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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1220 OF 2015

Gujarat Urja Vikas Nigam Limited    … Appellant

Versus

EMCO Limited & Another … Respondents

J U D G M E N T

Chelameswar,  J.

1. The  2nd respondent  herein,  the  Gujarat  Electricity  

Regulatory Commission is a body constituted under Section  

82 of the Electricity Act, 2003 (hereinafter referred to as “the  

Act”). In exercise of its statutory powers under Sections 61(h),  

62(1)(a) and 86(1)(e) of the Act the 2nd respondent issued Order  

No.2 of 2010 dated 29.01.2010 (hereinafter referred to as the  

“1st Tariff  Order”)  determining  the  tariff  for  procurement  of  

power  by  the  Distribution  Licensees  in  Gujarat  from  Solar  

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Energy  Projects1.    The  said  order  was  issued  after  an  

elaborate  consideration  of  the  various  relevant  factors  

including  the  policy  guidelines  of  the  State  of  Gujarat  and  

Union of India.  Under the said order, tariff for procurement of  

electricity  generated  by  PROJECTS  employing  Solar  

Photovoltaic (SPV) Technology was fixed at Rs.15 per kWh for  

the  initial  12  years  starting  from  the  date  of  commercial  

operation of the project and Rs.5 per kWh from the 13 th year to  

25th year.  The said order was declared to have had come into  

force  w.e.f.  29.01.2010.   Various  financial  and  operational  

parameters taken into consideration for determining the tariff  

are mentioned at para 4 of the said Order2.  One of the factors  

taken into consideration is  the ‘Rate  of  Depreciation’.   It  is  

specified at para 5 of the Order that the tariff fixed under the  

said  Order  “took  into  account  the  benefit  of  accelerated  1 The Tariff Order uses the term ‘Solar Energy Projects’ and the PPA uses the term ‘Solar Power Projects’.   The terms ‘Solar Power Projects’ and ‘Solar Energy Projects’ are identical. Hereinafter, we use the term  ‘PROJECTS’ to denote them. 2 Para 4. Components of Tariff

The following financial and operational parameters have been considered while determining the  tariff.

1. Capital cost 2. Evacuation cost 3. Operations & Maintenance charges 4. Debt – Equity Ratio 5. Loan Tenure 6. Interest rate on loan 7. Return on equity 8. Rate of Depreciation 9. Interest on Working Capital 10. Capacity Utilization Factor 11. Duration of Tariff 12. Auxiliary Consumption

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depreciation  under  the  Income  Tax  Act  and  Rules”.   It  is  

further  declared  that  “for  a  project  that  does  not  get  such  

benefit, the Commission would, on a petition in that respect,  

determine a separate tariff taking into account all the relevant  

facts.”

2. The 1st respondent produces electric energy (power) from  

one  of  the  PROJECTS.  The  appellant  and  1st respondent3  

entered  into  a  Power  Purchase  Agreement  (PPA)  dated  

09.12.2010 for sale and purchase of electricity from the 5 MW  

project to be established by the 1st respondent in Surendra  

Nagar  district  of  Gujarat.   The  provisions  relevant  for  the  

dispute in the present appeal are Clauses 5.1 & 5.2,  

“Article 5: Rates and Charges

5.1 Monthly Energy Charges: GUVNL shall pay to the Power Producer  every month for Scheduled Energy/Energy injected as certified in the monthly  SEA by SLDC the amounts (the “Tariff”) set forth in Article 5.2.

5.2 GUVNL shall pay the fixed tariff mentioned hereunder for the period  of 25 years for all the Scheduled Energy/Energy injected as certified in the  monthly SEA by SLDC.  The tariff is determined by Hon’ble Commission  vide Tariff Order for Solar based power project dated 29.01.2010.

Tariff for Photovoltaic Project:            Rs.15/kWh for First 12 years and Thereafter Rs.5/kWh from 13th Year

To 25th Year.

Above tariff  shall  apply for  solar  projects  commissioned on or before 31st  December 2011.  In case, commissioning of Solar Power Project is delayed  beyond 31st December 2011, GUVNL shall pay the tariff as determined by  Hon’ble GERC for Solar Projects effective on the date of commissioning  of solar power project or above mentioned tariff, whichever is lower.”

3  Described as power producer in the PPA

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and Clauses 12.84 & 12.105 of the said PPA.

3. However,  after  entering  into  the  abovementioned  PPA,  

respondent no.1 decided to change the PROJECT’S location.  

Therefore,  a  Supplemental  Agreement  was  entered  into  

between  the  appellant  and  respondent  no.1  on  07.05.2011  

making appropriate  and necessary modifications to the PPA  

dated  09.12.2010.   However,  Articles  5.1  and  5.2  of  the  

original PPA remained unaltered.

