GUJARAT URJA VIKAS NIGAM LTD. Vs EMCO LTD. .
Bench: J. CHELAMESWAR,ABHAY MANOHAR SAPRE
Case number: C.A. No.-001220-001220 / 2015
Diary number: 2277 / 2015
Advocates: HEMANTIKA WAHI Vs
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Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1220 OF 2015
Gujarat Urja Vikas Nigam Limited … Appellant
Versus
EMCO Limited & Another … Respondents
J U D G M E N T
Chelameswar, J.
1. The 2nd respondent herein, the Gujarat Electricity
Regulatory Commission is a body constituted under Section
82 of the Electricity Act, 2003 (hereinafter referred to as “the
Act”). In exercise of its statutory powers under Sections 61(h),
62(1)(a) and 86(1)(e) of the Act the 2nd respondent issued Order
No.2 of 2010 dated 29.01.2010 (hereinafter referred to as the
“1st Tariff Order”) determining the tariff for procurement of
power by the Distribution Licensees in Gujarat from Solar
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Energy Projects1. The said order was issued after an
elaborate consideration of the various relevant factors
including the policy guidelines of the State of Gujarat and
Union of India. Under the said order, tariff for procurement of
electricity generated by PROJECTS employing Solar
Photovoltaic (SPV) Technology was fixed at Rs.15 per kWh for
the initial 12 years starting from the date of commercial
operation of the project and Rs.5 per kWh from the 13 th year to
25th year. The said order was declared to have had come into
force w.e.f. 29.01.2010. Various financial and operational
parameters taken into consideration for determining the tariff
are mentioned at para 4 of the said Order2. One of the factors
taken into consideration is the ‘Rate of Depreciation’. It is
specified at para 5 of the Order that the tariff fixed under the
said Order “took into account the benefit of accelerated 1 The Tariff Order uses the term ‘Solar Energy Projects’ and the PPA uses the term ‘Solar Power Projects’. The terms ‘Solar Power Projects’ and ‘Solar Energy Projects’ are identical. Hereinafter, we use the term ‘PROJECTS’ to denote them. 2 Para 4. Components of Tariff
The following financial and operational parameters have been considered while determining the tariff.
1. Capital cost 2. Evacuation cost 3. Operations & Maintenance charges 4. Debt – Equity Ratio 5. Loan Tenure 6. Interest rate on loan 7. Return on equity 8. Rate of Depreciation 9. Interest on Working Capital 10. Capacity Utilization Factor 11. Duration of Tariff 12. Auxiliary Consumption
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depreciation under the Income Tax Act and Rules”. It is
further declared that “for a project that does not get such
benefit, the Commission would, on a petition in that respect,
determine a separate tariff taking into account all the relevant
facts.”
2. The 1st respondent produces electric energy (power) from
one of the PROJECTS. The appellant and 1st respondent3
entered into a Power Purchase Agreement (PPA) dated
09.12.2010 for sale and purchase of electricity from the 5 MW
project to be established by the 1st respondent in Surendra
Nagar district of Gujarat. The provisions relevant for the
dispute in the present appeal are Clauses 5.1 & 5.2,
“Article 5: Rates and Charges
5.1 Monthly Energy Charges: GUVNL shall pay to the Power Producer every month for Scheduled Energy/Energy injected as certified in the monthly SEA by SLDC the amounts (the “Tariff”) set forth in Article 5.2.
5.2 GUVNL shall pay the fixed tariff mentioned hereunder for the period of 25 years for all the Scheduled Energy/Energy injected as certified in the monthly SEA by SLDC. The tariff is determined by Hon’ble Commission vide Tariff Order for Solar based power project dated 29.01.2010.
Tariff for Photovoltaic Project: Rs.15/kWh for First 12 years and Thereafter Rs.5/kWh from 13th Year
To 25th Year.
Above tariff shall apply for solar projects commissioned on or before 31st December 2011. In case, commissioning of Solar Power Project is delayed beyond 31st December 2011, GUVNL shall pay the tariff as determined by Hon’ble GERC for Solar Projects effective on the date of commissioning of solar power project or above mentioned tariff, whichever is lower.”
3 Described as power producer in the PPA
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and Clauses 12.84 & 12.105 of the said PPA.
3. However, after entering into the abovementioned PPA,
respondent no.1 decided to change the PROJECT’S location.
Therefore, a Supplemental Agreement was entered into
between the appellant and respondent no.1 on 07.05.2011
making appropriate and necessary modifications to the PPA
dated 09.12.2010. However, Articles 5.1 and 5.2 of the
original PPA remained unaltered.
