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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.5881-5882 OF 2016

ALL INDIA POWER ENGINEER  FEDERATION & ORS. … APPELLANTS

VERSUS

SASAN POWER LTD. & ORS. ETC. ...RESPONDENTS

WITH

CIVIL APPEAL NOS.5239-5240 OF 2016 CIVIL APPEAL NO.5246 OF 2016

CIVIL APPEAL NOS.5342-5343 OF 2016 CIVIL APPEAL NO.5879 OF 2016 CIVIL APPEAL NO.5355 OF 2016 CIVIL APPEAL NO.5365 OF 2016 CIVIL APPEAL NO.5367 OF 2016 CIVIL APPEAL NO.5956 OF 2016

J U D G M E N T  

R.F. Nariman, J.

1. These appeals have been argued over a number of days, but

ultimately the points raised in them lie within a narrow compass.  

2. On 19.1.2005, the Central Government, in exercise of powers

under Section 63 of the Electricity Act, 2003 issued guidelines for a

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tariff  based  competitive  bid  process  to  be  initiated  by  distribution

licensees  /procurers  for  procurement  of  power  from  generating

companies. The electricity to be procured by such procurers is for the

purpose of distribution and retail supply to consumers generally.  On

10.2.2006,  in  pursuance of  these guidelines,  procurers  in  different

States, namely, appellants 1 to 3 and respondents 5 to 15 (in Civil

Appeal  Nos.5239-5240  of  2016)  nominated  Power  Finance

Corporation Limited, a Government of India undertaking as the Nodal

Agency to complete a competitive bid process for development of an

ultra  mega  power  project  based  on  linked  coalmines  using  super

critical  technology of  units of  660 mega watts (MW) each, plus or

minus  20%,  in  Sasan  District,  Singrauli,  Madhya  Pradesh.   On

10.2.2006,  Sasan  Power  Limited  was  incorporated  as  a  special

purpose vehicle by Power Finance Corporation in order to implement

the  aforesaid  purpose.   On  1.8.2007,  based  on  the  competitive

bidding process held by Power Finance Corporation, Reliance Power

Limited,  having  quoted  the  lowest  amount,  was  selected  as  the

successful bidder, and a letter of intent was issued to Reliance Power

Ltd.  The quoted tariff, year by year, for a period of 25 years, which

was  accepted  and  incorporated  as  Schedule  11  in  the  Power

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Purchase  Agreement  dated  7.8.2007  (PPA)  had  tariffs  at  an

extremely depressed rate for the first two years, after which the tariffs

were fixed at a significantly higher rate.  On the very day that the PPA

was executed between Sasan Power Limited and the procurers for

generation and sale of electricity, 100% share holding of the special

purpose vehicle was acquired by Reliance Power Limited.  The PPA

contains detailed clauses with respect to generation of power and the

tariffs payable for the period of 25 years.  Apart from other provisions,

we are really concerned with Article 6 read with Schedule 5 which

provides  for  pre-conditions  to  be  satisfied  for  declaration  of  a

generating  unit  as  Commercial  Operation  Date,  “COD”,  namely

readiness to commence commercial operations.  This happens only

when a performance test, by operating the generating unit at 95% of

the  contracted  capacity  as  existing  on  the  Effective  Date  on  a

continuous  running  basis  for  72  hours,  has  been  certified  by  an

independent engineer, by giving a final test certificate to the aforesaid

effect.  The PPA also contains various other clauses which will be set

out during the course of this judgment.  

3. The bone of contention in these matters is whether the COD for

Unit  No.3, which was the first Unit  to be commissioned, had been 3

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achieved on 31.3.2013.  If  it  had, then under  Schedule 11 to the

PPA, the entire first year would get exhausted in one day, i.e., 31st

March being the end of  the contract  year, for  which tariff  payable

would be at the rate of 69 paise per unit.  If not, then it is only on and

from the commencement of COD that such year would begin, which,

according to the appellants before us, would only begin on 16.8.2013

when a final test certificate in accordance with Article 6 of the PPA

was given by the independent engineer to the effect that 95% of the

contracted capacity had been achieved for a continuous period of 72

hours.  We are informed that if the COD is said to be on 31.3.2013,

as has been held by the Appellate Tribunal,  the consumers would

have to pay a sum of over  1000 crores,  ₹ being the differential tariff

that would apply.  

4. The date for commissioning the first unit was fixed under the

PPA as 7th May, 2013.  However, under Schedule 11 thereof, this date

was preponed to 27th November, 2012.  As Sasan kept postponing

this date, it appears that the commissioning tests for generating Unit

No.3 commenced from 20.3.2013.  Various emails were exchanged

from 27.3.2013 to 30.3.2013 between Sasan and the Western Region

Load Dispatch Centre (hereinafter  referred to as “the WRLDC”),  a 4

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statutory authority under the Electricity Act, 2003.  It is the case of

Sasan that though they were ready to deliver electricity on 31.3.2013

at 95% of the contracted capacity of 620 MW of the unit, they could

not do so as WRLDC did not give them the necessary green signal to

go ahead.  They relied heavily upon the independent engineer’s test

certificate dated 30.3.2013 to show that  a COD took place on the

following day, which we will  consider  in  some detail  later.  At  this

stage, suffice it to say that a petition was filed by WRLDC before the

Central Electricity Regulatory Commission (CERC) on 25.4.2013, in

which it was prayed:-

“1. Kindly look into the veracity of the certificate issued by the  Independent  Engineer  in  view  of  deliberate suppression and misrepresentation of the facts and issue suitable directions to respondent no.2 to desist from such act.

2. Kindly  look  into  the  matter  of  Respondent  No.  1 including  into  intentional  mis-declaration  of  parameters related  to  commercial  mechanism  in  vogue  and  has purported   to  declare  the  part  (de-rated)  capacity  of 101.38 MW  as  commercial  on   the  grounds   of   load

restriction by WRLDC and issued suitable  directions  in the matter.

3. Issue specific guidelines with respect to declaration of COD of the generators who are not governed by the CERC (Terms and Conditions of Tariff) Regulations, 2009 to be in line with CERC regulations so that the same can

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be implemented in a dispute free manner and eliminate any possibility of gaming by generator.

4. Hon’ble Commission may give any further directions as deemed fit in the circumstances of the case.”

5. This  petition  was  allowed  by  the  CERC  by  its  order  dated

8.8.2014, by which it first set out five issues as follows:-

(a) Whether  the  petition  filed  by  WRLDC  is maintainable?

(b) Whether  the  Certificate  issued  by  IE  is  in accordance with the PPA and if not, whether IE has made deliberate suppression or misrepresentation of facts while issuing the certificate?

(c) Whether COD of the station as declared by SPL is in accordance with the PPA?

(d) Whether  the  Respondent  No.1  has  indulged  in mis-declaration  of  parameters  relating  to  commercial mechanism in vogue?

(e) Guidelines with regard to the commercial operation of a generating station which is not regulated by the tariff regulations of the Commission.”

6. The  CERC  answered  issues  (a),  (b),  (c),  and  (e)  in  the

affirmative, and issue (d) in the negative.  Ultimately the Commission

arrived  at  the  conclusion  that  COD  had  not  been  achieved  on

31.3.2013 but had only been achieved later, on 16th August of the

same year.  This finding was set aside by the Appellate Tribunal by its

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judgment dated 31.3.2016, in which the Appellate Tribunal found that

though COD had not been achieved on 31.3.2013 in accordance with

the PPA, but that the procurers under the PPA had waived their right

to demand performance at 95%, and that the performance of Unit

No.3,  which was only roughly 17% of its contracted capacity, was

accepted by all the procurers, and that therefore there was a waiver

of this essential condition, which would then entitle the generator to

treat 31.3.2013 as the date on which commercial operation of Unit

No.3 commenced.  It is the correctness of this judgment which has

been assailed by the various appellants before us.  

7. Mr. Jayant Bhushan, learned senior  counsel,  Mr. Gopal Jain,

learned senior  counsel,  Mr. M.G. Ramachandran, learned counsel,

Mr. Purusha Indra  Kavrar, learned AAG,  and   Mr. Alok   Shankar,

learned counsel appearing for the appellants have relied heavily on

Article 6.3.1 read with Schedule 5 of the PPA, and stated that this is

an  Article  which  does  not  merely  reflect  the  individual  rights  and

liabilities of the generator and procurers of electricity but would also

sound in public interest inasmuch as the declaration of COD would

have  effect  on  the  tariff  that  is  payable  by  consumers  generally.

They, therefore,  argued  that  Article  6.3.1  cannot  be  waived  as  a 7

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matter of law.  They also argued that it cannot also be waived as a

matter of fact inasmuch as when the PPA expressly allowed a certain

provision to be waived, it expressly stated so.  In this regard, Articles

3.1.2, 4.4.2(b) 10.1(c), 10.2(c) were pointed out by them.  Referring to

Article 18.3 of the PPA, it was argued that the said Article is not a

substantive provision for waiver, but only a provision dealing with the

manner in which waiver is to be exercised, and has reference only to

the  aforesaid  Articles.   Further,  even  assuming  that  there  was  a

waiver, such waiver took place as late as 15.4.2013 when the last

communication from Uttarakhand Power was received.  There was,

therefore, no waiver of the aforesaid condition on 31.3.2013.  They

also argued that as a matter of fact the emails exchanged between

the  parties  would  show  that  the  lead  procurer  and  all  the  other

procurers had in fact never consented to 31.3.2013 as being the COD

for the purpose of the PPA.  They also argued that really speaking

any such alleged waiver was not a waiver at all, but an amendment to

the PPA which would require the Commission’s consent under Article

18.1, inasmuch as it  would affect  the tariff  payable by consumers.

They also argued that  it  is  clear  from a reading of  a chart  which

showed generation from March to August, 2013 that Sasan was not

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able to achieve anywhere near 95% of contracted capacity until 16 th

August  which  is  when  the  COD took  place  on  facts.   They  also

pointed out  that,  for  example,  in  the month of  July, there was no

supply of power at all by Sasan Power.  Ultimately, it was stated that

the  Independent  Engineer’s  certificate  dated  30.3.2013  was  a

document made only to favour Sasan, so that Sasan could swallow

one entire year of tariff in one day, so that the consumer would have

to pay the higher tariff for what is in reality the first year, but is now

being treated as the second year of generation and supply.  