4. 2nd respondent passed another  order  dated 27.01.2012  

(hereinafter referred to as the “2nd Tariff Order”) determining  

the tariff applicable to the PROJECTS to be commissioned on  

or after 29.01.2012.  The tariff fixed under the said order for  

the  PROJECTS  generating  electrical  Energy  through  Solar  

4 12.8 Amendments:  This Agreement shall not be amended, changed, altered, or modified except by a written  

instrument duly executed by an authorized representative of both Parties.  However, GUVNL may consider  any amendment or change that the Lenders may require to be made to this Agreement. 5 12.10 Entire Agreement, Appendices:

This  Agreement  constitutes  the  entire  agreement  between  GUVNL  and  the  Power  Producer, concerning the subject matter hereof.  All previous documents, undertakings, and agreements,   whether oral, written, or otherwise, between the Parties concerning the subject matter hereof are hereby  cancelled and shall be of no further force or effect and shall not affect or modify any of the terms or  obligations  set  forth  in  this  Agreement,  except  as  the  same  may  be  made  part  of  this  Agreement  in  accordance with its terms, including the terms of any of the appendices,  attachments or exhibits.  The   appendices, attachments and exhibits are hereby made an integral part of this Agreement and shall be fully   binding upon the Parties.

In the event of any inconsistency between the text of the Articles of this Agreement and  the appendices, attachments or exhibits hereto or in the event of any inconsistency between the provisions  and particulars of one appendix, attachment or exhibit and those of any other appendix, attachment or  exhibit GUVNL and the Power Producer shall consult to resolve the inconsistency.

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Photovoltaic  (SPV)  Technology  “availing  the  benefit  of  

accelerated  depreciation  under  the  Income  Tax  Act”  is  less  

favourable to the power producers and the tariff  payable by  

the appellant to the power producers which do not avail “the  

benefit of accelerated depreciation” under the Income-tax Act  

is more favourable to such power producers.

5. The 1st respondent commissioned its PROJECT only on  

2.3.2012, i.e.,  beyond the “control period6” of tariff  specified  

under the 1st Tariff Order.  The said “control period” ended on  

28.01.2012.  The 1st respondent admittedly did not avail the  

accelerated depreciation under Section 32 of the Income-tax  

Act.

6. The 1st respondent, therefore, filed a petition no.1270 of  

2012 before the State Commission invoking Section 86(1)(f) of  

the Act praying  “(A)  This Hon’ble Commission be pleased to  

hold and declare that the Petitioner is entitled to claim the  

tariff applicable to megawatt scale solar photovoltaic projects  

6 Para 7.2 Control Period The Commission had proposed a control period for this order as the period from the date of final  

order of the Commission to 31.12.2011. Commission’s Ruling-  “It has been observed that the capital cost of the solar power project might reduce drastically as  

time elapses.  However, since the gestation period for Solar PV projects is about 6 months and that for   Solar Thermal Projects is 18-24 months, the Commission decides that the control period for this order will  be 2 years.”

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not  availing  of  accelerated  depreciation  as  per  tariff  order  

dated 27.1.2012; and (B) This Hon’ble Commission be pleased  

to quash and set aside the decision of the Respondent taken in  

letters  dated  20.4.2012,  22.6.2012  and  20.11.2012  for  

denying  the  tariff  applicable  to  megawatt  scale  solar  

photovoltaic projects not availing of  accelerated depreciation  

as per tariff order dated 27.1.2012 to the Petitioner and direct  

the Respondent to forthwith make payment of a sum of Rs.  

59,50,260/- to the Petitioner being the differential amount of  

invoices which is unpaid by the Respondent;”  

7. The 2nd respondent by its order dated 08.08.2013 held  

that the 1st respondent is entitled for the benefit of the tariff  

specified in the 2nd Tariff Order dated 27.01.20127.   The 2nd  

respondent also held that the benefit of its adjudicatory order  

should not only go to the 1st respondent but also to others who  

have  commissioned  their  PROJECTS subsequent  to  the  2nd  

Tariff Order.

Para 8. Before parting with the judgment, we would like to observe that the issue raised  7 Para 7.  Considering the above, we decide that the petition succeeds.  We decide that the petitioner’s  project,  which  is  not  availing  the  benefit  of  Accelerated  Depreciation  is  entitled  to  the  tariff  of  Rs.11.25/Unit  for  the first  12 years of the project  and Rs.7.50/Unit  for the subsequent 13 years.   The  respondent is directed to pay the amount of difference of Rs.11.25 – Rs.9.98 = 1.27/KWh to the petitioner  for  the invoices so far raised by the petitioner  and payment of  which have already been made by the  respondent.  The respondent is further directed that he shall pay the above tariff now onward also to the  petitioner for energy supplied by him.

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in  the  present  petition  is  in  fact  on interpretation  of   the Order  No.1  of  2012 dated  27.01.2012; and hence the decision in this case would impact not only the petitioner, but  also other developers who have either commissioned or are likely to commission their  projects within the control period of the said order.  Some of such developers might not  avail the benefits of accelerated depreciation and it would be unfair if all of them are  required  to  file  separate  petitions  to  seek  justice,  especially  when  we  have  already  decided that in the Order No.1 of 2012, the Commission has determined separate tariff  for such projects.  We, therefore, in the interest of justice and fairness, decide that the  present order shall be applicable in all such cases.  The onus of proof regarding non- availing of accelerated depreciation shall, however, be on such developers.

8. Aggrieved by the order dated 08.08.2013, the appellant  

herein preferred an appeal before the Appellate Tribunal for  

Electricity (hereinafter referred to as “the Appellate Tribunal”),  

constituted  under  Section  110  of  the  Act  invoking  its  

jurisdiction under Section 111 of the Act.   

9. By the impugned order dated 20.11.2014, the Appellate  

Tribunal confirmed the order of the 2nd respondent.   