4. 2nd respondent passed another order dated 27.01.2012
(hereinafter referred to as the “2nd Tariff Order”) determining
the tariff applicable to the PROJECTS to be commissioned on
or after 29.01.2012. The tariff fixed under the said order for
the PROJECTS generating electrical Energy through Solar
4 12.8 Amendments: This Agreement shall not be amended, changed, altered, or modified except by a written
instrument duly executed by an authorized representative of both Parties. However, GUVNL may consider any amendment or change that the Lenders may require to be made to this Agreement. 5 12.10 Entire Agreement, Appendices:
This Agreement constitutes the entire agreement between GUVNL and the Power Producer, concerning the subject matter hereof. All previous documents, undertakings, and agreements, whether oral, written, or otherwise, between the Parties concerning the subject matter hereof are hereby cancelled and shall be of no further force or effect and shall not affect or modify any of the terms or obligations set forth in this Agreement, except as the same may be made part of this Agreement in accordance with its terms, including the terms of any of the appendices, attachments or exhibits. The appendices, attachments and exhibits are hereby made an integral part of this Agreement and shall be fully binding upon the Parties.
In the event of any inconsistency between the text of the Articles of this Agreement and the appendices, attachments or exhibits hereto or in the event of any inconsistency between the provisions and particulars of one appendix, attachment or exhibit and those of any other appendix, attachment or exhibit GUVNL and the Power Producer shall consult to resolve the inconsistency.
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Photovoltaic (SPV) Technology “availing the benefit of
accelerated depreciation under the Income Tax Act” is less
favourable to the power producers and the tariff payable by
the appellant to the power producers which do not avail “the
benefit of accelerated depreciation” under the Income-tax Act
is more favourable to such power producers.
5. The 1st respondent commissioned its PROJECT only on
2.3.2012, i.e., beyond the “control period6” of tariff specified
under the 1st Tariff Order. The said “control period” ended on
28.01.2012. The 1st respondent admittedly did not avail the
accelerated depreciation under Section 32 of the Income-tax
Act.
6. The 1st respondent, therefore, filed a petition no.1270 of
2012 before the State Commission invoking Section 86(1)(f) of
the Act praying “(A) This Hon’ble Commission be pleased to
hold and declare that the Petitioner is entitled to claim the
tariff applicable to megawatt scale solar photovoltaic projects
6 Para 7.2 Control Period The Commission had proposed a control period for this order as the period from the date of final
order of the Commission to 31.12.2011. Commission’s Ruling- “It has been observed that the capital cost of the solar power project might reduce drastically as
time elapses. However, since the gestation period for Solar PV projects is about 6 months and that for Solar Thermal Projects is 18-24 months, the Commission decides that the control period for this order will be 2 years.”
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not availing of accelerated depreciation as per tariff order
dated 27.1.2012; and (B) This Hon’ble Commission be pleased
to quash and set aside the decision of the Respondent taken in
letters dated 20.4.2012, 22.6.2012 and 20.11.2012 for
denying the tariff applicable to megawatt scale solar
photovoltaic projects not availing of accelerated depreciation
as per tariff order dated 27.1.2012 to the Petitioner and direct
the Respondent to forthwith make payment of a sum of Rs.
59,50,260/- to the Petitioner being the differential amount of
invoices which is unpaid by the Respondent;”
7. The 2nd respondent by its order dated 08.08.2013 held
that the 1st respondent is entitled for the benefit of the tariff
specified in the 2nd Tariff Order dated 27.01.20127. The 2nd
respondent also held that the benefit of its adjudicatory order
should not only go to the 1st respondent but also to others who
have commissioned their PROJECTS subsequent to the 2nd
Tariff Order.
Para 8. Before parting with the judgment, we would like to observe that the issue raised 7 Para 7. Considering the above, we decide that the petition succeeds. We decide that the petitioner’s project, which is not availing the benefit of Accelerated Depreciation is entitled to the tariff of Rs.11.25/Unit for the first 12 years of the project and Rs.7.50/Unit for the subsequent 13 years. The respondent is directed to pay the amount of difference of Rs.11.25 – Rs.9.98 = 1.27/KWh to the petitioner for the invoices so far raised by the petitioner and payment of which have already been made by the respondent. The respondent is further directed that he shall pay the above tariff now onward also to the petitioner for energy supplied by him.
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in the present petition is in fact on interpretation of the Order No.1 of 2012 dated 27.01.2012; and hence the decision in this case would impact not only the petitioner, but also other developers who have either commissioned or are likely to commission their projects within the control period of the said order. Some of such developers might not avail the benefits of accelerated depreciation and it would be unfair if all of them are required to file separate petitions to seek justice, especially when we have already decided that in the Order No.1 of 2012, the Commission has determined separate tariff for such projects. We, therefore, in the interest of justice and fairness, decide that the present order shall be applicable in all such cases. The onus of proof regarding non- availing of accelerated depreciation shall, however, be on such developers.