8. As  against  this,  Shri  Chidambaram  and  Shri  Sibal,  learned

senior  counsel  appearing  on  behalf  of  Sasan  Power  Ltd.,  have

argued that as against 69 and 70 paise per unit for electricity supplied

under  the  PPA,  the  procurers  were  in  fact  procuring  electricity  at

much higher rates.  It was the procurers themselves, therefore, who

kept telling Sasan to supply power as soon as possible.  For this, they

relied,  in  particular, on the minutes of  a  meeting dated 27.2.2013

between  the  procurers  and  Sasan,  in  which  the  procurers

unequivocally  stated  that  any  time  upto  31.3.2013,  the  power

generation  should  begin  from  Unit  No.3.   This  was  because  the

moment such power generation began, whether it was 69 paise or 70 9

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paise for the second year, the aforesaid tariff was much, much lower

than what the procurers would have to pay otherwise.  It was their

argument that it was only at the behest of the procurers themselves

that the COD was declared on 31.3.2013.  They further argued that

on a correct reading of emails and letters exchanged between the

parties, the lead procurer and all  other procurers had actually and

unequivocally waived the requirement of 95% of contracted capacity

demand  and  that  the  Appellate  Tribunal  was  right  in  this  behalf.

Countering the arguments of the appellant, they referred to and relied

upon Section 63 of  the Indian Contract  Act,  1872 to buttress their

submission that  waiver  is a right  granted by the Contract  Act  and

does  not  depend  upon  the  PPA.   Therefore,  whatever  the

construction of Article 18.3 of the PPA, it is clear that the Contract Act

itself  gives  them  this  right  which  the  procurers  themselves  have

exercised in accordance with law, for the very good reason that they

wanted the supply of cheap energy at any cost, even at the cost of

being at 17% instead of 95% of contracted demand.  It was also their

case that they were ready to supply electricity on 31st March at 95%

of the contracted demand, but unfortunately WRLDC prevented them

from doing so,  and that  the independent engineer’s certificate had

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been  wrongly  castigated  by  CERC,  as  was  correctly  held  by  the

Appellate  Tribunal.   The  independent  engineer  laid  bare  the  facts

correctly and therefore did not give a false or wrong certificate as was

found by CERC. They also met an argument raised by the appellant

that Haryana at least had waived its right without prejudice to its other

rights  and  contentions.   This  was  met  by  stating  that  Haryana

accounted only for roughly 12% of the total electricity demanded by

all  the procurers and that  as per a clause in the PPA, if  the lead

procurer and the other procurers constitute 65% or more, they can

bind all the other procurers.   

9. In order to appreciate the rival submissions, it is necessary to

refer to the relevant provisions of the PPA, which reads as follows:-

“1. Definitions

The  terms  used  in  this  Agreement,  unless  as defined below or repugnant to the context, shall have the same meaning as assigned to them by the Electricity Act, 2003  and  the  rules  or  regulations  framed  thereunder, including  those  issued/framed  by  Appropriate Commission  (as  defined  hereunder),  as  amended  or re-enacted from time to time.  

The following terms when used in this Agreement shall have the respective meanings, as specified below:

“Commercial Operation  “Date”  or

Means, in relation to a Unit, the date  one day after  the

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“COD” date  when  each  of  the Procurers  receives  a  Final Test  Certificate  of  the Independent  Engineer  as per the provisions of Article 6.3.1 and in relation to the Power  Station  shall  mean the  date  by  which  such Final  Test  Certificates  as per  Article  6.3.1  are received  by  the  Procurers for all the Units;

“Commissioning” or “commissioned with  its grammatical variations

Means, in relation to a Unit, that the Unit or in relation to the  Power  Station  all  the Units  of  the  Power  Station have  passed  the Commissioning  Tests successfully;

“Commissioning Tests”  or “Commissioning Test”

Means the Tests provided in Schedule 5 herein;

“Commissioned Unit”

Means the Unit in respect of which COD has occurred;

“Contract Year” Means the period beginning on  the  date  of  this Agreement  and  ending  on the immediately succeeding March  31  and  thereafter each  period  of  12  months beginning  on  April  1  and ending  on  March  31 provided that:

In  the  financial  year  in which  Scheduled  COD  of

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the  first  Unit  would  have occurred,  a  Contract  Year shall  end  on  the  date immediately  before  the Scheduled COD of the first Unit  and  a  new  Contract Year  shall  begin  once again  from the  Scheduled Commercial  Operation Date  of  the  first  Unit  and end  on  immediately succeeding March 31 and provided further that

(ii) (ii) The last Contract Year of this  Agreement  shall  end on the last day of the term of this Agreement;  

“Contracted Capacity”

Means (i)  for  the first  Unit, 620.4  MW;  (ii)  for  the second Unit, 620.4 MW; (iii) for the third Unit, 620.4 MW; (iv) for the fourth Unit, 620.4 MW;  (v)  for  the  fifth  Unit, 620.4  MW and  (vi)  for  the sixth  Unit  620.4  MW rated net  capacity  at  the Interconnection  Point,  and in  relation  to  the  Power Station  as  a  whole  means 3722.4  MW  rated  net capacity  at  the Interconnection  Point,  or such  rated  capacities  as may  be  determined  in accordance  with  Article 6.3.4  or  Article  8.2  of  this Agreement;

“Effective Date” Means  the  date  of  signing 13

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of this Agreement by last of all the Parties;

“Declared Capacity”

In relation to a Unit  or  the Power  Station  at  any  time means  the  net  capacity  of the  Unit  or  the  Power Station at the relevant time (expressed  in  MW  at  the Interconnection  Point)  as declared  by  the  Seller  in accordance  with  the  Grid Code  and  dispatching procedures  as  per  the Availability Based Tariff;

“Final  Test Certificate”

Means

(a)A  certificate  of  the Independent Engineer certifying  and accepting  the  results of  a  Commissioning Test/s  in  accordance with  Article  6.3.1  of this Agreement; or

(b)A  certificate  of  the Independent Engineer certifying the result of a  Repeat Performance  Tests  in accordance  with Article  8.2.1  of  this Agreement;  

“Grid  Code”  or “IEGC”

Means  any  set  of regulations or codes issued by CERC as amended and revised  from  time  to  time and  legally  binding  on  the

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Sellers’  and  Procedures’ governing  the  operation  of the  Grid  System  or  any succeeding  set  of regulations or code;

“Independent Engineer”

Means  an  independent consulting  engineering  firm or  group  appointed  jointly by all the Procurers (jointly) and the Seller, to carry out the functions in accordance with Article 4.7.1 and Article 6,  Article  12  and  Article  8 herein.

“Lead Procurer” Shall  have  the  meaning scribed  thereto  in  Article 2.5;  

“Performance Test”

Means the  test  carried  out in  accordance  with  Article 1.1  of  Schedule  5  of  this Agreement;

“Scheduled COD”  or “Scheduled Commercial Operation Date”

Means (i)  for  the first  Unit, May  7,  2013;  (ii)  for  the second  Unit,  December  7, 2013; (iii) for the third Unit, July  7,  2014;  (iv)  for  the fourth  Unit,  February  7, 2015;  (v)  for  the  fifth  Unit, September 7, 2015 and (vi) for  the  sixth  Unit,  April  7, 2016  or  such  other  dates from time to time specified in  accordance  with  the provisions  of  this Agreement;  

“Scheduled Means in relation to a Unit,

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Synchronization Date”

the  date,  which  shall  be maximum  of  one  hundred and eighty (180) days prior to the Schedule COD of the respective Unit;  

“Tariff” Means  the  tariff  as computed  in  accordance with Schedule 7;

“Tested Capacity”

In relation to a Unit, or the Power Station as a whole (if all  the  Units  of  the  Power Station  have  been commissioned)  means  the results  of  the  most  recent Performance Test or Repeat Performance  Test  carried out in relation to the Power Station  in  accordance  with Article  6,  Article  8  and Schedule  5  of  this Agreement;  

“Unit” Means  one  steam generator,  steam  turbine, generator  and  associated auxiliaries  of  the  Power Station  based  on Supercritical Technology;

6: Synchronization, Commissioning and Commercial Operation

6.1 Synchronisation

6.1.1 The Seller  shall  give the Procurers  and RLDC at least  sixty  (60) days advance preliminary written notice and at least thirty (30) days advance final written notice, of the date on which it intends to synchronize a Unit to the

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Grid System, Provided that no Unit shall be synchronized prior to 36 months from NTP.  

6.1.2 Subject to Article 6.1.1, a Unit may be synchronized by  the  Seller  to  the  Grid  System  when  it  meets  all connection conditions prescribed in any Grid Code then in effect  and  otherwise  meets  all  other  Indian  legal requirements for synchronization to the Grid System.  

6.2 Commissioning

6.2.1 The  Seller  shall  be  responsible  for  ensuring  that each Unit is Commissioned in accordance with Schedule 5 at its own cost, risk and expense.

6.2.2 The  Seller  shall  give  all  the  Procurers  and  the Independent Engineer not less than ten (10) days prior written notice of Commissioning Test of each Unit.

6.2.3 The Seller (individually), the Procurers (jointly) and the  Independent  Engineer  (individually)  shall  each designate  qualified  and  authorized  representatives  to witness and monitor Commissioning Test of each Unit.  

6.2.4 Testing  and  measuring  procedures  applied  during each Commissioning Test shall be in accordance with the codes, practices and procedures mentioned in Schedule 5 of this Agreement.  

6.2.5 Within five (5) days of  a Commissioning Test,  the Seller  shall  provide  the  Procurers  (jointly)  and  the Independent  Engineer  with  copies  of  the  detailed Commissioning  Test  results.   Within  five  (5)  days  of receipt  of  the  Commissioning  Test  results,  the Independent Engineer shall provide to the Procurers and the Seller  in writing,  his findings from the evaluation of Commissioning  Test  results,  either  in  the  form of  Final Test Certificate certifying the matters specified in Article 6.3.1  or  the  reasons  for  non-issuance  of  Final  Test Certificate.  