“Para 62. Summary of Findings:

(a) The  PPA  dated  19.12.2010  entered  into  between  the  Appellant  and  the  Respondent  No.1 provided for  tariff  as  determined by the State Commission  vide order dated 30.1.2010, viz. Rs.15 per kWh for first 12 years and thereafter  Rs.5  per  kWh  from  13th year  to  25th year,  provided  the  Solar  Project  is  commissioned  on  or  before  31st December  2011.   However,  in  case  commissioning  of  the  project  is  delayed  beyond  31st December,  2011,  the  Appellant has to pay the tariff as determined by the State Commission effective  on the date of commissioning of Solar Power Project.  The Solar Project of the  Respondent  No.1  was  commissioned  on  2.3.2012.   Therefore,  the  tariff  as  determined by the State Commission by the Order dated 27.1.2012 for the next  control period from 29.1.2012 to 31.3.2015 will be applicable to the Respondent  No.1.

(b) In order dated 27.1.2012, the State Commission has determined the tariff for  Solar  Project  availing  accelerated  depreciation  and  without  availing  the  accelerated  depreciation.   As  the  Respondent  No.1  has  not  availed  the  accelerated depreciation, the tariff determined without accelerated depreciation  in the order dated 27.1.2012 will be applicable in terms of the PPA and the tariff  order of the State Commission dated 27.1.2012.

(c) Complete reading of the Tariff Order dated 27.1.2012 clearly indicates that the  State  Commission  has  determined  tariff  for  both,  the  projects  availing  accelerated depreciation and those not availing accelerated depreciation.  The  order gives a choice to the Solar Developer to avail or not to avail the benefit of   accelerated depreciation.”  

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Hence, the instant appeal under Section 125 of the Act.

10. Both the 1st Tariff Order and the 2nd Tariff Order issued  

by  the  2nd respondent  deal  with  the  tariff  payable  to  the  

producers of power.  The distinction between both the tariff  

orders insofar as it is relevant for the purpose of the present  

case is that:

(I) 1st Tariff Order fixed the tariff for the PROJECTS which  

get the “benefit of accelerated depreciation” under Section  

32 of the Income Tax Act.

“Based on the various parameters as discussed above, the levelised  tariff  including  RoE  of  Solar  PV  power  generation,  using  a  discounting rate of 10.19% works out to Rs.  12.54  per kWh and  levelised tariff using the same discounting factor for Solar Thermal  Power generation works out to Rs.  9.29 per kWh.   However, the  Commission feels that it would be appropriate to determine tariff  for two sub-periods:  12 years and 13 years instead of the same  tariff for 25 years.   Hence, the Commission determines the tariff  for generation of electricity from Solar PV Power Project at Rs. 15  per kWh for the initial 12 (twelve) years starting from the date of  Commercial operation of the project and Rs. 5 per kWh from the  13th (Thirteenth) year to 25th (twenty fifth) year.   The Commission  also determines the tariff for generation of electricity from Solar  Thermal  Power  project  at  Rs.  11  per  kWh  for  the  initial  12  (twelve) years starting from the date of Commercial operation of  the project and Rs. 4.00 per kWh from the 13th (Thirteenth) year to  25th (twenty fifth) year.

The above tariffs  take  into account the benefit  of  accelerated  depreciation under the Income Tax Act and Rules.   For a project  that does not get such benefit, the Commission would, on a petition  in that respect, determine a separate tariff taking into account all  the relevant facts.”

(II) 2nd Tariff  Order,  on the other hand, fixed the tariff  for  

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both the classes of PROJECTS8 i.e. those which “avail”  

the  “benefit  of  accelerated depreciation”  (under  Section  

32 of the Income Tax Act) and those which do not “avail”  

the “benefit of accelerated depreciation”.

“Based on these  technical  and  financial  parameters,  the  levelized  tariff  including  return  on  equity  for  megawatt-scale  solar  photovoltaic  power  projects  availing  accelerated  depreciation is  calculated  to  be  Rs.  9.28  per  kWh,  while  the  tariff  for  similar  projects not availing accelerated depreciation is calculated to be Rs.  10.37 per kWh.    The Commission also decides to determine the  tariff for two sub-periods.   For megawatt-scale photovoltaic projects  availing accelerated depreciation, the tariff for the first 12 years shall  be Rs. 9.98 per kWh and for the subsequent 13 years shall be Rs. 7  per kWh.   Similarly, for megawatt-scale photovoltaic projects  not  availing accelerated depreciation, the tariff for the first 12 years  shall be Rs. 11.25 per kWh and for the subsequent 13 years shall be  Rs. 7.50 per kWh.”

 11. The case of the 1st respondent is that notwithstanding the  

fact  that  it  entered  into  a  PPA  during  the  “control  period”  

specified in the 1st tariff order, it is not obliged to sell power to  

the appellant for the price specified in Article 5.2 of the PPA  

and is legally entitled to seek (from the 2nd respondent) fixation  

of a separate tariff.  It is the further case of the 1st respondent  

that under the PPA, the appellant is under an obligation to  

procure the power from the 1st respondent for a period of 25  

8 There is some dispute between the parties in this regard and the Appellate Tribunal recorded:-

“36. .  The Tariff Order 2012 determines both the tariffs i.e. with or without accelerated depreciation.”

