory Commissions Act,

1988 and exercising powers in consonance with the principles

enunciated by the Electricity Act, 2003.  Insofar as fixation of

tariff is concerned, Part VII of the Act read with the functions of

the  State  Commission  contained  in  Section  86  thereof  are

relevant and would require to be specifically noticed. Sections

61,  62  64  and  Section  86  of  the  Act  therefore  are  being

extracted herein below.

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“61. Tariff regulations:- The Appropriate Commission shall, subject to the provisions of this Act, specify the terms and conditions  for  the determination of  tariff,  and in doing so, shall be guided by the following, namely:-  

(a) the principles and methodologies specified by the Central Commission  for  determination  of  the  tariff  applicable  to generating companies and transmission licensees;  

(b)  the generation, transmission, distribution and supply of electricity are conducted on commercial principles;  

(c) the factors which would encourage competition, efficiency, economical  use  of  the  resources,  good  performance  and optimum investments;  

(d) safeguarding of consumers' interest and at the same time, recovery of the cost of electricity in a reasonable manner;  

(e) the principles rewarding efficiency in performance;  

(f) multi year tariff principles;  

1[(g) that the tariff progressively reflects the cost of supply of electricity  and also  reduces  cross-subsidies  in  the  manner specified by the Appropriate Commission;]  

(h)  the  promotion  of  co-generation  and  generation  of electricity from renewable sources of energy;  

(i) the National Electricity Policy and tariff policy:

Provided that the terms and conditions for determination of tariff under the Electricity (Supply)  Act, 1948 (54 of 1948), the Electricity Regulatory Commission Act, 1998 (14 of 1998) and the enactments specified in the Schedule as they stood immediately  before  the  appointed  date,  shall  continue  to apply  for  a  period  of  one  year  or  until  the  terms  and conditions  for  tariff  are  specified  under  this  section, whichever is earlier.”  

“62.  Determination  of  tariff: -  (1)  The  Appropriate Commission shall determine the tariff in accordance with the provisions of this Act for –

(a)  supply  of  electricity  by  a  generating  company  to  a distribution licensee:  Provided that  the Appropriate  Commission may, in case of shortage  of  supply  of  electricity,  fix  the  minimum  and

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maximum ceiling of tariff for sale or purchase of electricity in pursuance  of  an  agreement,  entered  into  between  a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity;  (b) transmission of electricity; (c) wheeling of electricity; (d) retail sale of electricity:

Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission  may,  for  promoting  competition  among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity.  

(2) The Appropriate Commission may require a licensee or a generating company to furnish separate details,  as may be specified  in  respect  of  generation,  transmission  and distribution for determination of tariff.  

(3) The Appropriate Commission shall not, while determining the  tariff  under  this  Act,  show  undue  preference  to  any consumer of electricity but may differentiate according to the consumer's  load  factor,  power  factor,  voltage,  total consumption of electricity during any specified period or the time  at  which  the  supply  is  required  or  the  geographical position of any area, the nature of supply and the purpose for which the supply is required.  

(4) No tariff or part of any tariff may ordinarily be amended, more frequently than once in any financial  year,  except  in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.

(5) The Commission may require a licensee or a generating company to comply with such procedures as may be specified for  calculating  the  expected  revenues  from  the  tariff  and charges which he or it is permitted to recover.  

(6) If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee.”

“64.  Procedure  for  tariff  order:  - (1)  An  application  for determination of tariff under section 62 shall be made by a

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generating  company  or  licensee  in  such  manner  and accompanied  by  such  fee,  as  may  be  determined  by regulations.  

(2)  Every  applicant  shall  publish  the  application,  in  such abridged  form  and  manner,  as  may  be  specified  by  the Appropriate Commission.