6.3 Commercial Operation

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6.3.1 A Unit shall be Commissioned on the day after the date  when  all  the  Procurers  receive  a  Final  Test Certificate of the Independent Engineer stating that:  

a) the Commissioning Tests have been carried out in accordance with Schedule 5 and are acceptable to him; and  

b) the results of the Performance Test show that the Unit’s Tested Capacity, is  not  less than ninety five (95) percent  of  its  Contracted  Capacity  as  existing  on  the Effective Date.

6.3.2 If a Unit fails a Commissioning Test, the Seller may retake the relevant test, within a reasonable period after the end of  the previous  test,  with  three  (3)  day’s  prior written  notice  to  the  Procurers  and  the  Independent Engineer.  Provided however, the Procurers shall have a right to require deferment of any such re-tests for a period not  exceeding  fifteen  (15)  days,  without  incurring  any liability for such deferment, if the Procurers are unable to provide  evacuation  of  power  to  be  generated,  due  to reasons outside the reasonable control of the Procurers or due to inadequate demand in the Grid.

6.3.3 The  Seller  may  retake  the  Performance  Test  by giving at least fifteen (15) days advance notice in writing to the Procurers, up to eight (8) times, during a period of one hundred and eighty (180) days (“Initial Performance Retest Period”) from a Unit’s COD in order to demonstrate an  increased  Tested  Capacity  over  and  above  as provided  in  Article  6.3.1  (b).  Provided  however,  the Procurers shall have a right to require deferment of any such re-tests for a period not exceeding fifteen (15) days, without  incurring any liability  for  such  deferment,  if  the Procurers are unable to provide evacuation of power to be  generated,  due  to  reasons  outside  the  reasonable control of the Procurers or due to inadequate demand in the Grid.

6.3.4 (i) If  a  Unit’s  Tested  Capacity  after  the  most recent  Performance Test  mentioned in Article 6.3.3 has

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been conducted, is less than its Contracted Capacity as existing on the Effective Date, the Unit shall be de-rated with the following consequences in each case with effect from the date of completion of such most recent test:

a) the Unit’s Contracted Capacity shall be reduced to its  Tested  Capacity,  as  existing  at  the  most  recent Performance Test referred to in Article 6.3.3 and Quoted Capacity  Charges  shall  be  paid  with  respect  to  such reduced Contracted Capacity;

b) The  Quoted  Non  Escalable  Capacity  Charge  (in Rs./kwh) shall be reduced by the following in the event Tested Capacity is less than ninety five (95%) per cent of its Contracted Capacity as existing on the Effective Date: Rs.0.25/kwh x [1 – {(Tested Capacity of all Commissioned Units  +  Contracted  Capacity  of  all  Units  not Commissioned  at  the  Effective  Date)/  Contracted Capacity of all Units at the Effective Date})

c) the  Seller  shall  not  be  permitted  to  declare  the Available Capacity of the Unit at a level greater than its Tested Capacity;

d) the Availability  Factor of the derated Unit  shall  be calculated  by  reference  to  the  reduced  Contracted Capacity; and  

e) the Capital  Cost and each element of  the Capital Structure Schedule shall be reduced in proportion to the reduction in the Contracted Capacity of the Power Station as  a  result  of  that  de-rating  (taking  into  account  the Contracted  Capacity  of  any  Unit  which  has  yet  to  be Commissioned).  

(ii) If at the end of Initial Performance Retest Period or the  date  of  the  eighth  Performance  Test  mentioned  in Article 6.3.3, whichever is earlier, the Tested Capacity is less than the Contracted Capacity (as existing on the date of  this  Agreement),  the  consequences  mentioned  in Article 8.2.2 shall apply for a period of one year.  Provided that such consequences shall  apply with respect to the

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Tested Capacity existing at the end of Initial Performance Retest Period or the date of the eighth Performance Test mentioned in Article 6.3.3, whichever is earlier.  

6.3.5 If a Unit’s Tested Capacity as at the end of the Initial Performance  Retest  Period  or  the  date  of  the  eighth Performance Test mentioned in Article 6.3.3, whichever is earlier, is found to be more than it’s Contracted Capacity as  existing  on  the  Effective  Date,  the  Tested  Capacity shall be deemed to be the Unit’s Contracted Capacity if any  Procurer/s  agrees  and  intimates  the  same  to  the Seller within thirty (30) days of receipt of the results of the last  Performance Test  to  purchase such excess Tested Capacity and also provide to the Seller additional Letter of Credit  and  Collateral  Arrangement  (if  applicable)  for payments  in  respect  of  such  excess  Tested  Capacity agreed to be purchased by such Procurer/s.  In case the Procurer/s  decide  not  to  purchase  such  excess  Tested Capacity,  the  Seller  shall  be  free  to  sell  such  excess Tested  Capacity  to  any  third  party  and  the  Unit’s Contracted  Capacity  shall  remain  unchanged, notwithstanding  that  the  Tested  Capacity  exceeded  the Contracted Capacity.  

Provided that in all the above events, the Seller shall be liable  to  obtain/maintain  all  the  necessary  consents (including  Initial  Consents),  permits  and  approvals including those required under the environmental laws for generation of such excess Tested Capacity.  

6.4 Costs Incurred.  

The Seller expressly agrees that all costs incurred by  him  in  synchronizing,  connecting,  Commissioning and/or  Testing  or  Retesting  a  Unit  shall  be  solely  and completely to his account and the Procurer’s or Procurers’ liability  shall  not  exceed  the  amount  of  the  Energy Charges  payable  for  such  power  output,  as  set  out  in Schedule 7.  

18: Miscellaneous Provisions

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18.1 Amendment

The Agreement may only be amended or supplemented by a written agreement between the Parties and after duly obtaining  the  approval  of  the  Appropriate  Commission, where necessary.

18.3. No Waiver

A valid waiver by a Party shall be in writing and executed by an authorized representative of that Party.  Neither the failure by any Party to insist on the performance of the terms, conditions, and provisions of  this Agreement nor time or other indulgence granted by any Party to the other Parties  shall  act  as  a  waiver  of  such  breach  or acceptance of any variation or the relinquishment of any such right or any other right under this Agreement, which shall remain in full force and effect.

Schedule 5: Commissioning and Testing

1.1 Performance Test

i. (a) The  Performance  Test  shall  be  conducted under  any  and  all  ambient  conditions  (temperature, humidity etc.) and any and all Fuel qualities that may exist during  the  time  of  the  Performance  Test  and  no corrections in final gross and net output of the Unit will be allowed as  a  result  of  prevailing  ambient  conditions  or Fuel quality.  

(b) The correction curves will only be used if the Grid System operation during the Performance Test exceeds Electrical System Limits.  

(c) The  Performance  Test  shall  be  deemed  to  have demonstrated the Contracted Capacity of the Unit under all  designed  conditions  and  therefore  no  adjustments shall  be  made  on  account  of  fuel  quality  or  ambient conditions.  

(d) The Seller shall perform in respect of each Unit a Performance Test,  which such Unit  shall  be deemed to

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have passed if  it  operates continuously for seventy two consecutive hours at or above ninety five (95) percent of its Contracted Capacity as existing on the Effective Date and within the Electrical System Limits and the Functional Specifications.  

ii. For the purposes of any Performance Test pursuant to this sub-article 1.1, the Electrical System Limits to be achieved shall be as follows:

(a) Voltage

The  Unit  must  operate  within  the  voltage  levels described in the Functional Specification for the duration of the Performance Test.  If, during the Performance Test, voltage tests cannot be performed due to Grid System, data  supplied  from  tests  of  the  generator  step-up transformers  and  generators  supplied  by  the manufacturers shall be used to establish the ability of the Unit to operate within the specified voltage limits.

(b) Grid System Frequency

The  Unit  shall  operate  within  the  Grid  System frequency levels described in the Functional Specification for the duration of the Performance Test.

(c) Power Factor

The Unit shall operate within the power factor range described in the Functional Specification for the duration of the Performance Test.  If, during the Performance Test, power factor tests cannot be performed due to the Grid System, data supplied from tests of the generators and the  generator  step-up  transformers  supplied  by  the manufacturers shall be used to establish the ability of the Unit to operate within the specified power factor range.

(d) Fuel quality and cooling water temperature 22

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The Unit  must  operate to its  Contracted Capacity with Fuel quality and water temperature available at the time of Testing and no adjustment shall be allowed for any variation in these parameters.  

iii. As a part of the Performance Test, the Seller shall demonstrate  that  the  Unit  meets  the  Functional Specifications for Ramping rate as mentioned in Schedule 4.  For this purpose, representative samples of ramp rates shall be taken, by ramping up or down the gross turbine load  while  maintaining  the  required  temperature  and temperature differences associated with each ramp rate within the turbine while maintaining all other operational parameters within equipment limits.  

iv. Further, as a part of the Performance Test, the Unit shall  be  tested  for  compliance  with  parameters  of Supercritical Technology.

1.2 Testing  and  Measurement  procedures  applied during  Performance  Test  shall  be  in  accordance  with codes,  practices  or  procedures  as  generally/normally applied for the Performance Tests.  

1.3 The  Seller  shall  comply  with  the  prevalent  Laws, rules  and  regulations  as  applicable  to  the  provisions contained in this Schedule from time to time.  