In our opinion, the conclusion of the Tribunal in this regard is right.  The Tenor of the two tariff  orders (relevant portions of which are extracted above) is too obvious and does not call for any further  explanation to justify the above conclusion of the Appellate Tribunal.    

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years if the 1st respondent commences the generation of power  

within the “control period” and is also obliged to pay for the  

power procured by it at the rates specified in Article 5.2 of the  

PPA.  But the obligation of the 1st respondent to sell  power  

generated by it to the appellant at the rates specified in Article  

5.2 of the PPA comes into existence only on the happening of  

the two contingencies, i.e., the 1st respondent (i) commencing  

the generation of power within the “control period” stipulated  

under the 1st Tariff Order; and (ii) choosing to avail the “benefit  

of  accelerated  depreciation”  under  the  Income  Tax  Act.  

According to the 1st respondent, the stipulation under the 1st  

Tariff Order that the tariff fixed thereunder is not applicable to  

those  PROJECTS  which  “does  not  get  such  benefit,  the  

Commission would on a petition in that respect determine a  

separate tariff taking into account all the relevant facts from  

not”  would  only  imply  that  tariff  fixed  under  the  1st Tariff  

Order is not applicable to those PROJECTS/power producers  

which  do  not  avail  the  “benefit  of  accelerated  depreciation”  

under the Income Tax Act.       

12. On the other hand, the case of the appellants throughout  

has been that the 1st respondent clearly knew when it entered  

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into the PPA that the tariff  propounded under the 1st Tariff  

Order is applicable only for those PROJECTS which avail the  

“benefit of accelerated depreciation” under the Income Tax Act.  

If the first respondent did not intend to avail the “benefit of the  

accelerated depreciation” under the Income Tax Act, it ought  

not  to  have  entered  into  the  PPA  without  first  seeking  the  

determination  of  the  tariff  by  the  2nd respondent.   Having  

chosen to enter into a PPA, the 1st respondent cannot decide  

not to avail the “benefit of accelerated depreciation” at a later  

point of time i.e. beyond the control period prescribed under  

the  1st Tariff  Order  and  claim  the  benefit  of  a  more  

advantageous tariff fixed in the 2nd Tariff Order in favour of the  

PROJECTS  which  do  not  avail  the  “benefit  of  accelerated  

depreciation”.

13. We have already noticed that the 1st respondent did not  

commence  generation  of  power  within  “control  period”  

stipulated under the 1st Tariff Order and also did not avail the  

“benefit of the accelerated depreciation” under the Income Tax  

Act.

14. It is admitted on all hands that the “benefit of accelerated  

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depreciation” mentioned in the 1st Tariff Order and the PPA is  

the stipulation contained in Section 32 (1)(i) of the Income Tax  

Act read with Rule 5(1A) of the Income Tax Rules. They provide  

for the method and manner in which depreciation of the assets  

of an assessee is to be calculated. Section 32 of the Income  

Tax Act (insofar as relevant) stipulates as follows:-

“32(1) in respect of depreciation of –  

(i) buildings,  machinery,  plant  or  furniture,  being  tangible  assets;

(ii) know-how,  patents,  copyrights,  trade  marks,  licences,  franchises or any other business or commercial rights of similar  nature, being intangible assets acquired on or after the 1st day of  April, 1998.

owned, wholly or partly, by the assessee and used for  the  purposes  of  the  business  or  profession,  the  following  deductions shall be allowed –  

(i) in  the  case  of  assets  of  an  undertaking  engaged  in  generation or generation and distribution of power, such  percentage on the actual cost thereof to the assessee as  may be prescribed.”

The prescription contemplated is found in Rule 5(1A) of the  

Income Tax Rules, 1962 which reads as follows:-

“(1A)   The allowance under clause (i) of sub-section (1) of section 32 of  the Act in respect of depreciation of assets acquired on or after 1st day of  April, 1997 shall be calculated at the percentage specified in the second  column of  the  Table  in  Appendix  IA of  these rules  on  the  actual  cost  thereof to the assessee as are used for the purposes of the business of the  assessee at any time during the previous year:”

Under  the  second  proviso  to  the  said  Rule,  it  is  further  

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provided;

“Provided further  that  the  undertaking specified  in  clause  (i)  of  sub- section  (1)  of  section  32  of  the  Act  may,  instead  of  the  depreciation  specified in Appendix IA,  at its option,  be allowed depreciation under  sub-rule (1) read with Appendix I, if such option is exercised before the  due  date  for  furnishing  the  return  of  income  under  sub-section  (1)  of  section 139 of the Act,

(a) for the assessment year 1998-99, in the case of an undertaking  which began to generate power prior to 1st day of April, 1997;  and

(b) for the assessment year relevant to the previous year in which it  begins to generate power, in case of any other undertaking:”

15. It  can  be  seen  from  the  above  extracted  proviso,  an  

undertaking engaged in generation of power has an option to  

claim depreciation on its assets in accordance with the scheme  

under Section 32(1)(i) of the Income Tax Act.  Such an option  

could be exercised at the relevant point of time as indicated in  

the said proviso.   