(3)  The Appropriate  Commission shall,  within one hundred and  twenty  days  from  receipt  of  an  application  under sub-section  (1)  and  after  considering  all  suggestions  and objections received from the public,-  

(a)  issue a tariff  order  accepting the application with such modifications or such conditions as may be specified in that order;  

(b) reject the application for reasons to be recorded in writing if such application is not in accordance with the provisions of this Act and the rules and regulations made thereunder or the provisions of any other law for the time being in force:

Provided  that  an  applicant  shall  be  given  a  reasonable opportunity of being heard before rejecting his application.  

(4) The Appropriate Commission shall, within seven days of making the order, send a copy of the order to the Appropriate Government, the Authority, and the concerned licensees and to the person concerned.

(5) Notwithstanding anything contained in Part X, the tariff for  any  interstate  supply,  transmission  or  wheeling  of electricity, as the case may be, involving the territories of two States  may,  upon  application  made  to  it  by  the  parties intending  to  undertake  such  supply,  transmission  or wheeling,  be  determined  under  this  section  by  the  State Commission having jurisdiction in respect of the licensee who intends to distribute electricity and make payment therefor.  

(6) A tariff order shall, unless amended or revoked, continue to be in force for such period as may be specified in the tariff order.”

“86.  Functions  of  State  Commission:  -  (1)  The  State Commission shall discharge the following functions, namely: -

(a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the

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case may be, within the State:  Provided  that  where  open  access  has  been  permitted  to  a category  of  consumers  under  section  42,  the  State Commission shall determine only the wheeling charges and surcharge thereon, if any, for the said category of consumers;

(b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or  from other  sources through agreements for  purchase of power for distribution and supply within the State;  

(c)  facilitate  intra-State  transmission  and  wheeling  of electricity;  

(d) issue licences to persons seeking to act as transmission licensees,  distribution licensees and electricity  traders with respect to their operations within the State;  

(e)  promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures for  connectivity  with the grid and sale of  electricity  to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;

(f)  adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration;

(g) levy fee for the purposes of this Act;

(h)  specify  State  Grid  Code  consistent  with  the  Grid  Code specified under clause (h) of sub-section (1) of section 79;  

(i)  specify  or  enforce  standards  with  respect  to  quality, continuity and reliability of service by licensees;  

(j)  fix  the  trading  margin  in  the  intra-State  trading  of electricity, if considered, necessary; and  

(k) discharge such other functions as may be assigned to it under this Act.  

(2) The State Commission shall advise the State Government on all or any of the following matters, namely:-

(i)  promotion  of  competition,  efficiency  and  economy  in

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activities of the electricity industry;  

(ii) promotion of investment in electricity industry;  

(iii) reorganization and restructuring of electricity industry in the State;

(iv)  matters  concerning  generation,  transmission  , distribution  and  trading  of  electricity  or  any  other  matter referred to the State Commission by that Government.

(3)  The State  Commission shall  ensure  transparency  while exercising its powers and discharging its functions.  

(4) In discharge of its functions, the State Commission shall be  guided  by  the  National  Electricity  Policy,  National Electricity Plan and tariff policy published under section 3.”

10. While Section 61 of the Act lays down the principles for

determination of  tariff,  Section 62 of  the  Act  deals  with the

different  kinds  of  tariffs/charges  to  be  fixed.  Section  64

enumerates  the  manner  in  which  determination  of  tariff  is

required to be made by the Commission.  On the other hand

Section 86 which deals with the functions of the Commission

reiterates  determination  of  tariff  to  be  one  of  the  primary

functions of the Commission which determination includes, as

noticed above, a regulatory power with regard to purchase and

procurement  of  electricity  from  generating  companies  by

entering  into  PPA(s).   The  power  of  tariff  determination/

fixation undoubtedly is statutory and that has been the view of

this  Court  expressed  in  paragraphs  36  and  64  of

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Transmission  Corporation  of  Andhra  Pradesh  Vs.  Sai

Renewable Power Pvt. Ltd. (supra).  This, of course, is subject

to determination of price of power in open access (Section 42)

or in the case of open bidding (Section 63).  In the present case,

admittedly,  the  tariff  incorporated  in  the  PPA  between  the

generating company and the distribution licensee is the tariff

fixed  by  the  State  Regulatory  Commission in  exercise  of  its

statutory powers. In such a situation it is not possible to hold

that the tariff agreed by and between the parties, though finds

mention in  a  contractual  context,  is  the  result  of  an act  of

volition of the parties which can, in no case, be altered except

by mutual consent.  Rather, it is a determination made in the

exercise  of  statutory  powers  which  got  incorporated  in  a

mutual agreement between the two parties involved.   