Schedule 11: Quoted Tariff Contra ct Year

Commence ment Date of Contract Year

End Date of  Contract  Year

Quoted  Non-  Escalable  Capacity  Charges   (Rs.1kwh)

Quoted  Escalable  Capacity  Charges    (Rs. 1kwh)

Quoted  Non-  Indexed  Energy  Charges  (Rs.1kwh)

Quoted  Indexed  Energy  Charges  (Rs.1kwh)

1 27 Nov 2012 31 May 2013 0.21 0.001 0.575 0.001 2 1-Apr-2013 31-Mar-2014 0.125 Same as  

Above 0.575 Same as  

Above 3 1-Apr-2014 31-Mar-2015 0.163 Same as  

Above 1.148 Same as  

Above 4 1-Apr-2015 31-Mar-2016 0.171 Same as  

Above 1.148 Same as  

Above 23

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5 1-Apr-2016 31-Mar-2017 0.169 Same as  Above

1.148 Same as  Above

6 1-Apr-2017 31-Mar-2018 0.169 Same as  Above

1.148 Same as  Above

7 1-Apr-2018 31-Mar-2019 0.169 Same as  Above

1.148 Same as  Above

8 1-Apr-2019 31-Mar-2020 0.168 Same as  Above

1.148 Same as  Above

9 1-Apr-2020 31-Mar-2021 0.167 Same as  Above

1.148 Same as  Above

10 1-Apr-2021 31-Mar-2022 0.166 Same as  Above

1.147 Same as  Above

11 1-Apr-2022 31-Mar-2023 0.165 Same as  Above

1.147 Same as  Above

12 1-Apr-2023 31-Mar-2024 0.164 Same as  Above

1.147 Same as  Above

13 1-Apr-2024 31-Mar-2025 0.164 Same as  Above

1.147 Same as  Above

14 1-Apr-2025 31-Mar-2026 0.163 Same as  Above

1.147 Same as  Above

15 1-Apr-2026 31-Mar-2027 0.162 Same as  Above

1.146 Same as  Above

16 1-Apr-2027 31-Mar-2028 0.161 Same as  Above

1.146 Same as  Above

17 1-Apr-2028 31-Mar-2029 0.160 Same as  Above

1.146 Same as  Above

18 1-Apr-2029 31-Mar-2030 0.160 Same as  Above

1.146 Same as  Above

19 1-Apr-2030 31-Mar-2031 0.159 Same as  Above

1.145 Same as  Above

20 1-Apr-2031 31-Mar-2032 0.158 Same as  Above

1.145 Same as  Above

21 1-Apr-2032 31-Mar-2033 0.157 Same as  Above

1.145 Same as  Above

22 1-Apr-2033 31-Mar-2034 0.136 Same as  Above

1.145 Same as  Above

23 1-Apr-2034 31-Mar-2035 0.126 Same as  Above

1.144 Same as  Above

24 1-Apr-2035 31-Mar-2036 0.126 Same as  Above

1.144 Same as  Above

25 1-Apr-2036 31-Mar-2037 0.137 Same as  Above

1.144 Same as  Above

26 1-Apr-2037 25th  anniversary of the Scheduled COD of the  first Unit

0.169 Same as  Above

1.143 Same as  Above

10. It  is  also necessary to set  out  the relevant provisions of  the

Electricity Act, 2003. Sections 28, 29, 61, 62 and 63 of the Electricity

Act, 2003 read as under:-

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“Section  28.  Functions  of  Regional  Load  Despatch Centre:  

(1) The Regional Load Despatch Centre shall be the apex body to ensure integrated operation of the power system in the concerned region.  

(2) The Regional Load Despatch Centre shall comply with such principles, guidelines and methodologies in respect of the wheeling and optimum scheduling and despatch of electricity as the Central Commission may specify in the Grid Code.  

(3) The Regional Load Despatch Centre shall –  

(a) be responsible for optimum scheduling and despatch of  electricity  within  the  region,  in  accordance  with  the contracts entered into with the licensees or the generating companies operating in the region;  (b) monitor grid operations;  (c)  keep  accounts  of  quantity  of  electricity  transmitted through the regional grid;  (d) exercise supervision and control over the inter-State transmission system; and  (e) be responsible for carrying out real time operations for grid control and despatch of electricity within the region through secure and economic operation of  the regional grid in accordance with the Grid Standards and the Grid Code.  

(4)  The Regional  Load Despatch Centre  may levy and collect  such  fee  and  charges  from  the  generating companies  or  licensees  engaged  in  inter-State transmission  of  electricity  as  may  be  specified  by  the Central Commission.  

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Section  29.  Compliance  of  directions:  ---  (1)  The Regional Load Despatch Centre may give such directions and  exercise  such  supervision  and  control  as  may  be required for ensuring stability of grid operations and for achieving  the  maximum economy and efficiency  in  the operation  of  the  power  system in  the  region  under  its control.

(2)  Every  licensee,  generating  company,  generating station, sub-station and any other person connected with the operation of the power system shall comply with the directions issued by the Regional Load Despatch Centres under subsection (1).  

(3) All directions issued by the Regional Load Despatch Centres  to  any  transmission  licensee  of  State transmission lines or any other licensee of the State or generating company (other than those connected to inter State  transmission  system)  or  sub-station  in  the  State shall be issued through the State Load Despatch Centre and the State Load Despatch Centres shall ensure that such  directions  are  duly  complied  with  the  licensee  or generating company or sub-station.  

(4)  The  Regional  Power  Committee  in  the region  may, from  time  to  time,  agree  on  matters  concerning  the stability and smooth operation of the integrated grid and economy  and  efficiency  in  the  operation  of  the  power system in that region.  

(5) If any dispute arises with reference to the quality of electricity or safe, secure and integrated operation of the regional  grid  or  in relation to any direction given under sub-section  (1),  it  shall  be  referred  to  the  Central Commission  for  decision  :  Provided  that  pending  the decision of the Central Commission, the directions of the

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Regional Load Despatch Centre shall be complied with by the State Load Despatch Centre or  the licensee or the generating company, as the case may be.  

(6)  If  any  licensee,  generating  company  or  any  other person fails  to  comply with the directions issued under sub-section (2) or sub-section (3), he shall be liable to a penalty not exceeding rupees fifteen lacs.

Section  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;  

(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;

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(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,  the Electricity  Regulatory  Commission  Act,  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.  

Section 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 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.  

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(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.  

Section  63.  Determination  of  tariff  by  bidding process:  Notwithstanding anything contained in section 62,  the Appropriate Commission shall  adopt  the tariff  if

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such  tariff  has  been  determined  through  transparent process  of  bidding  in  accordance  with  the  guidelines issued by the Central Government.”  

11. Since counsel for the opposing parties have made wide ranging

arguments on the effect of Article 18 and waiver as a legal concept, it

is important first to find out as to which pigeonhole the facts of the

present case fit – whether the emails exchanged by the parties would

amount to an “amendment” governed by Article 18.1, or whether it

would amount to a “waiver” governed by Article 18.3.   

12. A perusal of the emails exchanged between the parties would

show that the parties did not intend to amend by a written agreement

any of the provisions of the PPA.  Whereas an amendment of the

PPA under Article 18.1 would be bilateral, a waiver of a provision of

the PPA would be unilateral under Article 18.3.

13. In  order  to  better  understand,  conceptually,  the  difference

between amendment and waiver, it is necessary to advert to Sections

1, 62 and 63 of the Indian Contract Act, 1872.  

“Section 1.Short title.-This Act may be called the Indian Contract Act, 1872.

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Extent, Commencements.-It extends to the whole of India except  the  State  of  Jammu  and  Kashmir;  and  it  shall come into force on the first day of September, 1872.

Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.

Section  62.  Effect  of  novation,  rescission,  and alteration of contract.

If  the  parties  to  a  contract  agree  to  substitute  a  new contract for it, or to rescind or alter it, the original contract need not be performed.

Section  63.  Promisee  may  dispense  with  or  remit performance  of  promise.-  Every  promisee  may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such  performance,  or  may  accept  instead  of  it  any satisfaction which he thinks fit.”

14. Under  Section  62,  apart  from  novation  of  a  contract  and

rescission  of  a  contract,  alteration  of  a  contract  is  mentioned.

Alteration is understood here, in the facts of the present case, in the

sense  of  amendment.   It  is  settled  law  that  an  amendment  to  a

contract  being in  the nature  of  a  modification of  the terms of  the

contract must be read in and become a part of the original contract in

order  to  amount  to  an  alteration  under  Section  62  of  the  Indian

Contract  Act.  This  is  clear  from  Juggilal  Kamlapat  v.  N.V.

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Internationale Crediet-En-Handels Vereeninging ‘Rotterdam’, AIR

1955 Cal 65 in paragraph 15 of which it is stated:-

“The effect of the alterations or modifications is that there is  a  new  arrangement;  in  the  language  of Viscount Haldane in Morris v. Baron & Co. (1) (1918 Appeal Cases, 1 at 17), “a new contract containing as an entirety the old terms together  with and as modified by the new terms incorporated.”  The  modifications  are  read  into  and become  part  and  parcel  of  the  original  contract.  The original terms also continue to be part of the contract and are not rescinded and/or superseded except in so far as they are inconsistent with the modifications. Those of the original terms which cannot make sense when read with the alterations must be rejected. In my view the arbitration clause  in  this  case  is  in  no  way  inconsistent  with  the subsequent modifications and continues to subsist.” [para 15]

15. No such thing having occurred on the present facts, it is clear

that there is in fact no amendment by written agreement to the PPA.

To this extent, learned counsel for Sasan are correct.   

16. The relevant section therefore that would apply on the facts of

the present case is Section 63.  At this stage, it is important to advert

to an argument made by counsel for the appellants that Article 18.3

only  refers  to  waivers  that  can  expressly  be  made  under  various

provisions of the agreement and not to Article 6 which, according to

learned counsel, cannot be waived under the PPA.  Assuming that 32

Page 33

such argument is correct, and that Article 18.3 refers only to the mode

of carrying out a waiver under the PPA, yet it is clear that Section 63

would operate on the facts of this case.  This is for the reason that,

when read with Section 1 of the Contract Act, it becomes clear that

the PPA is subject to Section 63 of the Contract Act,  which would

allow a promisee to  dispense with  or  remit,  wholly  or  in  part,  the

performance of the promise made to him, and accept instead of it any

satisfaction which he thinks fit.  This is made clear in an interesting

judgment by Chief Justice Stone in Official Assignee of Bombay v.