16. The  argument  of  the  first  respondent  throughout  has  

been that the stipulation in the 1st Tariff Order that “a project  

that does not get such a benefit….” only means that the tariff  

propounded under the said order does not apply to PROJECTS  

which do not choose to exercise the option to be governed by  

the scheme under Section 32 of the Income Tax Act.  On the  

other  hand,  the  argument  by the  appellant  throughout  has  

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been that such a clause only implies that the tariff under the  

1st Tariff  Order  is  not  applicable  to  those  power  generating  

PROJECTS which by operation of law (but not because of the  

violation of the assessees) are not entitled to claim the benefit  

of the scheme under Section 32(1)(i) of the Income Tax Act.

17. We do not wish to examine the question whether there is  

a  possibility  under  the  Income  Tax  Act  for  any  PROJECT/  

undertaking engaged in the generation of  power9 not to fall  

within the operation of Section 32(1)(i) apart from those cases  

where the “undertaking” chooses not to be governed by such  

regime.   Neither of the parties made the submission that in  

law there is  a possibility  of  a  power project  not  getting the  

benefit of the accelerated depreciation.

18. Assuming for the sake of argument that in law such a  

possibility exists, the construction such as the one sought to  

be placed on the relevant portion of para 5 of  the 1st Tariff  

Order by the appellant cannot be accepted because it would be  

inherently  illogical.   At  the  cost  of  repetition,  we reproduce  

9 The relevant portion of Section 32 of the Income Tax Act reads as under:

“….. undertaking engaged in generation …. of power ……..”

The said Section covers not only Solar Power Projects but also all kinds of Power Projects.  

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that portion of the para 5 of the 1st Tariff Order:

The above tariffs take into account the benefit of accelerated depreciation  under the Income Tax Act and Rules.   For a project that does not get such  benefit, the Commission would, on a petition in that respect, determine a  separate tariff taking into account all the relevant facts.”

It is not the case of either the appellant or the 2nd respondent  

that Section 32(1)(i) of the Income Tax Act does not apply to  

some PROJECTS.   The tenor of the statement is clear.  The 2nd  

respondent  proposed the  tariff  for  all  classes  of  PROJECTS  

taking into account that all of them would be entitled to claim  

the ‘benefit  of  accelerated depreciation’  under Section 32 of  

Income Tax Act.   The 2nd respondent must be presumed to  

have known at the time of propounding the 1st tariff order that  

the  Income  Tax  Act  and  the  Rules  thereunder  provide  an  

option to the assessee (producer of power) either to claim or  

not  the  ‘benefit  of  accelerated  depreciation’.  Hence,  the  

stipulation.   The submission of  the  appellant  regarding  the  

construction  of  the  above  extracted  clause  of  the  1st Tariff  

Order is rejected.

19. However, that does not solve the problem on hand.   Two  

questions  still  remain  to  be  examined,  (i)  Even  if  the  

interpretation  placed  by  the  1st respondent  on  the  above  

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extracted portion of para 5 of the 1st Tariff Order is correct (in  

fact it would be the logical consequence of the rejection of the  

submission of the appellant), would the 1st respondent have a  

right  to  exercise  the  choice  not  to  avail  the  ‘benefit  of  

accelerated depreciation’ after signing the PPA?     (ii) Whether  

the 1st respondent’s right under the Income Tax Act to make  

such a choice could be so exercised which would result in a  

situation whereby the appellant would be obliged under the  

PPA to purchase the power generated by the 1st respondent for  

a period of 25 years without knowing the price at which the 1st  

respondent would be obliged to supply the power?

20. These questions were raised and argued before the 2nd  

respondent  but  unfortunately  the  issue  was  unnecessarily  

complicated by the arguments based on promissory estoppel10.  

After  noticing  the  issue,  the  appellate  tribunal  elaborately  

extracted from the order of the 2nd respondent dated 8.8.2013.  

The relevant part of which reads as under:

“6.16. However, it is also a fact that the parties to the above PPA agreed  in the second para of the Article 5.2 of the PPA that if the project of the  Petitioner is not commissioned during the control period of the Order No.2  of 2010 dated 29.1.2010, either the tariff that was agreed in Article 5.2  of the PPA or the tariff determined by the Commission as on the date  

10 18. One other issue raised by the Appellant before the State Commission is that the choice to sell   electricity at the tariff with or without accelerated depreciation was to be exercised by the Developer only  at the relevant time and such a claim made subsequently is barred by the principles of estoppel.

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of commissioning of the project, whichever is lower, will be applicable.  Thus, the aforesaid PPA recognizes the two tariffs applicable to the  Petitioner  case.   As  the  Petitioner’s  project  was  commissioned  on  2.3.2012, it falls under the control period of Order No.1 of 2012 dated  27.01.2012,  for  tariff  purposes,  relevant  para  of  which  is  reproduced  below:

xxx xxx xxx xxx The above table reveals that both the tariffs i.e. one for the project availing  the benefit  of Accelerated Depreciation and another for the project not  availing  the  benefit  of  accelerated  Depreciation  is  allowed  by  the  Commission for the projects commissioned during the control period of  29.01.2012 to 31.03.2015.  Such being the case, on the cogent reading of  the  Article  5.2  of  the  PPA and  the  tariff  Order  No.1  of  2012  dated  27.01.2012, we are of the view that the Principle of Promissory Estoppel  is not applicable in the present case.”