11. The principles on which tariff is to be determined by the

Commission  as  set  out  in  Section  61  have  already  been

noticed.  Generation, transmission, distribution and supply of

electricity  is  required  to  be  conducted  on  commercial

principles; while the consumers’ interest is to be safeguarded,

recovery of cost of electricity in a reasonable manner has also

to be ensured.  Under Section 64(6) a tariff order continues to

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remain in force for such period as may be specified.  In the

State of Gujarat, currently, the Gujarat Electricity Regulatory

Commission  (multi-year  tariff)  Regulations,  2016  govern  the

fixation of tariff by the State Commission.  As per Regulation

31  the  Commission  is  required  to  determine  the  tariff  of  a

generating  company,  transmission  licensee,  SLDC  and

distribution licensee for each financial year during the control

period  (control  period  is  5  years)  (financial  year  2016  to

financial year 2021) having regard to the following factors:

“(a) The  approved  forecast  of  Aggregate  Revenue Requirement and expected revenue from tariff  and charges  of  the  Generating  company,  Transmission Licensee, SLDC and Distribution Licensee for such financial  year,  including  modification  approved  at the time of mid-term review, if any, and  

(b) Approved gains and losses, including the incentive available  to be passed through in tariffs,  following the Truing Up of previous year.  

12.  Not  only  the  tariff  fixed  is  subject  to  periodic  review,

furthermore  the  above  Regulations  provide  for  taking  into

consideration the force majeure events.  Any force majeure is

considered as an uncontrollable factor.  In fact Regulation 23

provides that the approved aggregate gain or loss on account of

uncontrollable factor shall be passed through as an adjustment

in the tariff over such period as may be specified in the Order

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of the Commission.   

13.  Regulations  23  and  31  of  the  Gujarat  Electricity

Regulatory  Commission  (multi-year  tariff)  Regulations,  2016

are reproduced hereunder.

23.   Mechanism for pass through of gains or losses on account of uncontrollable factors  

23.1 The approved aggregate gain or loss to the Generating Company  or  Transmission  Licensee  or  SLDC  or Distribution  Licensee  on  account  of  uncontrollable factors shall be passed through as an adjustment in the tariff of the Generating Company or Transmission Licensee or SLDC or Distribution Licensee over such period  as  may  be  specified  in  the  Order  of  the Commission passed under these Regulations.

23.2 The Generating Company or Transmission Licensee or SLDC  or  Distribution  Licensee  shall  submit  such details  of  the  variation  between  expenses  incurred and revenue earned and the figures approved by the Commission,  in  the  prescribed  format  to  the Commission,  along  with  the  detailed  computations and  supporting  documents  as  may  be  required  for verification by the Commission.

23.3 Nothing contained in this Regulation 23shall apply in respect of any gain or loss arising out of variations in the price of fuel and power purchase, which shall be dealt with as specified by the Commission from time to time.

31. Annual determination of tariff  

The Commission shall determine the tariff of a Generating Company,  Transmission Licensee,  SLDC and Distribution Licensee covered under a Multi-Year Tariff framework for each  financial  year  during  the  Control  Period,  at  the commencement of such financial year, having regard to the

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following:  (a) The  approved  forecast  of  Aggregate Revenue  Requirement  and  expected  revenue from  tariff  and  charges  of  the  Generating Company,  Transmission  Licensee,  SLDC  and Distribution  Licensee  for  such  financial  year, including modifications approved at the time of mid-term review, if any; and  (b)    Approved gains and losses, including the incentive  available  to  be  passed  through  in tariffs, following the Truing Up of previous year.”