8. Aggrieved by the order dated 08.08.2013, the appellant
herein preferred an appeal before the Appellate Tribunal for
Electricity (hereinafter referred to as “the Appellate Tribunal”),
constituted under Section 110 of the Act invoking its
jurisdiction under Section 111 of the Act.
9. By the impugned order dated 20.11.2014, the Appellate
Tribunal confirmed the order of the 2nd respondent.
“Para 62. Summary of Findings:
(a) The PPA dated 19.12.2010 entered into between the Appellant and the Respondent No.1 provided for tariff as determined by the State Commission vide order dated 30.1.2010, viz. Rs.15 per kWh for first 12 years and thereafter Rs.5 per kWh from 13th year to 25th year, provided the Solar Project is commissioned on or before 31st December 2011. However, in case commissioning of the project is delayed beyond 31st December, 2011, the Appellant has to pay the tariff as determined by the State Commission effective on the date of commissioning of Solar Power Project. The Solar Project of the Respondent No.1 was commissioned on 2.3.2012. Therefore, the tariff as determined by the State Commission by the Order dated 27.1.2012 for the next control period from 29.1.2012 to 31.3.2015 will be applicable to the Respondent No.1.
(b) In order dated 27.1.2012, the State Commission has determined the tariff for Solar Project availing accelerated depreciation and without availing the accelerated depreciation. As the Respondent No.1 has not availed the accelerated depreciation, the tariff determined without accelerated depreciation in the order dated 27.1.2012 will be applicable in terms of the PPA and the tariff order of the State Commission dated 27.1.2012.
(c) Complete reading of the Tariff Order dated 27.1.2012 clearly indicates that the State Commission has determined tariff for both, the projects availing accelerated depreciation and those not availing accelerated depreciation. The order gives a choice to the Solar Developer to avail or not to avail the benefit of accelerated depreciation.”
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Hence, the instant appeal under Section 125 of the Act.
10. Both the 1st Tariff Order and the 2nd Tariff Order issued
by the 2nd respondent deal with the tariff payable to the
producers of power. The distinction between both the tariff
orders insofar as it is relevant for the purpose of the present
case is that:
(I) 1st Tariff Order fixed the tariff for the PROJECTS which
get the “benefit of accelerated depreciation” under Section
32 of the Income Tax Act.
“Based on the various parameters as discussed above, the levelised tariff including RoE of Solar PV power generation, using a discounting rate of 10.19% works out to Rs. 12.54 per kWh and levelised tariff using the same discounting factor for Solar Thermal Power generation works out to Rs. 9.29 per kWh. However, the Commission feels that it would be appropriate to determine tariff for two sub-periods: 12 years and 13 years instead of the same tariff for 25 years. Hence, the Commission determines the tariff for generation of electricity from Solar PV Power Project at Rs. 15 per kWh for the initial 12 (twelve) years starting from the date of Commercial operation of the project and Rs. 5 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year. The Commission also determines the tariff for generation of electricity from Solar Thermal Power project at Rs. 11 per kWh for the initial 12 (twelve) years starting from the date of Commercial operation of the project and Rs. 4.00 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year.
The above tariffs take into account the benefit of accelerated depreciation under the Income Tax Act and Rules. For a project that does not get such benefit, the Commission would, on a petition in that respect, determine a separate tariff taking into account all the relevant facts.”
(II) 2nd Tariff Order, on the other hand, fixed the tariff for
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both the classes of PROJECTS8 i.e. those which “avail”
the “benefit of accelerated depreciation” (under Section
32 of the Income Tax Act) and those which do not “avail”
the “benefit of accelerated depreciation”.
“Based on these technical and financial parameters, the levelized tariff including return on equity for megawatt-scale solar photovoltaic power projects availing accelerated depreciation is calculated to be Rs. 9.28 per kWh, while the tariff for similar projects not availing accelerated depreciation is calculated to be Rs. 10.37 per kWh. The Commission also decides to determine the tariff for two sub-periods. For megawatt-scale photovoltaic projects availing accelerated depreciation, the tariff for the first 12 years shall be Rs. 9.98 per kWh and for the subsequent 13 years shall be Rs. 7 per kWh. Similarly, for megawatt-scale photovoltaic projects not availing accelerated depreciation, the tariff for the first 12 years shall be Rs. 11.25 per kWh and for the subsequent 13 years shall be Rs. 7.50 per kWh.”