[Extracted portion of the order of the 2nd respondent  in the impugned order]

It can be seen from the above that the 2nd respondent noticed  

the stipulation in the PPA that if the 1st respondent does not  

commission the PROJECT during the control period specified  

under the 1st Tariff Order “….either the tariff that was agreed  

… or the tariff determined by the Commission … whichever is  

lower will be applicable but reached a conclusion that ……. on  

a cogent reading of the Article 5.2 ……. and the tariff order  

No.1 of 2012 dated 27.01.2012, we are of the view that the  

Principle  of  Promissory  Estoppel  is  not  applicable  in  the  

present case.”  The 2nd respondent noticed the stipulation of  

the PPA regarding the applicable tariff in the event of the 1st  

respondent  not  commissioning  the  PROJECT  would  be  the  

lower of the two tariffs. Without examining the legal effect of  

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such stipulation, the 2nd respondent went into the analysis of  

the 2nd Tariff Order which is neither necessary (nor called for)  

for determining the legal effect of the stipulation of the PPA.

21. The appellate Tribunal after noticing the issue and the  

elaborate consideration bestowed on it by the 2nd respondent  

did not record in the impugned order its view regarding the  

correctness  of  the  above  extracted  conclusion  of  the  2nd  

respondent.  We can only presume that the appellate tribunal  

approved  the  reasoning  and  the  conclusion  of  the  2nd  

respondent since it did not reverse the 2nd respondent’s order.  

22. One of the submissions of the 1st respondent which was  

accepted by the Tribunal is that the issue is covered by an  

earlier  judgment  of  the  Tribunal  in  Appeal  No.111 of  2012  

dated  30th April,  201311 pertaining  to  Rasna  Marketing  

Services  LLP  v.  Gujarat  Urja  Vikas  Nigam  Limited  &  

Another (hereinafter referred to as “RASNA case”).

11  29.  According to the Respondent, the issue has already been decided in favour of the Developer in  judgment dated 30.4.2013 in Appeal No.111 of 2012.

  31.   In the above judgment in Rasna case, the Tribunal decided that there is no infirmity in the  State Commission determining the tariff for the Solar Power Projects of  Rasna Marketing Services Ltd.   without  considering the  benefit  of  accelerated  depreciation in  terms of  the Order  No.2  of  2010 dated  29.1.2010.  In that case, Rasna Marketing Services Ltd. had commissioned its project within the Control   Period specified in the State Commission’s order dated 29.1.2010.  The order dated 29.1.2010 determined  the tariff for Solar Projects with accelerated depreciation but provided that for a project that does not get the  accelerated depreciation benefit, the Commission on a Petition filed by the Developer would determine a   separate tariff without accelerated depreciation.

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23. The  facts  of  RASNA  case are:  that  Rasna,  a  power  

producer,  entered  into  a  power  purchase  agreement  on  

8.12.2010 with the appellant (GUVNL) herein.  Under the said  

PPA, Rasna agreed to sell power at the rate prescribed by the  

1st Tariff  Order.   Eventually,  Rasna commissioned its power  

plant on 31.12.2011 within the control period stipulated in the  

1st Tariff Order.  However, Rasna filed a petition before the 2nd  

respondent praying for determination of specific tariff for the  

sale of power on the ground that Rasna would not be availing  

accelerated  depreciation  benefits.   The  said  application  of  

Rasna was resisted by the GUVNL.  A preliminary objection  

that such an application is  not  maintainable  was raised by  

GUVNL on the ground that Rasna having received the benefit  

of the PPA and also the payment pursuant thereto is debarred  

from seeking the relief such as the one sought by it.  The 2nd  

respondent  overruled  the  preliminary  objection.   Therefore,  

GUVNL went before the appellate tribunal.  Dealing with the  

said appeal, the Tribunal took note of the categoric objection  

raised by the GUVNL that the application for determination of  

a separate tariff by Rasna could not be entertained after Rasna  

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had signed the PPA.12

24. The Tribunal rejected the said objection of GUVNL.13 In  

substance, the conclusion of the Tribunal in RASNA case was  

that the execution of the PPA does not put any embargo on the  

right of  Rasna to seek the determination of a specific tariff.  

The tribunal’s reasons for such a conclusion are that (i) the 1st  

Tariff Order recognises the right of the power producers like  

Rasna either  to  opt  for  or  not  to  opt  for  the  benefit  of  

accelerated depreciation; (ii) there is no specific stipulation in  

the Tariff Order that the power producers like Rasna which do  

not wish to avail the benefit of accelerated depreciation should  

12  21.  The main ground of objection raised by the Appellants before the State Commission was that Rasna  Marketing  Services Limited, R-2 could not be permitted to file the said application after having signed the  PPAs both on 08.12.2010 and 8.6.2011 with the Appellants and such a petition could be entertained by the   State Commission only before the signing of the PPAs and Rasna Marketing Services Ltd. R-2 having  preferred to sign the PPA as per the tariff order dated 29.1.2010 fixing the generic tariff cannot take a   different stand and maintain the petition for determination of project specific tariff on the pretext of not  availing the accelerated depreciation benefits.   13  22.(ii)  It can not be contended that the subsequent execution of PPA would in any manner put an  embargo  on  the  jurisdiction  of  the  State  Commission  for  such  a  specific  tariff  determination  especially when the PPA itself recognised the fact that the tariff shall be as per the order No.2 of 2010  dated 29.01.2010 and particularly when the said order also recognised the right of the developers who are  not willing to get the benefit of accelerated depreciation to approach the State Commission for determining   the specific tariff for those projects.