14. When the tariff order itself is subject to periodic review it

is  difficult  to  see  how  incorporation  of  a  particular  tariff

prevailing on the date of commissioning of the power project

can be understood to bind the power producer for the entire

duration of the plant life (20 years) as has been envisaged by

Clause 4.6 of the PPA in the case of Junagadh.  That apart,

modification of the tariff on account of air cooled condensers

and  denying  the  same  on  account  of  claimed  inadequate

pricing of biogas fuel is itself contradictory.  

15. As already noticed, Section 86(1)(b) of the Act empowers

the  State  Commission  to  regulate  the  price  of  sale  and

purchase of electricity between the generating companies and

distribution licensees through agreements for power produced

for  distribution  and  supply.   As  held  by  this  Court  in

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Sri Venkata Setaramanjaneya Rice & Oil Mills and Ors. Vs.

State of A.P. (supra),  K. Ramanathan  Vs.  State of T.N. &

Anr. (supra) and D.K. Trivedi & Sons Vs. State of Gujarat &

Ors. (supra) the power of regulation is indeed of wide import.

The  following  extracts  from  the  reports  in  the  above  cases

would illuminate the issue.  

Sri Venkata Setaramanjaneya Rice & Oil  Mills and Ors. Vs. State of A.P. (supra)

“20.  Then it was faintly argued by Mr. Setalvad that  the  power  to  regulate  conferred  on  the respondent  by  Section  3(1)  cannot  include  the power to increase the tariff rate; it would include the power to reduce the rates. This argument is entirely misconceived. The word “regulate” is wide enough  to  confer  power  on  the  respondent  to regulate  either  by  increasing  the  rate,  or decreasing the rate, the test being what is it that is necessary or expedient to be done to maintain, increase, or secure supply of the essential articles in  question  and  to  arrange  for  its  equitable distribution  and  its  availability  at  fair  prices. …………………………………………………..”  

K.  Ramanathan  Vs.  State  of  T.N.  & Anr. (supra)

“18. The word “regulation” cannot have any rigid or inflexible meaning as to exclude “prohibition”. The word “regulate” is difficult to define as having any precise meaning. It is a word of broad import, having  a  broad  meaning,  and  is  very comprehensive in scope.  There is a diversity of opinion as to its meaning and its application to a particular state of facts, some courts giving to the term a somewhat restricted, and others giving to it a liberal, construction. The different shades of meaning  are  brought  out  in  Corpus  Juris Secundum, Vol. 76 at p. 611:

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“‘Regulate’ is variously defined as meaning to adjust;  to  adjust,  order,  or  govern  by  rule, method, or established mode; to adjust or control by  rule,  method,  or  established  mode,  or governing principles or laws; to govern; to govern by rule; to govern by, or subject to, certain rules or restrictions;  to govern or direct  according to rule;  to  control,  govern,  or  direct  by  rule  or regulations.

‘Regulate’ is also defined as meaning to direct; to  direct  by  rule  or  restriction;  to  direct  or manage according to certain standards, laws, or rules; to rule; to conduct; to fix or establish; to restrain; to restrict.” See  also:  Webster’s  Third  New  International Dictionary,  Vol.  II,  p.  1913 and  Shorter  Oxford Dictionary, Vol. II, 3rd Edn., p. 1784.

19. It  has  often  been  said  that  the  power  to regulate does not necessarily include the power to prohibit, and ordinarily the word “regulate” is not synonymous with the word “prohibit”. This is true  in  a  general  sense  and in  the  sense  that mere  regulation  is  not  the  same  as  absolute prohibition.  At  the  same  time,  the  power  to regulate carries with it full power over the thing subject to regulation and in absence of restrictive words,  the power  must be regarded as plenary over the entire  subject.  It  implies the power  to rule,  direct  and  control,  and  involves  the adoption  of  a  rule  or  guiding  principle  to  be followed, or the making of a rule with respect to the subject to be regulated. The power to regulate implies the power to check and may imply  the power  to  prohibit  under  certain  circumstances, as where the best or only efficacious regulation consists  of  suppression.  It  would  therefore appear  that  the  word  “regulation”  cannot  have any  inflexible  meaning  as  to  exclude “prohibition”. It has different shades of meaning and  must  take  its  colour  from  the  context  in which it is used having regard to the purpose and object  of  the  legislation,  and  the  Court  must necessarily keep in view the mischief which the legislature seeks to remedy.”