11. The case of the 1st respondent is that notwithstanding the
fact that it entered into a PPA during the “control period”
specified in the 1st tariff order, it is not obliged to sell power to
the appellant for the price specified in Article 5.2 of the PPA
and is legally entitled to seek (from the 2nd respondent) fixation
of a separate tariff. It is the further case of the 1st respondent
that under the PPA, the appellant is under an obligation to
procure the power from the 1st respondent for a period of 25
8 There is some dispute between the parties in this regard and the Appellate Tribunal recorded:-
“36. . The Tariff Order 2012 determines both the tariffs i.e. with or without accelerated depreciation.”
In our opinion, the conclusion of the Tribunal in this regard is right. The Tenor of the two tariff orders (relevant portions of which are extracted above) is too obvious and does not call for any further explanation to justify the above conclusion of the Appellate Tribunal.
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years if the 1st respondent commences the generation of power
within the “control period” and is also obliged to pay for the
power procured by it at the rates specified in Article 5.2 of the
PPA. But the obligation of the 1st respondent to sell power
generated by it to the appellant at the rates specified in Article
5.2 of the PPA comes into existence only on the happening of
the two contingencies, i.e., the 1st respondent (i) commencing
the generation of power within the “control period” stipulated
under the 1st Tariff Order; and (ii) choosing to avail the “benefit
of accelerated depreciation” under the Income Tax Act.
According to the 1st respondent, the stipulation under the 1st
Tariff Order that the tariff fixed thereunder is not applicable to
those PROJECTS which “does not get such benefit, the
Commission would on a petition in that respect determine a
separate tariff taking into account all the relevant facts from
not” would only imply that tariff fixed under the 1st Tariff
Order is not applicable to those PROJECTS/power producers
which do not avail the “benefit of accelerated depreciation”
under the Income Tax Act.
12. On the other hand, the case of the appellants throughout
has been that the 1st respondent clearly knew when it entered
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into the PPA that the tariff propounded under the 1st Tariff
Order is applicable only for those PROJECTS which avail the
“benefit of accelerated depreciation” under the Income Tax Act.
If the first respondent did not intend to avail the “benefit of the
accelerated depreciation” under the Income Tax Act, it ought
not to have entered into the PPA without first seeking the
determination of the tariff by the 2nd respondent. Having
chosen to enter into a PPA, the 1st respondent cannot decide
not to avail the “benefit of accelerated depreciation” at a later
point of time i.e. beyond the control period prescribed under
the 1st Tariff Order and claim the benefit of a more
advantageous tariff fixed in the 2nd Tariff Order in favour of the
PROJECTS which do not avail the “benefit of accelerated
depreciation”.
13. We have already noticed that the 1st respondent did not
commence generation of power within “control period”
stipulated under the 1st Tariff Order and also did not avail the
“benefit of the accelerated depreciation” under the Income Tax
Act.
14. It is admitted on all hands that the “benefit of accelerated
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depreciation” mentioned in the 1st Tariff Order and the PPA is
the stipulation contained in Section 32 (1)(i) of the Income Tax
Act read with Rule 5(1A) of the Income Tax Rules. They provide
for the method and manner in which depreciation of the assets
of an assessee is to be calculated. Section 32 of the Income
Tax Act (insofar as relevant) stipulates as follows:-
“32(1) in respect of depreciation of –
(i) buildings, machinery, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998.
owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed –
(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed.”
The prescription contemplated is found in Rule 5(1A) of the
Income Tax Rules, 1962 which reads as follows:-
“(1A) The allowance under clause (i) of sub-section (1) of section 32 of the Act in respect of depreciation of assets acquired on or after 1st day of April, 1997 shall be calculated at the percentage specified in the second column of the Table in Appendix IA of these rules on the actual cost thereof to the assessee as are used for the purposes of the business of the assessee at any time during the previous year:”
Under the second proviso to the said Rule, it is further
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provided;
“Provided further that the undertaking specified in clause (i) of sub- section (1) of section 32 of the Act may, instead of the depreciation specified in Appendix IA, at its option, be allowed depreciation under sub-rule (1) read with Appendix I, if such option is exercised before the due date for furnishing the return of income under sub-section (1) of section 139 of the Act,
(a) for the assessment year 1998-99, in the case of an undertaking which began to generate power prior to 1st day of April, 1997; and
(b) for the assessment year relevant to the previous year in which it begins to generate power, in case of any other undertaking:”
15. It can be seen from the above extracted proviso, an
undertaking engaged in generation of power has an option to
claim depreciation on its assets in accordance with the scheme
under Section 32(1)(i) of the Income Tax Act. Such an option
could be exercised at the relevant point of time as indicated in
the said proviso.