Madholal Sindhu, ILR 1948 (2) Bom 1.  The learned Chief Justice

after setting out the facts had this to say on the effect of Section 1 of

the Contract Act:  

“The Indian Contract Act of 1872 applies to all contracts in India and with regard to a pawn is a codification of the English common law. Speaking of the common law right to sell Mr. Justice Story in his commentaries on the Law of Bailments, eighth edition, says at p. 262:— “Another  right  resulting,  by  the  common  law,  from  the contract of pledge is the right to sell the pledge, where there has been a default in the pledge in complying with his  engagement,  but  a  sale  before  default  would  be  a conversion.  Such  a  right  does  not  divest  the  general property of the pawner but still leave in him (as we shall presently see) a right of redemption.”

And at p. 263:—

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“The  common  law  of  England,  existing  in  the  time  of Glanville,  seems to have required a judicial  process to justify  the  sale,  or  at  least  to  destroy  the  right  of redemption. But the law as at present established leaves an election to the pawnee.  He may file  a bill  in  equity against the pawner for a foreclosure and sale; or, he may proceed to sell ex mero motu,  upon giving notice of his intention to the pledger.”

The terms of an instrument of pledge, such as there is in this  case,  giving  an  unqualified  power  of  sale,  are inconsistent  with the provisions of  s.  176 of  the Indian Contract Act, and, therefore, by virtue of s. 1 of that Act must  give  place  to  the  express  provisions  of  the  Act: See Chitguppi & Co. v. Vinaya Kashinath [(1920) 45 Bom. 157, S.C.22 Bom L.R. 959] .

The group of sections in the Indian Contract Act dealing with  bailment  commence  with  s.  148,  and  it  is  to  be observed that in the ss. 152, 163, 171 and 174 the power is given to contract out of the Act. In the former section the words are “in the absence of any special contract” and in the three latter sections the expression used is “in the absence  of  any  contract  to  contrary”.   In  my  opinion, therefore, except in these four sections, the provisions of the Act with regard to bailment are mandatory: see The Co-operative  Hindustan  Bank,  Ltd. v. Surendranath De [(1931) 59 Cal. 667.].”

17. It is thus clear that if on facts there is a waiver of a provision of

the PPA by one of the parties to the PPA, then Section 63 of  the

Contract Act will operate in order to give effect to such waiver.  

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18. At  this juncture,  it  is  important  to understand what exactly is

meant  by  waiver.  In  Jagad Bandhu Chatterjee  v. Nilima Rani,

(1969) 3 SCC 445, this Court held:

“In India the general principle with regard to waiver of contractual obligation is to be found in Section 63 of the Indian Contract Act. Under that section it is open to a promisee to dispense with or remit, wholly or in part, the performance of the promise made to him or he can accept instead of it any satisfaction which  he  thinks  fit.  Under  the  Indian  law  neither consideration  nor  an  agreement  would  be necessary  to  constitute  waiver.  This  Court  has already  laid  down  in Waman  Shriniwas Kini v. Ratilal Bhagwandas & Co.[1959 Supp 2 SCR 217, 226] that waiver is the abandonment of a right which normally everybody is at liberty to waive. “A waiver is nothing unless it amounts to a release. It signifies nothing more than an intention not to insist upon the right”. It  is well-known that in the law of pre-emption the general principle which can be said to have been uniformly adopted by the Indian courts is that acquiescence in the sale by any positive act amounting to relinquishment of a pre-emptive right has the effect of the forfeiture of such a right. So far as the law of pre-emption is concerned the principle of  waiver  is  based  mainly  on  Mohammedan Jurisprudence. The contention that the waiver of the appellant's right under Section 26-F of the Bengal Tenancy  Act  must  be  founded  on  contract  or agreement  cannot  be  acceded  to  and  must  be rejected.” [para 5]

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19. In  P. Dasa Muni Reddy v. P. Appa Rao,  (1974) 2 SCC 725,

this Court held:

“Waiver is an intentional relinquishment of a known right or advantage, benefit, claim or privilege which except  for  such  waiver  the  party  would  have enjoyed. Waiver can also be a voluntary surrender of a right. The doctrine of waiver has been applied in cases where landlords claimed forfeiture of lease or tenancy because of breach of some condition in the  contract  of  tenancy.  The  doctrine  which  the courts of law will recognise is a rule of judicial policy that a person will not be allowed to take inconsistent position to gain advantage through the aid of courts. Waiver  sometimes  partakes  of  the  nature  of  an election. Waiver is consensual in nature. It implies a meeting  of  the  minds.  It  is  a  matter  of  mutual intention.  The  doctrine  does  not  depend  on misrepresentation.  Waiver  actually  requires  two parties, one party waiving and another receiving the benefit of waiver. There can be waiver so intended by one party and so understood by the other. The essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The  voluntary  choice  is  the  essence  of  waiver. There  should  exist  an  opportunity  for  choice between the relinquishment and an enforcement of the right in question. It cannot be held that there has been  a  waiver  of  valuable  rights  where  the circumstances  show  that  what  was  done  was involuntary.  There  can  be  no  waiver  of  a non-existent right. Similarly, one cannot waive that which is not one's as a right at the time of waiver. Some mistake or misapprehension as to some facts which constitute the underlying assumption without which  parties  would  not  have  made  the  contract may be sufficient to justify the court in saying that there was no consent.” [para 13]

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20. Regard being had to  the aforesaid  decisions,  it  is  clear  that

when waiver is spoken of in the realm of contract, Section 63 of the

Indian Contract Act governs.  But it is important to note that waiver is

an intentional  relinquishment of  a known right,  and that,  therefore,

unless there is a clear intention to relinquish a right that is fully known

to a party, a party cannot be said to waive it.  But the matter does not

end here.   It  is  also clear  that  if  any element  of  public  interest  is

involved  and  a  waiver  takes  place  by  one  of  the  parties  to  an

agreement, such waiver will not be given effect to if it is contrary to

such public interest.   This is clear from a reading of  the following

authorities.

21. In  Lachoo Mal v. Radhey Shyam,  (1971) 1 SCC 619, it was

held:-

“The  general  principle  is  that  everyone  has  a  right  to waive and to agree to waive the advantage of a law or rule  made  solely  for  the  benefit  and  protection  of  the individual in his private capacity which may be dispensed with  without  infringing  any  public  right  or  public  policy. Thus the maxim which sanctions the non-observance of the statutory provision is  cuilibet licet renuntiare juri pro se introducto. (See Maxwell on Interpretation of Statutes, Eleventh Edn., pp. 375 and 376). If there is any express prohibition against contracting out of a statute in it then no question  can  arise  of  anyone  entering  into  a  contract which  is  so  prohibited  but  where  there  is  no  such

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prohibition  it  will  have  to  be  seen  whether  an  Act  is intended to have a more extensive operation as a matter of public policy.” [para 6]

22. In Indira Bai v. Nand Kishore, (1990) 4 SCC 668, it was held:-

“The  test  to  determine  the  nature  of  interest, namely, private or public is whether the right which is renunciated is the right of party alone or of the public also in the sense that the general welfare of the society is involved. If the answer is latter then it may be difficult to put estoppel as a defence. But if it is  right  of  party  alone then it  is  capable  of  being abnegated either in writing or by conduct.” [para 5]

23. In  Krishna Bahadur v. Purna Theatre,  (2004) 8 SCC 229, it

was held:

“The  principle  of  waiver  although  is  akin  to  the principle  of  estoppel;  the  difference  between  the two,  however,  is  that  whereas  estoppel  is  not  a cause of action; it  is a rule of evidence; waiver is contractual and may constitute a cause of action; it is  an agreement between the parties and a party fully knowing of its rights has agreed not to assert a right for a consideration. A right can be waived by the party for whose benefit certain  requirements  or  conditions  had  been provided  for  by  a  statute  subject  to  the  condition that no public interest is involved therein. Whenever waiver  is  pleaded it  is  for  the  party  pleading  the same to show that an agreement waiving the right in consideration of some compromise came into being. Statutory right, however, may also be waived by his conduct.” [para 9]

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24. It  is  thus clear  that  if  there is any element  of  public  interest

involved,  the  court  steps  in  to  thwart  any  waiver  which  may  be

contrary to such public interest.  

25. On the facts of this case, it is clear that the moment electricity

tariff gets affected, the consumer interest comes in and public interest

gets affected.  This is in fact statutorily recognized by the Electricity

Act in Sections 61 to 63 thereof. Under Section 61, the appropriate

commission, when it specifies terms and conditions for determination

of tariff, is to be guided inter alia by the safeguarding of the consumer

interest  and the recovery of  the cost  of  electricity  in  a reasonable

manner.   For  this  purpose,  factors  that  encourage  competition,

efficiency  and  good  performance  are  also  to  be  heeded.   Under

Section 62 of  the Act,  the appropriate commission is to determine

such tariff in accordance with the principles contained in Section 61.

The present case, however, is covered by Section 63, which begins

with  a  non  obstante clause  stating  that  notwithstanding  anything

contained in Section 62, the appropriate commission shall adopt the

tariff if such tariff has been determined through a transparent process

of bidding in accordance with the guidelines issued by the Central

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Government.  The guidelines dated 19.1.2005 issued by the Central

Government under Section 63 make it clear that such guidelines are

framed with the following objectives in mind:

“These  guidelines  have  been  framed  under  the  above provisions  of  section  63  of  the  Act.   The  specific objectives of these guidelines are as follows:

1) Promote  competitive  procurement  of  electricity  by distribution licensees;

2) Facilitate transparency and fairness in procurement processes;

3) Facilitate reduction of  information asymmetries for various bidders;

4) Protect  consumer  interests  by  facilitating competitive conditions in procurement of electricity;

5) Enhance standardization and reduce ambiguity and hence time for materialization of projects;

6) Provide flexibility to suppliers on internal operations while ensuring certainty on availability of power and tariffs for buyers.  

Clause 2.3 of the said guidelines reads as follows:

“2.3. Unless explicitly  specified in  these guidelines,  the provisions  of  these  guidelines  shall  be  binding  on  the procurer.   The  process  to  be  adopted  in  event  of  any deviation proposed from these guidelines is specified later in these guidelines under para 5.16.”