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D.K.  Trivedi  &  Sons  Vs.  State  of Gujarat & Ors. (supra)

“30. Bearing  this  in  mind,  we  now  turn  to examine  the  nature  of  the  rule-making  power conferred upon the State Governments by Section 15(1). Although under Section 14, Section 13 is one of the sections which does not apply to minor minerals, the language of Section 13(1) is in pari materia with the language of Section 15(1). Each of  these  provisions  confers  the  power  to  make rules for “regulating”. The Shorter Oxford English Dictionary, 3rd Edn., defines the word “regulate” as meaning “to control, govern, or direct by rule or  regulations;  to  subject  to  guidance  or restrictions;  to  adapt  to  circumstances  or surroundings”.  Thus,  the  power  to  regulate  by rules given by Sections 13(1) and 15(1) is a power to control, govern and direct by rules the grant of prospecting licences and mining leases in respect of  minerals  other  than minor  minerals  and for purposes  connected  therewith  in  the  case  of Section  13(1)  and  the  grant  of  quarry  leases, mining leases and other mineral concessions in respect  of  minor  minerals  and  for  purposes connected therewith in the case of Section 15(1) and to subject such grant to restrictions and to adapt them to the circumstances of the case and the surroundings with reference to  which such power is exercised. It is pertinent to bear in mind that the power to regulate conferred by Sections 13(1)  and 15(1)  is  not  only with respect  to the grant of licences and leases mentioned in those sub-sections but is also with respect to “purposes connected  therewith”,  that  is,  purposes connected with such grant.”

16. All the above would suggest that in view of Section 86(1)

(b)  the Court must lean in favour of  flexibility  and not read

inviolability in terms of the PPA insofar as the tariff stipulated

therein as approved by the Commission is concerned.  It would

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be a sound principle of interpretation to confer such a power if

public  interest  dictated  by  the  surrounding  events  and

circumstances require a review of the tariff.  The facts of the

present  case,  as  elaborately  noted  at  the  threshold  of  the

present opinion,  would suggest  that  the Court must lean in

favour of such a view also having due regard to the provisions

of Sections 14 and 21 of the General Clauses Act, 1898.  In

this context, the views of this Court on the purport and effect of

Sections  14  and  21  of  the  General  Clauses  Act  may  be

re-noticed  by  extracting  paragraphs  47,  48  and  49  of  the

decision of this Court in  D.K. Trivedi & Sons  Vs.  State of

Gujarat & Ors. (supra).

“47. The  next  contention  was  that  though  under Section 15(1) the State Governments may have the power to make rules providing for payment of royalty and  dead  rent,  sub-section  (3)  showed  that  such power did not extend to amending the rules so as to enhance the rate  of  dead rent.  The submission in this behalf was that the power to enhance the rate of royalty  by  amending  the  rules  was  expressly provided  for  in  sub-section  (3)  by  the  use of  the words “at the rate prescribed for the time being in the rules framed by the State Government in respect of minor minerals” but there was no such provision in  Section  15  with  respect  to  dead  rent.  We  are unable  to  accept  this  submission.  Rules  under Section  15(1),  though  made  by  the  State Governments,  are rules made under a Central  Act and the provisions of the General Clauses Act, 1897,

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apply to such rules. Under Section 21 of the General Clauses Act, where by any Central Act, a power to make rules is conferred, then that power includes a power, exercisable in the like manner and subject to the like sanction and conditions if  any, to add to, amend,  vary  or  rescind  any  rules  so  made.  The power  to  amend  the  rules  is  therefore, comprehended within the power to make rules and as Section 15(1) confers upon the State Governments the  power to  make rules providing for  payment of dead rent and royalty, it also confers upon the State Governments the power to amend those rules so as to  alter  the  rates  of  royalty  and  dead  rent  so prescribed,  either  by  enhancing  or  reducing  such rates.    ……………     ………….   ………….  ………….   