16. The argument of the first respondent throughout has
been that the stipulation in the 1st Tariff Order that “a project
that does not get such a benefit….” only means that the tariff
propounded under the said order does not apply to PROJECTS
which do not choose to exercise the option to be governed by
the scheme under Section 32 of the Income Tax Act. On the
other hand, the argument by the appellant throughout has
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been that such a clause only implies that the tariff under the
1st Tariff Order is not applicable to those power generating
PROJECTS which by operation of law (but not because of the
violation of the assessees) are not entitled to claim the benefit
of the scheme under Section 32(1)(i) of the Income Tax Act.
17. We do not wish to examine the question whether there is
a possibility under the Income Tax Act for any PROJECT/
undertaking engaged in the generation of power9 not to fall
within the operation of Section 32(1)(i) apart from those cases
where the “undertaking” chooses not to be governed by such
regime. Neither of the parties made the submission that in
law there is a possibility of a power project not getting the
benefit of the accelerated depreciation.
18. Assuming for the sake of argument that in law such a
possibility exists, the construction such as the one sought to
be placed on the relevant portion of para 5 of the 1st Tariff
Order by the appellant cannot be accepted because it would be
inherently illogical. At the cost of repetition, we reproduce
9 The relevant portion of Section 32 of the Income Tax Act reads as under:
“….. undertaking engaged in generation …. of power ……..”
The said Section covers not only Solar Power Projects but also all kinds of Power Projects.
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that portion of the para 5 of the 1st Tariff Order:
The above tariffs take into account the benefit of accelerated depreciation under the Income Tax Act and Rules. For a project that does not get such benefit, the Commission would, on a petition in that respect, determine a separate tariff taking into account all the relevant facts.”
It is not the case of either the appellant or the 2nd respondent
that Section 32(1)(i) of the Income Tax Act does not apply to
some PROJECTS. The tenor of the statement is clear. The 2nd
respondent proposed the tariff for all classes of PROJECTS
taking into account that all of them would be entitled to claim
the ‘benefit of accelerated depreciation’ under Section 32 of
Income Tax Act. The 2nd respondent must be presumed to
have known at the time of propounding the 1st tariff order that
the Income Tax Act and the Rules thereunder provide an
option to the assessee (producer of power) either to claim or
not the ‘benefit of accelerated depreciation’. Hence, the
stipulation. The submission of the appellant regarding the
construction of the above extracted clause of the 1st Tariff
Order is rejected.
19. However, that does not solve the problem on hand. Two
questions still remain to be examined, (i) Even if the
interpretation placed by the 1st respondent on the above
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extracted portion of para 5 of the 1st Tariff Order is correct (in
fact it would be the logical consequence of the rejection of the
submission of the appellant), would the 1st respondent have a
right to exercise the choice not to avail the ‘benefit of
accelerated depreciation’ after signing the PPA? (ii) Whether
the 1st respondent’s right under the Income Tax Act to make
such a choice could be so exercised which would result in a
situation whereby the appellant would be obliged under the
PPA to purchase the power generated by the 1st respondent for
a period of 25 years without knowing the price at which the 1st
respondent would be obliged to supply the power?
20. These questions were raised and argued before the 2nd
respondent but unfortunately the issue was unnecessarily
complicated by the arguments based on promissory estoppel10.
After noticing the issue, the appellate tribunal elaborately
extracted from the order of the 2nd respondent dated 8.8.2013.
The relevant part of which reads as under:
“6.16. However, it is also a fact that the parties to the above PPA agreed in the second para of the Article 5.2 of the PPA that if the project of the Petitioner is not commissioned during the control period of the Order No.2 of 2010 dated 29.1.2010, either the tariff that was agreed in Article 5.2 of the PPA or the tariff determined by the Commission as on the date
10 18. One other issue raised by the Appellant before the State Commission is that the choice to sell electricity at the tariff with or without accelerated depreciation was to be exercised by the Developer only at the relevant time and such a claim made subsequently is barred by the principles of estoppel.
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of commissioning of the project, whichever is lower, will be applicable. Thus, the aforesaid PPA recognizes the two tariffs applicable to the Petitioner case. As the Petitioner’s project was commissioned on 2.3.2012, it falls under the control period of Order No.1 of 2012 dated 27.01.2012, for tariff purposes, relevant para of which is reproduced below:
xxx xxx xxx xxx The above table reveals that both the tariffs i.e. one for the project availing the benefit of Accelerated Depreciation and another for the project not availing the benefit of accelerated Depreciation is allowed by the Commission for the projects commissioned during the control period of 29.01.2012 to 31.03.2015. Such being the case, on the cogent reading of the Article 5.2 of the PPA and the tariff Order No.1 of 2012 dated 27.01.2012, we are of the view that the Principle of Promissory Estoppel is not applicable in the present case.”