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26. Paragraph 4 of the aforesaid guidelines relates to tariff structure

and paragraph 4.11 in particular, which relates to energy charges, is

as follows:-

“4.11 Where  applicable,  the  energy  charges payable during the operation of the contract shall be related on the base energy charges specified in the bid with suitable provision for escalation.  In case the  bidder  provides  firm  energy  charge  rates  for each of  the years of  the contract  term,  the same shall be permitted in the tariffs.”

27. Para 5.4 then speaks of a model power purchase agreement

proposed to be entered into with the seller of electricity as follows:-

“(ii) Model PPA proposed to be entered into with the  seller  of  electricity.   The  PPA shall  include necessary details on:

• Risk allocation between parties;

• Technical  requirements  on  minimum  load conditions;

• Assured offtake levels;

• Force majeure clauses as per industry standards;

• Lead times for scheduling of power;

• Default conditions and cure thereof, and penalties;

• Payment  security  proposed  to  be  offered  by  the procurer.”

28. Paragraph 5.16 then goes on to state:-

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“Deviation  from  process  defined  in  the guidelines

5.16 In  case  there  is  any  deviation  from  these guidelines, the same shall be with the prior approval of  the  Appropriate  Commission.   The  Appropriate Commission shall decide on the modifications to the bid  documents  within  a  reasonable  time  not exceeding 90 days.”

29. A perusal of the CERC tariff adoption order in the present case

dated  17.10.2007  makes  it  clear  that  the  tariff  is  adopted  by  the

Commission only because the competitive bidding process which has

been undertaken is in accordance with the guidelines so issued.  

30. All this would make it clear that even if a waiver is claimed of

some of the provisions of the PPA, such waiver, if it affects tariffs that

are  ultimately  payable  by  the  consumer,  would  necessarily  affect

public interest  and would have to pass muster of  the Commission

under Sections 61 to 63 of the Electricity Act.  This is for the reason

that what is adopted by the Commission under Section 63 is only a

tariff  obtained by competitive  bidding in  conformity  with  guidelines

issued.  If at any subsequent point of time such tariff is increased,

which increase is outside the four corners of the PPA, even in cases

covered  by  Section  63,  the  legislative  intent  and  the  language  of

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Sections 61 and 62 make it  clear  that  the Commission alone can

accept such amended tariff as it would impact consumer interest and

therefore public interest.  

31. But on the facts of these cases, it is argued by learned counsel

for Sasan that in point of fact the tariff laid down in Schedule 11 of the

PPA has not been sought to be changed. All that has happened is

that, as a result of COD being declared on 31.3.2013, the very tariff

laid down in Schedule 11 becomes applicable, but for year one being

treated  as  one  day  and  year  two  commencing  from  1.4.2013.

Counsel for Sasan may be right in saying this, but the substance of

the matter is that a consumer would have to pay substantially more

by way of tariff under the PPA if year one is gobbled up in one day, as

year two’s tariff  is one paisa more than year one and year three’s

tariff is substantially more than year two. In short, instead of getting

two years or part thereof exceeding one year at a substantially lower

tariff, the consumer now gets only one year and one day at the lower

tariff rates.  This may also by itself not lead to the parties having to go

to the Commission as this is envisaged by the PPA.  But it is clear

that if a waiver is to be accepted on the facts of this case, it would

clearly impact the public interest, in that consumers would have to 43

Page 44

pay substantially more for electricity consumed by them.  This being

the case, on facts it may not be necessary to go to the Commission

as  had  Sasan  in  fact  met  the  parameters  of  Schedule  5  on  30 th

March, then as per Schedule 11, year one would in fact have been

only  for  one  day.   However,  any  waiver  of  the  requirement  of

Schedule 5 would definitely impact the generation of electricity at the

mandated percentage of  contracted  capacity  as  also  the amounts

payable by consumers, and would therefore affect the public interest.

This being the case, this is not a case covered by the judgments cited

on  behalf  of  Sasan,  in  particular  the  judgment  of  this  Court  in

Commissioner  of  Customs,  Bombay  v.  Virgo  Steels  Bombay,

(2002) 4 SCC 316, in which it has been held that even the mandatory

requirement  of  a  statute  can  be  waived  by  the  party  concerned,

provided it is intended only for his benefit. This case would fall within

the parameters of the other judgments referred to above, and would

therefore be governed by judgments which state that any waiver of

the  requirements  of  Article  6.3  and  Schedule  5  would  ultimately

impact  consumer  interest  and  therefore  the  public  interest.   Such

waiver therefore cannot be allowed to pass muster on the facts of the

present case.   

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32. Since the result  of  this  case also depends upon the correct

reading of Article 6 read with Schedule 5 of the PPA, and whether

there has been waiver in fact in the sense of being the intentional

relinquishment of a known right by the procurers or on their behalf, it

is necessary to advert to the scheme of Article 6, the independent

engineer’s  certificate,  and  various  meetings,  emails,  and  letters

exchanged between the parties.  Article 6 deals with synchronization,

commissioning, and commercial operations.  In the first  step to be

taken  by  the  seller,  the  unit  producing  electricity  has  to  be

synchronized to the grid system.  It is only after synchronization takes

place that the unit is to be commissioned.  What is important is that at

the commissioning stage, the parameters mentioned in Schedule 5

are to be met.  The most important parameter mentioned in Schedule

5,  when  the  performance  test  is  to  be  taken  for  the  purpose  of

commissioning, is that a unit shall be deemed to have passed such

test only if  it  operates continuously for  72 consecutive hours at or

about 95% of its contracted capacity as existing on the effective date

and within the electrical system limits and functional specifications.

Further,  as  a  part  of  the  performance  test,  the  seller  must

demonstrate that the unit meets functional specifications for ramping

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rate separately mentioned in Schedule 4 of the PPA.  It is only when

such test is passed that a unit can be said to be commissioned under

the PPA.  This then is to be certified by the independent engineer

jointly appointed by the parties under Article 6.3.1, in the form of a

final test certificate, which states that (a) the commission tests have

been carried in accordance with Schedule 5 and are acceptable to

him, and (b) the result of the performance test shows that the unit’s

tested capacity is not less than 95% of the contracted demand as

existing on the effective date.

33. If the Schedule 5 parameters are not met, it is incumbent on the

independent engineer to then state reasons for the non-issuance of

the final test certificate.  Once this is done, under Article 6.3.2, the

seller may retake the relevant test within a reasonable period after

the  end  of  the  previous  test  so  as  to  comply  with  the  basic

requirements of Schedule 5.  It is only after this that a unit can be

said to be a “commissioned unit” as defined, which means that it is a

unit  in  respect  of  which COD has occurred.   COD or  commercial

operation date is also separately defined as meaning, in relation to a

unit,  the date one day after  the date when each of  the procurers

receives a final test  certificate of  the independent engineer as per 46

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Article 6.3.1.  It is thus clear that the scheme of Article 6 is that a unit

cannot be said to have a commercial operation date unless and until

it is first synchronized with the grid and commissioned after meeting

the parameters mentioned in Schedule 5 of the PPA.

34. Article  6.3.3  refers  to performance tests of  a unit  during the

period  of  the  PPA.   If  under  Article  6.3.3  after  COD  has  been

achieved in a unit, an increased tested capacity over and above that

provided in 6.3.1 (b) is achieved in a subsequent performance test,

certain  consequences  follow.   Equally,  if  after  COD  has  been

obtained in a unit, and the most recent performance test mentioned

during the working of the PPA has been conducted, and it is found

that in such test a figure less than contracted capacity is achieved,

the  unit  shall  be  de-rated  with  certain  consequences  which  are

mentioned in Article 6.3.4 read with Article 8.2.2.   The scheme of

Article 6 therefore read as a whole appears to be that COD cannot be

achieved until the parameters mentioned in Schedule 5 are achieved

and there is a final  test  certificate to that  effect.   The subsequent

clauses,  Article  6.3.3  and  Article  6.3.4  only  kick  in  after  COD  is

obtained in a unit, leading to either increased capacity or to de-rated

capacity with consequences which follow under the PPA.  47

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35. The  meetings,  emails,  and  letters  between  the  parties  have

now to be examined. The first important meeting that is necessary for

us  to  advert  to  is  the  meeting  of  27.2.2013.   The  meeting  was

Chaired by the Managing Director of the lead procurer i.e. M.P. Power

Management  Company  Limited.   It  was  attended  by  all  the  other

procurers, and officials of Sasan.  What is emphasized on behalf of

Sasan is that the revised COD of the Sasan units was accepted by all

the procurers under article 4.5.1 of  the PPA to be – (first  unit)  by

31.3.2013.  The procurers asked Sasan for the estimated date for

synchronization  and  COD  of  the  first  unit.  Sasan  indicated  that

synchronization is expected in the first week of March, 2013, and the

COD before 31.3.2013.  What is important about this meeting is that

the  procurers  were  no  doubt  interested  in  getting  electricity  from

Sasan as soon as possible, but obviously only in accordance with

article 6.3.1 read with the 5th Schedule.  This would only mean that

the meeting would disclose that the anxiety of the procurers to get

electricity at cheap rates would be in accordance with the PPA and

not against it.  In other words, if a final test certificate had been given

to  the  effect  that  95%  of  contracted  capacity  could  have  been

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delivered by Unit No.3 on or before 31.3.2013, the procurers were

anxious to avail of it, and not otherwise.   

36. It is unnecessary for us to burden this judgment with the emails

that  passed between Sasan and WRLDC between 27.3.2013 and

30.3.2013.  It is enough for us to state that Sasan contends that it

was  ready  to  deliver  at  95%  of  the  contracted  demand  but  for

WRLDC, and WRLDC states that  Sasan was never  obstructed by

WRLDC, and in fact was not capable of delivering electricity at 95%

of the contracted demand at the relevant time.  WRLDC appears to

be correct in this for the simple reason that if we see the performance

of Sasan for the period 1st April to 16th August, 2013, it is clear that

various tests were undertaken, but  95% of contract  capacity for  a

continuous period of 72 hours had only been achieved in June even

according to Sasan.  