48. It was then contended that the very language of sub-section (1) of Section 15 shows that it does not confer  any  power  upon  the  State  Governments  to enhance the rate of royalty or dead rent because the rules which are to be made under that sub-section are for regulating the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals and, therefore, the rules under that sub-section can be  made only  with respect  to  the time when such leases or concessions are granted and not with respect to any point of time subsequent thereto  and  there  being  no  provision  similar  to sub-section (3)  of  Section 15 with respect  to  dead rent,  any rule providing for increase in the rate of dead rent during the subsistence of a lease would be ultra vires Section 15. This submission is devoid of substance. As pointed out earlier, sub-section (3) of Section 15 does not confer any power to amend the rules  made  under  Section  15(1),  for  the  power  to amend the rules is comprehended within the power to  make  the  rules  conferred  by  sub-section  (1)  of Section  15.  The  construction  sought  to  be  placed upon the word “grant” in Section 15(1) also cannot be accepted. While granting a lease it is open to the

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grantor  to  prescribe  conditions  which  are  to  be observed during the period of the grant and also to provide for the forfeiture of  the lease on breach of any of those conditions. If the grant of a lease were not  to  prescribe  such conditions,  the  lessee  could with impunity commit breaches of the conditions of the lease.  Ordinary leases of immovable property at times provide for periodic increases of rent and there is no reason why such increases should not be made in  a  mining  or  quarry  lease  or  other  mineral concession  granted  under  a  regulatory  statute intended for the benefit of the public and even less reason why such a statute should not confer power to make rules providing for increases in the rate of dead  rent  during  the  subsistence  of  the  lease. ………………      ………………    ……………  ……………

49. In support of the above contention it was also submitted that in the absence of a provision like the one contained in Section 15(3) the power to enhance the rate of dead rent cannot be so exercised as to affect  subsisting  leases  and  that  unless  this construction were placed upon sub-section (1),  the power conferred by that sub-section would be bad in law as being an arbitrary power.  It  was submitted that a mining lease is the result of a contract entered into between two parties and dead rent is part of the consideration for the grant of the lease, and just as in the case of a contract of sale of goods, it cannot be left to the sweet will of the seller to charge what price he liked, in the same way in the case of leases and concessions granted under Section 15(1), it cannot be left to the State Governments to amend the rules so  as  to  charge  whatever  dead rent  they  like  and whenever  they  like  during  the  subsistence  of  the lease.  We  find  no  substance  in  either  of  these submissions. A  quarry  lease,  mining  lease  or other mineral concession in respect of a minor mineral does not stand on the same footing as an  ordinary  contract.  These  leases  and

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concessions  are  granted  by  the  State Governments pursuant to rules made under the statutory  power  conferred  upon  them  by  a regulatory Act. Minerals are part of the material resources  which  constitute  a  nation’s  natural wealth  and  if  the  nation  is  to  advance industrially and if its economy is to be benefited by the proper development and exploitation of these resources, they cannot be permitted to be frittered  away  and  exhausted  within  a  few years  by  indiscriminate  exploitation  without any regard to public and national interest. The same view was expressed by the Court in  State of Tamil  Nadu v.  Hind  Stone.  …………   …………… …………  The  presumption  is  that  an  authority clothed  with  a  statutory  power  will  exercise  such power reasonably, and if in the public interest and for the efficacious regulation of mines and quarries of  minor  minerals  and  the  proper  development  of such minerals, a State Government as the delegate of  the  Union Government  thinks  fit  to  amend the rules  so  as  to  enhance  the  rate  of  dead  rent,  it cannot be said that it is prevented from doing so by the principles of the ordinary law of contracts. It may be that  in  certain  cases  by  enhancing  the  rate  of dead rent the holders of leases in respect of certain types of  minor  minerals  may be adversely  affected but private interest cannot be permitted to override public interest.  Conservation of minerals and their proper exploitation result in securing the maximum benefit to the community and it is open to the State Governments to enhance the rate of dead rent so as to ensure the proper conservation and development of  minor  minerals  even  though  it  may  affect  a lessee’s liability under a subsisting lease.”