[Extracted portion of the order of the 2nd respondent in the impugned order]
It can be seen from the above that the 2nd respondent noticed
the stipulation in the PPA that if the 1st respondent does not
commission the PROJECT during the control period specified
under the 1st Tariff Order “….either the tariff that was agreed
… or the tariff determined by the Commission … whichever is
lower will be applicable but reached a conclusion that ……. on
a cogent reading of the Article 5.2 ……. and the tariff order
No.1 of 2012 dated 27.01.2012, we are of the view that the
Principle of Promissory Estoppel is not applicable in the
present case.” The 2nd respondent noticed the stipulation of
the PPA regarding the applicable tariff in the event of the 1st
respondent not commissioning the PROJECT would be the
lower of the two tariffs. Without examining the legal effect of
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such stipulation, the 2nd respondent went into the analysis of
the 2nd Tariff Order which is neither necessary (nor called for)
for determining the legal effect of the stipulation of the PPA.
21. The appellate Tribunal after noticing the issue and the
elaborate consideration bestowed on it by the 2nd respondent
did not record in the impugned order its view regarding the
correctness of the above extracted conclusion of the 2nd
respondent. We can only presume that the appellate tribunal
approved the reasoning and the conclusion of the 2nd
respondent since it did not reverse the 2nd respondent’s order.
22. One of the submissions of the 1st respondent which was
accepted by the Tribunal is that the issue is covered by an
earlier judgment of the Tribunal in Appeal No.111 of 2012
dated 30th April, 201311 pertaining to Rasna Marketing
Services LLP v. Gujarat Urja Vikas Nigam Limited &
Another (hereinafter referred to as “RASNA case”).
11 29. According to the Respondent, the issue has already been decided in favour of the Developer in judgment dated 30.4.2013 in Appeal No.111 of 2012.
31. In the above judgment in Rasna case, the Tribunal decided that there is no infirmity in the State Commission determining the tariff for the Solar Power Projects of Rasna Marketing Services Ltd. without considering the benefit of accelerated depreciation in terms of the Order No.2 of 2010 dated 29.1.2010. In that case, Rasna Marketing Services Ltd. had commissioned its project within the Control Period specified in the State Commission’s order dated 29.1.2010. The order dated 29.1.2010 determined the tariff for Solar Projects with accelerated depreciation but provided that for a project that does not get the accelerated depreciation benefit, the Commission on a Petition filed by the Developer would determine a separate tariff without accelerated depreciation.
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23. The facts of RASNA case are: that Rasna, a power
producer, entered into a power purchase agreement on
8.12.2010 with the appellant (GUVNL) herein. Under the said
PPA, Rasna agreed to sell power at the rate prescribed by the
1st Tariff Order. Eventually, Rasna commissioned its power
plant on 31.12.2011 within the control period stipulated in the
1st Tariff Order. However, Rasna filed a petition before the 2nd
respondent praying for determination of specific tariff for the
sale of power on the ground that Rasna would not be availing
accelerated depreciation benefits. The said application of
Rasna was resisted by the GUVNL. A preliminary objection
that such an application is not maintainable was raised by
GUVNL on the ground that Rasna having received the benefit
of the PPA and also the payment pursuant thereto is debarred
from seeking the relief such as the one sought by it. The 2nd
respondent overruled the preliminary objection. Therefore,
GUVNL went before the appellate tribunal. Dealing with the
said appeal, the Tribunal took note of the categoric objection
raised by the GUVNL that the application for determination of
a separate tariff by Rasna could not be entertained after Rasna
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had signed the PPA.12
24. The Tribunal rejected the said objection of GUVNL.13 In
substance, the conclusion of the Tribunal in RASNA case was
that the execution of the PPA does not put any embargo on the
right of Rasna to seek the determination of a specific tariff.
The tribunal’s reasons for such a conclusion are that (i) the 1st
Tariff Order recognises the right of the power producers like
Rasna either to opt for or not to opt for the benefit of
accelerated depreciation; (ii) there is no specific stipulation in
the Tariff Order that the power producers like Rasna which do
not wish to avail the benefit of accelerated depreciation should
12 21. The main ground of objection raised by the Appellants before the State Commission was that Rasna Marketing Services Limited, R-2 could not be permitted to file the said application after having signed the PPAs both on 08.12.2010 and 8.6.2011 with the Appellants and such a petition could be entertained by the State Commission only before the signing of the PPAs and Rasna Marketing Services Ltd. R-2 having preferred to sign the PPA as per the tariff order dated 29.1.2010 fixing the generic tariff cannot take a different stand and maintain the petition for determination of project specific tariff on the pretext of not availing the accelerated depreciation benefits. 13 22.(ii) It can not be contended that the subsequent execution of PPA would in any manner put an embargo on the jurisdiction of the State Commission for such a specific tariff determination especially when the PPA itself recognised the fact that the tariff shall be as per the order No.2 of 2010 dated 29.01.2010 and particularly when the said order also recognised the right of the developers who are not willing to get the benefit of accelerated depreciation to approach the State Commission for determining the specific tariff for those projects.