37. In  any  event,  the  performance  test  certificate  issued  on

30.3.2013 leaves much to be desired.  Since the Commission has

castigated this certificate and the Appellate Tribunal has absolved the

Independent  Engineer  completely,  it  is  necessary  to  set  out  this

certificate in full.

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“Lahmeyer International (India) Pvt. Ltd. Corporate Office & Correspondence address: Intec House, 37 Institutional Area, Sector 44, Gurgaon-122002 , National Capital  Region (INDIA)

CERTIFICATE OF INDEPENDENT ENGINEER (IE)

Test Certificate of Performance Test for the Commercial Operation Declaration of the First Unit (Unit-3 of 660 MW) of SASAN ULTRA MEGA POWER PROJECT (6x660 MW)

This Certificate is issued by IE with reference to article 6.3.1 of PPA executed on 7th August 2007 between Sasan Power Limited (SPL, the Seller) and the Power Procurers.  Based on the Performance Test  witnessed by IE from 27 th March 2013 to 30th March 2013 and review of the detailed Performance Test results provided by the Seller, it is certified that:

1. The Unit was synchronized with the grid at 15.18 hrs on 27 th March 2013 after receiving the permission of WRLDC.

2. The Seller (SPL) had submitted the power injection schedule to WRLDC at 15.35 hours  on  27th March  2013  for  raising  the  load  gradually  to  100%  of  the Contracted Capacity of 620.4 MW(ex bus) by 2000 hrs. on 27 th March 2013 for demonstrating continuous operation at that load for continuous 72 (seventy two) consecutive hours.  However, WRLDC, did not permit the Seller to operate the Unit beyond 100 MW (ex bus) till  the morning of 28 th March 2013 due to the following reasons:

a) The demand in the grid was low due to the Holiday on account of Holi Festival. b) All the Units in the grid were operating at their technical minimum capacity. 3. The Seller was continuously keeping in touch with WRLDC till 21.40 hours on

29th March 2013 for seeking permission to raise the load.  At 22.19 hrs on 29 th March 2013 WRLDC permitted the seller to raise the load.  Accordingly, Seller raised the load to around 150 MW (ex bus).

4. At 07.13 hours on 30th March 2013, WRLDC asked the seller to submit its revised power injection schedule for raising the load.  At this point of time, the Unit had already completed continuous operation of 50 (fifty) consecutive hours at a low load  of  about  100  MW  (ex-bus)  and  another  9  (nine)  consecutive  hours immediately thereafter at 150 MW.  Seller informed WRLDC at 14.18 hrs that it would increase the load from 20.00 hours to reach full load.  As such, in line with WRLDC instructions and grid conditions.  Seller maintained load of around 100 MW (ex bus) for around 50 hours and maintained load of around 150 MW (ex bus) for remaining 22 hours as per WRLDC instructions and grid conditions.  

5. The Commissioning Test has been carried out in accordance with Schedule 5 of PPA and the results of the Performance Test are acceptable to IE.  The results of

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the  Performance  Test  show  that  the  Unit’s  Tested  Capacity  is  not  less  than 101.38 MW (ex bus), the maximum permitted load by WRLDC for injection into the  grid.   During  the  above  stated  period  of  continuous  72  (seventy  two) consecutive  hours,  the  performance of  the  unit  was found to  conform to  the Electrical Limits of the Functional Specifications in accordance with Schedule 4 of PPA.

The salient details of the Performance Test are as follows:

Minimum  Hourly  Net Generation of the Unit during 72 Hours Test (MW)

101.38 mw FROM 0600 HRS TO 0700  hrs  on  28th March 2013

Maximum  Hourly  Net Generation of the Unit during 72 Hours Test (MW)

161.01 MW from 1900 hrs to 2000 hrs on 30th March 2013.

Average  Hourly  Net Generation of the Unit during 72 Hours Test (MW)

120.84 MW

Tested  Capacity  of  the  Unit (MW)*

101.38 MW

Generator Terminal Voltage 21.66  KV  to  21.83  KV (Parameter  as  per  OCM-22 KV)

Power factor 096 Max (lagging), 0.89 MIN (lagging)

(*) Due to load restriction by WRLDC.

6. Since the Unit  was operating below 50% of the rated load due to grid restriction, the Unit could not be demonstrate the Ramping Rate above 50% of the rated load in accordance with  Schedule 4 of PPA.   However, as per the certificate  provided  by  Original  Equipment  Manufacturer  of  Boiler,  Turbine  & Generator, minimum ramp up and ramp down rate of 1% of Contracted Capacity per minute can be achieved.  

7.  The  Unit  could  not  be  tested  for  the  following  parameters  of Supercritical Technology at the steam turbine inlet as defined in PPA due to grid restriction.

i) Main Steam Pressure: 247 kg/cm2 (abs)  

ii) Main Steam Temperature: 535 deg C.

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iii) Reheat Temperature: 565 deg C.

However, the Unit was found to operate with the following parameters at the steam turbine inlet during one hour operation from 1200 hrs to 1300 hrs on 29th March 2013.

i) Main Steam Pressure: 77.36 Kg/cm2 (abs) ii) Main Steam Temperature: 535.64 deg.C. iii) Reheat Temperature: 575.04 deg C.

8. All  the  systems  and  equipment  have  been  commissioned  and  are operational with two coal mills which  were taken into service.  The balance mills could not be taken into service due to the restrictions imposed by the grid.  The furnace was found to operate stably even at a low load of 101.38 MW (ex-bus) and the parameters of Turbine shaft vibrations, Generator slot temperature and Generator core temperature were found to be well within the equipment limits recommended by OEM.

9. In view of the above, the Unit-3 is certified to have achieved Commercial Operation, with a tested capacity of 101.38 MW (ex bus) since:

(a)  Commissioning  Test  was  carried  out  in  accordance   with  Article  6  and Schedule 5 of the PPA.

(B)  Results  of  the  test  show  that  Unit-3  has  met  functional  specifications stipulated in Schedule 4 of the PPA.

For Lahmeyer International s(India)

Sd/-

R.K. Soni

Project Manager

Dated: 30th March 2013”

38. It will be seen from this certificate that the tested capacity of the

Unit was found to be only 101.38 MW as against 95% of 620 MW i.e.

587 MW. It was also stated that since the unit was operating below

50%  of  the  rated  load  due  to  grid  restriction,  the  unit  could  not

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demonstrate ramping rate above 50% of rated load in accordance

with the Schedule 4 of the PPA.  

39. Paragraph  9  of  the  certificate  leaves  much  to  be  desired.

Obviously,  if  the  tested  capacity  is  101.38  MW  as  against  the

required  95% i.e. 587 MW, the test could not have been carried out

in accordance with article 6 read with schedule 5, and that despite the

fact  that  ramping  up  and  down could  not  be  achieved,  functional

specifications stipulated in Schedule 4 of the PPA were said to have

been met.  We are constrained, therefore, to agree with CERC which

in its order dated 8.8.2014 has castigated this certificate.  What article

6.3.1  requires  is  first  and  foremost  a  final  test  certificate  of  the

Independent Engineer.  The certificate dated 30.3.2013 given by the

Independent Engineer is not a final test certificate.  Indeed, it is only

in August that a final test certificate was given in accordance with

Article  6.3.1  of  the  PPA by  the  very  same independent  engineer.

Obviously the commissioning tests could not have been carried out in

accordance  with Schedule 5, which requires in clause  1.1 (i)  (d)

that the seller shall perform, in respect of each unit, a performance

test, by which such unit shall be deemed to have passed only if  it

operates continuously for 72 consecutive hours, at or above 95% of 53

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its contracted capacity as existing on the effective date. Also, part of

the same schedule requires that as a part of the performance test,

the  seller  shall  demonstrate  that  the  unit  meets  the  functional

specifications for  ramping rate as mentioned in Schedule 4, which

was again conspicuous by its absence. According to the Independent

Engineer, “… the Unit  3  is  certified  to have achieved Commercial

Operation, with a tested capacity 101.38 MW” after carrying out the

commissioning test in accordance with Article 6 and Schedule 5 of

the PPA.  In the certificate dated 30.3.2013 he has stated that on

witnessing the performance test from 27.03.2013 to 30.03.2013, the

tested  capacity  of  the  Unit  is  101.38  MW.  However,  it  is  clearly

recorded  that  Unit  was  operated  beyond  100  MW  only  from  the

morning of  28.03.2013.  In the chart  on the performance test,  the

Independent Engineer has noted that 101.38 MW is operated only

from 06.00 a.m. on 28.03.2013. Under Article 6 read with Schedule 5

…  “Unit   shall   be   deemed   to   have  passed  if  it  operates

continuously  for  72  consecutive  hours  at  or  above  95%  of  its

contracted  capacity  as  existing  on  the  Effective  Date.”  Even

according to the Independent Engineer, 101.38 MW was injected only

at 06.00 a.m. on 28.03.2013. Such a tested capacity of 101.38 MW

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for 72 hours continuously could therefore have been certified only at

06.00 a.m. on 31.03.2013.  If that be so, the Commercial Operation

Date would have been only one day after  the date when the test

certificate  of  the  Independent  Engineer  has  been received  by  the

procurers.   For this reason also, the test certificate is by no means in

accordance  with  Article  6.3.1  of  the  PPA read  with  Schedule  5

thereof.

40. It is now important to examine the correspondence between the

parties in order to ascertain whether the Appellate Tribunal is correct

in  stating that  waiver  had in  fact  taken place.   At  this  stage,  it  is

important  to  advert  to  an email  dated 31.3.2013 sent  by  the lead

procurer to Sasan.  This email categorically states as follows:

“With  reference  to  the  letter  no.  GEIE 12086/12-13/001/RKS dt. 30th March 2013 relating to the Test Certificate of the Independent Engineer towards  the  Performance  Test  for  declaration  of COD of Unit-3 of 660 MW of UMPP Sasan  Project. It is to inform that as per clause 6.3.1 (a) and (b) of the  PPA,  Commissioning  Test  should  have  been carried out in accordance with Schedule 5 of PPA and that the result of the test should not have been less than ninety five (95) percent of its Contracted Capacity.  The test result is not as per the aforesaid clause and, therefore, is not acceptable to us.  If the Seller is agreeable to consider the performance test

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under clause 6.3.4 for a de-rated capacity of 101.38 MW, the same could be agreed by us.”