17.  A similar view expressed in Shree Sidhbali Steels Ltd.

and Others  Vs.  State of Uttar Pradesh and Others7 may 7 (2011) 3 SCC 193

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also be noticed.  

“41.   By virtue of Sections 14 and 21 of the General Clauses  Act,  when  a  power  is  conferred  on  an authority to do a particular act, such power can be exercised from time to time and carries with it the power  to  withdraw,  modify,  amend  or  cancel  the notifications earlier issued, to be exercised in the like manner  and  subject  to  like  conditions,  if  any, attached with the exercise of the power. It would be too narrow a view to accept that chargeability once fixed cannot be altered. Since the charging provision in the Electricity (Supply) Act, 1948 is subject to the State Government’s power to issue notification under Section  49  of  the  Act  granting  rebate,  the  State Government,  in  view of  Section 21  of  the  General Clauses Act, can always withdraw, rescind, add to or modify  an exemption notification.  No industry  can claim  as  of  right  that  the  Government  should exercise its power under Section 49 and offer rebate and it is for the Government to decide whether the conditions are such that rebate should be granted or not.”

18. Before parting, a word about the recent pronouncements

of this Court in Gujarat Urja Vikas Nigam Limited Vs. EMCO

Ltd. & Anr. (supra) and  Bangalore Electricity Supply Co.

Vs.  Konark Power Projects Ltd. (supra), relied upon by the

appellant.  All that would be necessary to note in this regard  is

the context in which the bar of a review of the terms of a PPA

was found by this Court in the above cases.  In Gujarat Urja

Vikas  Nigam Limited  Vs.  EMCO Ltd.  &  Anr. (supra)  the

power  purchaser  sought  the  benefit  of  a  second tariff  order

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made effective to projects commissioned after 29.01.2012 (the

power purchaser had commissioned its project on 02.03.2012)

though under the PPA it was to be governed by the first tariff

order of January, 2010.  Under the first tariff order for such

projects which were not commissioned on or before the date

fixed  under  the  said  order,  namely,  31.11.2011  the  tariff

payable  was  to  be  determined  by  the  Gujarat  Electricity

Regulatory Commission. The power producer in the above case

did not seek determination of a separate tariff but what was

sought  was  a  declaration that  the  second tariff  order  dated

27.01.2012  applicable  to  PPA(s)  after  29.01.2012  would  be

applicable.  It is in this context that this Court had taken the

view  that  the  power  producer  would  not  be  relieved  of  its

contractual  obligations  under  the  PPA.  In  the  case  of

Bangalore  Electricity  Supply  Co. Vs.  Konark  Power

Projects Ltd. (supra), this Court held that it was beyond the

power of State Commission to vary the tariff fixed under the

approved PPA in view of the specific provisions in Regulations

5.1  and  9  of  the  KERC(Power  Procurement  from Renewable

Sources by Distribution Licensee) Regulations, 2004 and 2011

respectively as the same specifically excluded a PPA concluded

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prior to the date of notification of the Regulations in question.   

19. In view of the above, the appeals are dismissed and the

orders  dated  31.05.2012  and  02.12.2013  of  the  Appellate

Tribunal are affirmed.  In the facts and circumstances of the

case, the parties are left to bear their own costs.

….……......................,J.                                             [RANJAN GOGOI]

….……......................,J.                                                  [PRAFULLA C. PANT]

NEW DELHI; JULY 05, 2016.