(iii) According to the Appellants, if Rasna Marketing Services LL (R-2) did not want to avail accelerated depreciation benefits, the same should have been intimated to the Appellants even before signing of the PPAs. This contention is not tenable because there is no such reservation either in the tariff order No.2 of 2010 or in the PPA entered into between the parties.
(iv) Rasna Marketing Services LLP (R-2) is not mandated under any provision of law to disclose to the Appellants that it would not be availing the benefit of accelerated depreciation before signing the PPA. It is the discretion of the project developer not availing the benefit of accelerated depreciation to move the State Commission in a separate petition for determination of project specific tariff as permitted by the State Commission in the tariff order No.2 of 2010 dated 29.1.2010. The said tariff order is a statutory order binding on the project developers and licensees such as the Appellants and the developers.
v) If the option of signing or not signing the PPA was contingent on the developers in exercise of option, then that option should have been specifically sought for by the Appellant and ensured that the same was incorporated in the PPA. This admittedly has not been done.
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intimate the same to the appellant before entering into the
PPA; (iii) nor there is any obligation under any law by which
Rasna is bound to disclose the fact before signing the PPA that
it would not avail the benefit of accelerated depreciation.
25. Relying on the judgment of the RASNA case, the
Tribunal recorded a conclusion in the impugned order:
“32. In the present case, the Solar Project could not be commissioned during the control period specified in the State Commission’s Order dated 29.1.2010. Therefore, in terms of the PPA, the Respondent No.1 is entitled to tariff as determined by the State Commission in the subsequent order dated 27.1.2012.”
We do not wish to make any comment on the correctness of
the order of the tribunal in RASNA case. We are not sure
whether the order has become final. But we are of the opinion
that the reliance by the tribunal in the instant case on RASNA
case order is clearly wrong. In RASNA case, the prayer was
for the determination of a separate tariff applicable to it. In
the instant case, the prayer of the 1st respondent is not for
fixation of separate tariff but for a declaration that the 1st
respondent is entitled for claiming the benefits of the tariff
determined under the 2nd Tariff Order.
26. Apart from that, the conclusion of the Tribunal in the
instant case is wrong. First of all the PPA does not give any
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option to the respondent to opt out of the terms of the PPA. It
only visualises a possibility of the producer not commissioning
its PROJECT within the “control period” stipulated under the
1st Tariff Order and provides that in such an eventuality what
should be the tariff applicable to the sale of power by the 1st
respondent. Secondly, the PPA does not ‘entitle’ the 1st
respondent to the “tariff as determined by the” 2nd respondent
by the 2nd Tariff Order. On the other hand, the PPA clearly
stipulates that in such an eventuality;
“Above tariff shall apply for solar projects commissioned on or before 31st December 2011. In case, commissioning of Solar Power Project is delayed beyond 31st December 2011, GUVNL shall pay the tariff as determined by Hon’ble GERC for Solar Projects effective on the date of commissioning of solar power project or above mentioned tariff, whichever is lower.”
The right of the 1st respondent not to avail the “benefit of
accelerated depreciation” flows from the Income Tax Act. It is
only the 1st Tariff Order which gives an option to the 1st
respondent (for that matter to all the power producers who are
similarly situated as the 1st respondent) not to sell the power
produced by it at the price specified in the 1st Tariff Order but
seek the determination of a separate tariff. Such a right and
option is available to the power producers only in one
contingency i.e., that they are not inclined to avail the ‘benefit
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of accelerated depreciation’.
27. The real question is: what is the point of time at which
the power producer can exercise such right to seek the
determination of a separate tariff.
28. The Income Tax Act gives an option to the producers of
power either to avail the ‘benefit of the accelerated
depreciation’ or not. It also specifies the point of time at
which such an option could be exercised. The right to
exercise such option at a point of time specified in the 2nd
proviso to Rule 5(1A) is limited only for the purpose of availing
the benefits flowing from the Income Tax Act. The PPA does
not make any reference to the “benefits of accelerated
depreciation”. It simply specified the price to be paid by the
appellant for the power purchased by it from the 1st
respondent. The appellant determined the said price after
taking into consideration various factors. One of them
happened to be that the Power Producers are entitled to
certain ‘benefits’ under the Income Tax Act. The availability of
such ‘benefit’ is dependent upon the option of the power
producers. Though the 1st Tariff Order employs the expression
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‘benefit’ in the context of the AD Scheme under Section 32 of
the IT Act, the applicability of the provision to a power
producer depends upon the choice of the power producer.