41. However, Sasan relies heavily upon an email sent on 2.4.2013

by the lead procurer to Sasan.  This email reads as follows:

“To

       The Chief Executive Officer M/s. Sasan Power Ltd., Dhirubhai Ambani Knowledge City, 1 Block, 2nd Floor, North Wing,  Thane, Belapur Road, Koparkhairane, Navi Mumbai, Maharashtra 400 710

Sub: Independent Engineer’s letter dated 30th March 2013

Ref: Independent Engineer’s letter dated 30th March 2013

Dear Sir,

Please refer the Independent Engineer’s letter dated 30th March 2013 pertaining to “Test Certificate of Performance Test for  the  Commercial  Operation  Declaration  of  the  First  Unit (Unit-3  of  660  MW)  of  SASAN  ULTRA  MEGA  POWER PROJECT (6x660 MW)” and e-mail dated 31.3.2013 of 12.39 AM sent by Western Region Load Despatch Centre regarding scheduling of power from Unit No.3 of Sasan UMPP.   As lead procurer, the Performance Test, as certified by the independent Engineer for a capacity of 101.38 MW (ex-bus), is acceptable to us  under  Clause  6.3.4  of  the  PPA.   You  may  kindly  go  for Performance Test under notice to us for increasing the capacity beyond certification by the Independent Engineer in accordance with Clause 6.3.3 of the PPA.

As  provided  in  Article  6.3.4  of  the  PPA,  in  the  period between this performance test and the next performance test, the unit’s contracted capacity and available capacity would be considered as 101.38 MW (ex-bus)  and its  availability  factor

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shall be calculated by reference to 101.38 MW.  The charges payable for power shall be as laid down in Article 6.3.4 of the PPA.  In case the unit is in position to produce beyond 101.38 MW, the additional quantity would be scheduled in favour of the Procurers under proviso to Article 11.1 of the PPA, until the next Performance Test is conducted under Article 6.3.3.

Thanking you,

Yours faithfully,

Sd/-

Executive Director (IPC)”

42. The two emails read together would show that the lead procurer

made it clear that declaration of COD of unit 3 is not accepted by

them as the test was not performed as per Article  6.3.1.  However, in

its anxiety to procure electricity, what was stated in the second email

was  that  the  capacity  of  101.38  MW  was  acceptable  only  under

Article 6.3.4 of the PPA, meaning thereby that this ought to be treated

as  de-rated  capacity,  which  should  be  paid  for  as  provided.  And

any quantity produced over and above  101.38 MW  would  be

treated as infirm power under Article 11.1 proviso, and paid for as

such.   

43. Shri Sibal argued that the moment Article 6.3.4 of the PPA is

attracted,  this  would  necessarily  mean  that  the  Appellants  have

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waived the requirement of 95% of the contracted capacity as existing

on the effective date mentioned in Article 6.3.1(b). According to him,

this would mean that scheduled power would have to be supplied,

which in turn can only be done if  there is waiver of  the aforesaid

requirement.  It is difficult to agree.  The case of the appellants has

throughout been, starting from 12th April, 2013, onwards, that it has

never  consented  to  Schedule  5  of  the  PPA and  Article  6.3.1(b)

parameters being lowered.  It is true that Article 6.3.4 would not apply

for the reason that it would come into effect only after the last recent

performance test mentioned in Article 6.3.3 has been conducted.  And

for Article 6.3.3 to apply, a performance test must first indicate that

from a unit’s COD an increased tested capacity over and above that

provided in Article 6.3.1(b) must first occur.  Admittedly on facts this

has not happened.  What is important to note therefore is that the

appellants desperately wanted power at  a cheaper rate,  and were

willing  to  go  to  any  extent  to  get  such  power,  including  invoking

clause 6.3.4, which would not apply, and stating that anything over

and above 101.38 MW ought to be treated as infirm power.  It is clear

under  the  Regulations,  however,  that  infirm  power  can  never  be

supplied to the appellants themselves but can only be supplied to the

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grid.  This being the case, the question that is still posed is whether

the two emails read together would amount to a waiver of the right

mentioned in clause 6.3.1.  Waiver is, as has been pointed out above,

an  intentional  relinquishment  of  a  known  right.   Waiver  must  be

spelled out with crystal clarity for there must be a clear intention to

give up a known right.  There is no such clear intention that can be

spelled out on a reading of the two emails.  All that can be spelled out

is that the first email of 31.3.2013 categorically states that the test

result  is  not  as  per  Article  6.3.1,  and  is  not  acceptable.  The  last

sentence  of  this  very  email  then  refers  to  clause  6.3.4  and  to  a

de-rated capacity of 101.38 MW.  Thereafter, the email of 2nd April,

2013 expands on the aforesaid last sentence of the earlier email by

referring  to  Article  6.3.4  and  Article  11 proviso.  This  is  akin  to  a

‘without  prejudice’  acceptance  of  de-rated  power,  being  a

non-acceptance of the test certificate dated 30.3.2013 coupled with a

desperate attempt to somehow get whatever power is available.  But

this  does  not  amount  to  a  clear  and  unequivocal  intention  to

relinquish a known right.

44. It is not necessary to burden this judgment with various other

acceptance emails of the other discoms inasmuch as they are all in 59

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terms of the email sent by the lead procurer.  Haryana discom has

sent  an  email  dated  12.4.2013  in  which,  even  while  accepting

derated power, it  has accepted the  same without  prejudice to  its

rights.  

45. In contrast to the aforesaid emails,  the acceptance emails of

BYPL and  BRPL,  both  Reliance  Group  Companies,  may  now be

quoted:-

“Dear Sir  

From Sasan UMPP Delhi has allocation of 450 mw as per MOP  out  of  which  BRPL  share  is  43.58  out  of  Delhi allocation.  We accept the COD of 1st unit of 660 mw as declared by SPL.  May please schedule Full quantum of BRPL with immediate effect and confirm.

Regards.

Sanjay Srivastav.

Assistant VP BRPL. 9312147045

Sanjay Srivastav (As V.P.)”

46. This acceptance email is in stark contrast with the acceptance

email of the lead procurer, in that it unequivocally accepts COD of the

first Unit of 660 MW as declared by Sasan.  It is therefore clear that

on facts in this case there is no waiver and the Appellate Tribunal in

coming to an opposite conclusion, is clearly erroneous.  60

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47. Interestingly enough, the Appellate Tribunal,  in the impugned

judgment  dated  31.3.2016,  contradicts  itself  when it  states  in  one

portion as follows:-

“e) We have carefully gone through the ratio of the law laid  down  by  Hon’ble  Supreme  Court  in  Waman Shriniwas and  in  Krishan  Lal’s case,  wherein  in  the latter case the Hon’ble Supreme Court cited an illustration in  paragraph  21  thereof.   The  words  of  the  Hon’ble Supreme Court are “to illustrate this principle, it has been stated that if the statutory condition be imposed simply for the  security  or  the  benefit  of  the  parties  to  the  action themselves,  such  condition  will  not  be  considered  as indispensable  and  either  party  may  waive  it.”  In  the present  case,  the requirement  of  achieving 95% of  the contracted capacity for declaration of COD was not one for the private benefit  of the seller and procurers.  The said requirement and the appointment of an independent expert  to  oversee the commissioning process was built into  the  statutory  contract  i.e.  PPA itself  for  a  specific purpose,  as  a requirement  of  general  policy, to  ensure that  generators  do  not  declare  their  units  to  be commercially  available  without  even  demonstrating  the capability  of  such units  to  achieve at  least  95% of  the contracted capacity.”

And then goes on to state:

“We  further  find  that  in  the  present  case,  there  is  no question of any public interest or public policy or morals or statutory regulations being violated. The WRLDC, who was  a  petitioner  before  the  Central  Commission,  in  its Petition clearly and equivocally states that there are no guidelines  in  respect  of  declaration  of  COD  of  the generators  who  are  not  governed  by  CERF  (Tariff Regulations) 2009 and in the Petition, WRLDC prays to

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the  Central  Commission  for  issuing  regulations  and guidelines in that behalf.”

48. We thus find that the Appellate Tribunal is wholly incorrect in

accepting  the  case  of  waiver  put  forward  by  learned  counsel  for

Sasan, and is equally incorrect in absolving the independent engineer

for the test certificate given by him on 30.3.2013.  We, therefore, set

aside the Appellate Tribunal’s judgment, and reinstate the judgment

dated 8.8.2014 of the Central Electricity Regulatory Commission.   

49. Shri  Sibal’s  last  argument  is  that  there  is  no  substantial

question of law so as to attract Section 125 of the Electricity Act, 2003

in  these  appeals.  We  are  afraid  that  we  cannot  agree.   One

substantial  question  of  law  is  whether,  when  public  interest  is

involved, waiver can at all take place  of  a  right  in  favour  of  the

generator   of   electricity     under   a  PPA  if  the  right  also  has  an

impact  on   consumer   interest.  This substantial question of law has

been answered by us in the   course of the judgment.  We have also

pointed out that the Appellate Tribunal’s finding that the Independent

Engineer’s test certificate can pass muster and that there is a waiver

on facts is not a possible conclusion, and such finding is, therefore,

perverse and hence set aside. That apart, we have also pointed out 62

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the contradictory nature of  the judgment  of  the Appellate Tribunal,

when it points out that the requirement of Article 6.3.1 is not merely

for the private benefit of the procurers of electricity, but is as a matter

of  general  policy;  and then later  on in  the judgment  finds that  no

question of public interest or public policy arises in the present case.

In these circumstances, this plea must also be turned down.  In the

result, the appeals are allowed but with no order as to costs.   

………………………….J. (Kurian Joseph)

………………………….J. (R.F. Nariman)

New Delhi; December 08, 2016.  

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