(iii)  According to the Appellants, if Rasna Marketing Services LL (R-2) did not want to avail   accelerated  depreciation  benefits,  the  same  should  have  been  intimated  to  the  Appellants  even  before  signing of the PPAs.  This contention is not tenable because there is no such reservation either in the tariff   order No.2 of 2010 or in the PPA entered into between the parties.

(iv)   Rasna Marketing Services LLP (R-2) is not mandated under any provision of law to disclose   to the Appellants that it would not be availing the benefit of accelerated depreciation before signing the  PPA.  It is the discretion of the project developer not availing the benefit of accelerated depreciation to   move the State  Commission in a separate petition for determination of project specific tariff as permitted  by the State Commission in the tariff  order No.2 of 2010 dated 29.1.2010.  The said tariff  order  is  a  statutory order binding on the project developers and licensees such as the Appellants and the developers.

v)  If the option of signing or not signing the PPA was contingent on the developers in exercise of  option, then that option should have been specifically sought for by the Appellant and ensured that the same  was incorporated in the PPA.  This admittedly has not been done.

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intimate  the  same to  the  appellant  before  entering  into  the  

PPA; (iii) nor there is any obligation under any law by which  

Rasna is bound to disclose the fact before signing the PPA that  

it would not avail the benefit of accelerated depreciation.  

25. Relying  on  the  judgment  of  the  RASNA  case,  the  

Tribunal recorded a conclusion in the impugned order:

“32. In the present case, the Solar Project could not be commissioned  during the control period specified in the State Commission’s Order dated  29.1.2010.  Therefore, in terms of the PPA, the Respondent No.1 is  entitled  to  tariff  as  determined  by  the  State  Commission  in  the  subsequent order dated 27.1.2012.”

We do not wish to make any comment on the correctness of  

the order of  the tribunal in  RASNA case.   We are not sure  

whether the order has become final.  But we are of the opinion  

that the reliance by the tribunal in the instant case on RASNA  

case order is clearly wrong.  In RASNA case, the prayer was  

for the determination of a separate tariff applicable to it.  In  

the instant case, the prayer of the 1st respondent is not for  

fixation  of  separate  tariff  but  for  a  declaration  that  the  1st  

respondent  is  entitled  for  claiming the  benefits  of  the  tariff  

determined under the 2nd Tariff Order.

26. Apart  from that,  the conclusion of  the Tribunal  in the  

instant case is wrong.  First of all the PPA does not give any  

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option to the respondent to opt out of the terms of the PPA.   It  

only visualises a possibility of the producer not commissioning  

its PROJECT within the “control period” stipulated under the  

1st Tariff Order and provides that in such an eventuality what  

should be the tariff applicable to the sale of power by the 1st  

respondent.    Secondly, the PPA  does not ‘entitle’  the 1st  

respondent to the “tariff as determined by the” 2nd respondent  

by the 2nd Tariff Order.  On the other hand, the PPA clearly  

stipulates that in such an eventuality;

“Above tariff shall apply for solar projects commissioned on or before 31st  December  2011.   In  case,  commissioning  of  Solar  Power  Project  is  delayed  beyond 31st December 2011,  GUVNL shall  pay  the  tariff  as  determined by Hon’ble GERC for Solar Projects effective on the date of  commissioning  of  solar  power  project  or  above  mentioned  tariff,  whichever is lower.”

The  right  of  the  1st respondent  not  to  avail  the  “benefit  of  

accelerated depreciation” flows from the Income Tax Act.   It is  

only  the  1st Tariff  Order  which  gives  an  option  to  the  1st  

respondent (for that matter to all the power producers who are  

similarly situated as the 1st respondent) not to sell the power  

produced by it at the price specified in the 1st Tariff Order but  

seek the determination of a separate tariff.  Such a right and  

option  is  available  to  the  power  producers  only  in  one  

contingency i.e., that they are not inclined to avail the ‘benefit  

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of accelerated depreciation’.

27. The real question is: what is the point of time at which  

the  power  producer  can  exercise  such  right  to  seek  the  

determination of a separate tariff.

28. The Income Tax Act gives an option to the producers of  

power  either  to  avail  the  ‘benefit  of  the  accelerated  

depreciation’  or  not.    It  also  specifies  the point  of  time at  

which  such  an  option  could  be  exercised.    The  right  to  

exercise  such option at  a  point  of  time specified  in  the  2nd  

proviso to Rule 5(1A) is limited only for the purpose of availing  

the benefits flowing from the Income Tax Act.  The PPA does  

not  make  any  reference  to  the  “benefits  of  accelerated  

depreciation”.  It simply specified the price to be paid by the  

appellant  for  the  power  purchased  by  it  from  the  1st  

respondent.    The appellant  determined the said price after  

taking  into  consideration  various  factors.   One  of  them  

happened  to  be  that  the  Power  Producers  are  entitled  to  

certain ‘benefits’ under the Income Tax Act.  The availability of  

such  ‘benefit’  is  dependent  upon  the  option  of  the  power  

producers.  Though the 1st Tariff Order employs the expression  

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‘benefit’ in the context of the AD Scheme under Section 32 of  

the  IT  Act,  the  applicability  of  the  provision  to  a  power  

producer  depends  upon  the  choice  of  the  power  producer.  

