Talegaon Industrial Parks Pvt. Ltd. vs Central Electricity Regulatory Commission & Ors
- Court
- Appellate Tribunal For Electricity
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APL No. 300 OF 2015
rd
Dated: 3 July, 2026
Present : Hon`ble Ms. Seema Gupta, Officiating Chairperson
Hon`ble Mr. Virender Bhat, Judicial Member
In the matter of:
Talegaon Industrial Parks Pvt. Ltd.
514 Dalamal Towers
214, FPG Marg,
Mumbai – 400 021
…
Appellant(s)
Versus
1. Central Electricity Regulatory
…
Respondent No.1
Commission
Through its Chairman
rd th
3 & 4 Floor, Chanderlok Building
36, Janpath, New Delhi – 110 001
2. Power Grid Corporation of India
…
Respondent No.2
Limited
Having its registered office at:
B-9, Qutub Institutional Area,
Katwaria Sarai, New Delhi – 110 016
Corporate Office at:
“Saudamini” Plot No. 2
Sector – 29, Near IFFCO Chowk
Gurgaon – 122 001
Haryana
3. Oriental Bank of Commerce
…
Respondent No.3
Through its Branch Manager
B-1 & GL-34, Galleria,
Hiranandani Gardens
Powai, Mumbai – 400 076
A.No. 300 of 2015 Page 1 of 30
4. Central Transmission Utility of India
…
Respondent No.4
Ltd.
Through its Executive Director
Plot No.2, Sector – 29, Gurugram
Haryana – 122 001
Counsel on record for the Appellant(s) : Parthiv J. Mehta
for App.
Counsel on record for the Respondent(s) :
for Res. 1
Poorva Saigal
Shubham Arya
Pallavi Saigal
Ravi Nair
Reeha Singh
Anumeha Smiti
for Res. 2
Abiha Zaidi
Suriti Chowdhary
Pritam Raman Giriya
Arushi
Mohit Yadav
for Res. 4
JUDGMENT
PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
1. In this Appeal, the Appellant has assailed the order dated
24.08.2015 passed by the Respondent No.1-Central Electricity
Regulatory Commission (hereinafter referred to as “Commission” ) in
Petition No. 111/MP/2014 filed by the Appellant thereby dismissing the
petition wherein the Appellant had sought stay on encashment/revocation
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of application bank guarantee in the sum of Rs.1.5 Crore and Rs. 1 Crore
furnished under the Long Term Access (LTA) granted to it for evacuation
of power from its 2500 MW power project.
2. The facts and circumstances of the case stated briefly leading to
filing of the instant Appeal are narrated hereunder:-
3. The Appellant is a developer of 2500 MW combined cycle power
plant at village Navlakh Umbre, Yalegaon, Pune, Maharashtra. The
Appellant applied for grant of connectivity on 13.1.2010 for an
installed capacity of 2500 MW with the commissioning schedule
progressively from April, 2012 to July, 2013. Central Transmission
Utility of India Ltd. (in short “CTUIL” ) carried out the system studies
of the power system and decided the connectivity transmission
system for evacuation of power from the generating station of the
Appellant and circulated the same in the agenda for connectivity/long
term access vide its letter dated 12.3.2010.
4. On 15.12.2010, the Appellant applied for long term access to
CTUIL in accordance with the Connectivity Regulations for 1500 MW
capacity from its proposed power plant with three target regions
(Western Region-375 MW, Northern Region-375 MW, Eastern
Region-750 MW) to be effective from December, 2014. The
application was accompanied by a bank guarantee of Rs.1.5 crore
with validity for one year from 15.12.2010 in addition to the application
fee of Rs.9 lakh. The Appellant vide its application dated 28.2.2011
applied for another LTA for 1000 MW and furnished a Bank Guarantee
of Rs.1 crore effective from 27.2.2012. The Appellant vide its letter
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dated 28.2.2011 requested for revision of connectivity from 2500 MW
to 2100 MW.
5. CTUIL carried out the system studies and evolved the
transmission system for connectivity as well as transmission system
strengthening for LTA and circulated the agenda vide letter dated
4.4.2011 for discussion in the meeting of Western Region
Constituents. In the 14th meeting of Western Region Constituents
regarding connectivity/open access application held on 13.5.2011, the
Appellant’s applications for grant of connectivity and long term open
access were considered. In the said meeting, the Appellant informed
that it was reviewing the target beneficiaries/quantum of power in the
LTA and requested CTUIL to put on hold its application for the time
being and agreed to come back to CTUIL at the earliest.