Whether the availability of the AD Scheme is beneficial to the
power producer or not in a given case depends on various
factors the details of which we do not propose to examine. It
is for the power producer to make an assessment whether the
availing of the AD is beneficial or not will take a decision if the
scheme under Section 32 IT Act should be availed or not.
29. But the availability of such an option to the power
producer for the purpose of the assessment of income under
the IT Act does not relieve the power producer of the
contractual obligations incurred under the PPA. No doubt
that the 1st respondent as a power producer has the freedom of
contract either to accept the price offered by the appellant or
not before the PPA was entered into. But such freedom is
extinguished after the PPA is entered into.
30. The 1st respondent knowing fully well entered into the
PPA in question which expressly stipulated under Article 5.2
that “the tariff is determined by Hon’ble Commission vide tariff
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order for solar based power project dated 29.1.2010”
31. Apart from that both the respondent No. 2 and the
appellate tribunal failed to notice and the 1st respondent
conveniently ignored one crucial condition of the PPA
contained in the last sentence of para 5.2 of the PPA:-
“In case, commissioning of Solar Power Project is delayed beyond 31st December 2011, GUVNL shall pay the tariff as determined by Hon’ble GERC for Solar Projects effective on the date of commissioning of solar power project or above mentioned tariff, whichever is lower.”
The said stipulation clearly envisaged a situation where
notwithstanding the contract between the parties (the PPA),
there is a possibility of the first respondent not being able to
commence the generation of electricity within the “control
period” stipulated in the 1st tariff order. It also visualised that
for the subsequent control period, the tariffs payable to a
PROJECTS/power producers (similarly situated as the first
respondent) could be different. In recognition of the said two
factors, the PPA clearly stipulated that in such a situation, the
1st respondent would be entitled only for lower of the two
tariffs. Unfortunately, the said stipulation is totally overlooked
by the second respondent and the appellate tribunal. There is
no whisper about the said stipulation in either of the orders.
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32. The 1st respondent created enough confusion. While on
one hand the 1st respondent asserted a right to seek
determination of a separate tariff independent of the tariff
fixed under the 1st Tariff Order in view of the stipulation
contained in the 1st Tariff Order that “for a project that does
not get such benefit, the Commission would, on a petition in
that respect, determine a separate tariff taking into account all
the relevant facts” did not seek a relief before the 2nd
respondent to determine a separate tariff but claimed the
benefit of the 2nd Tariff Order. Assuming for the sake of
argument that the petition filed by the 1st respondent
(1270/2012) is to be treated as an application for
determination of separate tariff which would be identical with
the tariff fixed under the 2nd Tariff Order, whether the 1st
respondent would be entitled for such a relief depends, if at all
he is entitled to seek such a determination, on a consideration
of “all the relevant facts” but not by virtue of the operation of
the 2nd Tariff Order.
33. For all the above-mentioned reasons, we are of the
opinion that the impugned order cannot be sustained and the
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same is therefore set aside. As a consequence, the order of the
2nd respondent dated 8.8.2013, which was the subject matter
of appeal in the impugned order, is also set aside.
34. At this juncture, we need to mention that the learned
counsel for the respondents very vehemently argued that the
instant appeal is not maintainable because Section 125 of the
Electricity Act mandates that an appeal to this Court under
the said provision is maintainable only where there is a
substantial question of law and the parties seeking to invoke
the appellate jurisdiction of this Court must clearly indicate as
to what is the substantial question of law that arises for
consideration of this Court. According to the respondents,
the memorandum of appeal does not disclose any substantial
question of law which arises for the consideration of this Court
35. We do not find any substance in the submission. We
believe that debate in the foregoing paragraphs of this
judgment revolved around more than one substantial question
of law justifying the exercise of the appellate jurisdiction of
this Court. The appeal is allowed with costs quantified at Rs.
2 lakhs payable by the 1st respondent herein. The interim
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orders granted earlier stand dissolved. The amounts, if any,
paid by the appellant pursuant to the interim orders of this
Court shall be adjusted towards the payments due to the 1st
respondent for future procurement of power by the appellant
in such manner as the appellant deems fit and proper.
….………………………….J. (J. Chelameswar)
…….……………………….J. (Abhay Manohar Sapre)
New Delhi; February 2, 2016
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