Whether the availability of the AD Scheme is beneficial to the  

power  producer  or  not  in  a  given case  depends on various  

factors the details of which we do not propose to examine.  It  

is for the power producer to make an assessment whether the  

availing of the AD is beneficial or not will take a decision if the  

scheme under Section 32 IT Act should be availed or not.

29. But  the  availability  of  such  an  option  to  the  power  

producer for the purpose of the assessment of income under  

the  IT  Act  does  not  relieve  the  power  producer  of  the  

contractual  obligations  incurred  under  the  PPA.   No  doubt  

that the 1st respondent as a power producer has the freedom of  

contract either to accept the price offered by the appellant or  

not  before  the PPA was entered into.   But such freedom is  

extinguished after the PPA is entered into.

30. The 1st respondent  knowing fully  well  entered into  the  

PPA in question which expressly stipulated under Article 5.2  

that “the tariff is determined by Hon’ble Commission vide tariff  

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order for solar based power project dated 29.1.2010”

31. Apart  from  that  both  the  respondent  No.  2  and  the  

appellate  tribunal  failed  to  notice  and  the  1st respondent  

conveniently  ignored  one  crucial  condition  of  the  PPA  

contained in the last sentence of para 5.2 of the PPA:-

“In case, commissioning of Solar Power Project is delayed beyond 31st  December 2011, GUVNL shall pay the tariff as determined by Hon’ble  GERC for Solar Projects effective on the date of commissioning of  solar power project or above mentioned tariff, whichever is lower.”

The  said  stipulation  clearly  envisaged  a  situation  where  

notwithstanding the  contract  between the parties  (the  PPA),  

there is a possibility of the first respondent not being able to  

commence  the  generation  of  electricity  within  the  “control  

period” stipulated in the 1st tariff order.   It also visualised that  

for  the  subsequent  control  period,  the  tariffs  payable  to  a  

PROJECTS/power  producers  (similarly  situated  as  the  first  

respondent) could be different.   In recognition of the said two  

factors, the PPA clearly stipulated that in such a situation, the  

1st respondent  would  be  entitled  only  for  lower  of  the  two  

tariffs.  Unfortunately, the said stipulation is totally overlooked  

by the second respondent and the appellate tribunal.  There is  

no whisper about the said stipulation in either of the orders.

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32. The 1st respondent created enough confusion.  While on  

one  hand  the  1st respondent  asserted  a  right  to  seek  

determination  of  a  separate  tariff  independent  of  the  tariff  

fixed  under  the  1st Tariff  Order  in  view  of  the  stipulation  

contained in the 1st Tariff Order that “for a project that does  

not get such benefit, the Commission would, on a petition in  

that respect, determine a separate tariff taking into account all  

the  relevant  facts”  did  not  seek  a  relief   before  the  2nd  

respondent  to  determine  a  separate  tariff  but  claimed  the  

benefit  of  the  2nd Tariff  Order.   Assuming  for  the  sake  of  

argument  that  the  petition  filed  by  the  1st respondent  

(1270/2012)  is  to  be  treated  as  an  application  for  

determination of separate tariff which would be identical with  

the  tariff  fixed  under  the  2nd Tariff  Order,  whether  the  1st  

respondent would be entitled for such a relief depends, if at all  

he is entitled to seek such a determination, on a consideration  

of “all the relevant facts” but not by virtue of the operation of  

the 2nd Tariff Order.

33. For  all  the  above-mentioned  reasons,  we  are  of  the  

opinion that the impugned order cannot be sustained and the  

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same is therefore set aside.  As a consequence, the order of the  

2nd respondent dated 8.8.2013, which was the subject matter  

of appeal in the impugned order, is also set aside.    

34. At  this  juncture,  we need to mention that  the learned  

counsel for the respondents very vehemently argued that the  

instant appeal is not maintainable because Section 125 of the  

Electricity Act mandates that an appeal to this Court under  

the  said  provision  is  maintainable  only  where  there  is  a  

substantial question of law and the parties seeking to invoke  

the appellate jurisdiction of this Court must clearly indicate as  

to  what  is  the  substantial  question  of  law  that  arises  for  

consideration of this Court.   According to the respondents,  

the memorandum of appeal does not disclose any substantial  

question of law which arises for the consideration of this Court

35. We do not find any substance in the submission.  We  

believe  that  debate  in  the  foregoing  paragraphs  of  this  

judgment revolved around more than one substantial question  

of  law justifying the exercise  of  the appellate jurisdiction of  

this Court.  The appeal is allowed with costs quantified at Rs.  

2  lakhs  payable  by  the  1st respondent  herein.  The  interim  

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orders granted earlier stand dissolved.  The amounts, if any,  

paid by the appellant pursuant to the interim orders of this  

Court shall be adjusted towards the payments due to the 1st  

respondent for future procurement of power by the appellant  

in such manner as the appellant deems fit and proper.  

….………………………….J.                                                       (J. Chelameswar)

…….……………………….J.   (Abhay Manohar Sapre)

New Delhi; February 2, 2016   

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