6. The Appellant vide its letter dated 14.7.2011 again requested
CTUIL to revise its connectivity from 2100 MW to 1110 MW. CTUIL in
its letter dated 29.7.2011 advised the Appellant that on account of
material charge in the quantum of power to be interchanged with
ISTS, filing of fresh application would be required. On 18.8.2011, the
Appellant applied for connectivity for 1137 MW. Further, the Appellant
vide letter dated 20.9.2011 requested CTUIL to: (a) consider its LTA
application dated 28.2.2011 for 1000 MW and connectivity application
for 1137 MW in the meeting of the Western Region Constituents to be
held on October, 2011; and (b) keep the LTA application dated
15.12.2010 on hold so as to be considered in the subsequent meeting
of the Western Region Constituents. Keeping in view the request of
the Appellant for revision of installed capacity for the purpose of
connectivity and the LTA beneficiaries, CTUIL circulated the agenda
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vide its letter dated 5.10.2011 for discussion in the meeting of the WR
Constituents/Standing Committee meeting on power system planning
proposed to be held on 21.10.2011 which included the request of the
Appellant for grant of connectivity and long term access. In the 15th
meeting of WR Constituents held on 21.10.2011 regarding
connectivity/open access applications, the Appellant informed that
environmental clearance has been granted for one unit of 379 MW
but the letter regarding environmental clearance was awaited as the
matter was sub-judice due to public interest litigation. It was decided
in the meeting to grant connectivity and LTA for 379 MW keeping in
view the progress of the generation project. Considering the desired
date of connectivity as September 2013, the Appellant agreed to
develop the connectivity transmission system including the bays at
400 kV Pune (AIS) and Pune (GIS) S/s. As regards the LTA, it was
decided that the Appellant would sign the LTA Agreement/TSA with
CTUIL for sharing of transmission charges corresponding to 379 MW
(114 MW for SR and 265 MW for ER). Accordingly, CTUIL issued the
intimation for connectivity and LTA to the Appellant.
7. The Appellant vide its letter dated 28.11.2011 has requested
CTUIL to modify beneficiaries for full LTA quantum of 379 MW to ER
since the Appellant had signed PPA with West Bengal. CTUIL vide its
letter dated 30.1.2012 sought confirmation from the constituents of
Western Region to the proposed modification. The Appellant vide its
letter dated 6.2.2012 has confirmed its request for modification of
beneficiary for full quantum of 379 MW to Eastern Region. The
Appellant vide its letter dated 22.2.2012 also submitted to CTUIL the
Connectivity Agreement in CON-4 duly filled in. Vide its letter dated
2.4.2012, CTUIL granted LTA for 379 MW to the Appellant for sale of
A.No. 300 of 2015 Page 5 of 30
power in Eastern Region. Subsequently, CTUIL issued a revised LTA
vide its letter dated 13.6.2013 for 379 MW to Eastern Region in line
with the discussion held in the 17th Meeting of WR constituents
regarding Connectivity and Open Access Applications held on
3.1.2013. The Appellant was required to enter into LTA Agreement
with CTUIL within 30 days from the date of receipt of draft LTA
Agreement. The Appellant vide letter dated 7.11.2013 requested for
substitution of the existing bank guarantee of Rs.1 crore by a fresh
bank guarantee of Rs.37.90 lakh in view of the reduced quantum of
LTA granted to it. No action appears to have been taken by CTUIL on
the request of the Appellant. Despite issue of reminders dated
11.11.2013 and 9.12.2013 by CTUIL, the Appellant has not signed the
LTA Agreement.
8. The Appellant vide its letter dated 18.12.2013 intimated CTUIL that
the Environment Clearance for Unit 1 for 379 MW dated 22.2.2012 has
been quashed by the Bombay High Court. The Supreme Court directed
the authorities to have a fresh look at the EIA report within a stipulated
timeframe. The authorities required HPGCL to repeat the process which
the Appellant undertook but the process could not be completed as the
public hearing could not be held on account of agitation by local villagers
and environmental NGOs. In the meantime, based on the report of Dr. K.
Kasturirajan, Member (Science) Planning Commission, new or expansion
project or activities related to thermal power plant development was
prohibited in the Western Ghats where the project was to be located. The
Appellant further intimated that WBSEDCL, the long term customer for
Unit 1 has also terminated the PPA. The Appellant has further intimated
that on account of developments beyond its control, the Appellant has
decided to relocate its project from the existing location. The Appellant
A.No. 300 of 2015 Page 6 of 30
requested CTUIL to refund its Application Bank Guarantee of Rs. 1.5 crore
and Rs.1 crore as the LTAs have been frustrated and CTUIL has not
incurred any expenditure towards any grid augmentation pursuant to the
applications for LTA. The Appellant vide its letter dated 30.1.2014
reiterated its position with regard to non-signing of LTA Agreement and
refund of Application Bank Guarantee.
9. Vide letter dated 22.04.2014, CTUIL rejected the request of the
Appellant for refund of the application bank guarantee and called upon the
Appellant to extend the bank guarantee that was to expire on 27.05.2014
failing which the same would be encashed as per the connectivity
regulations. Accordingly, the bank guarantee was extended by the
Appellant upto 27.08.2014.
10. However, feeling aggrieved by the rejection of its request by CTU,
the Appellant approached the Commission vide Petition No. 111/MP/2014
with the following prayers:-
“(a) Direct the Respondent No. 1 and 2 to stay the
encashment/invocation of the bank guarantee of the petitioner in
view of frustration and impossibility of performance of the
contract;
(b) Grant ex-parte ad interim order staying the operation and
effect of the letter dated 22.4.2014 addressed to the Respondent
No. 2 and direct the Respondent Nos. 1 & 2 to stay the
encashment/invocation of the bank guarantee of the petitioner in
view of frustration and impossibility of performance of the
contract; and
A.No. 300 of 2015 Page 7 of 30
(c ) Pass any other order or orders in light of the facts and
submissions made herein above which this Hon`ble Commission
deems fit and appropriate in favour of the petitioner and against
the respondents.”
11. The Petition has been dismissed by the Commission vide order
dated 24.08.2015 which has been impugned in this Appeal. The relevant
portion of the impugned order which embodies the reasoning of the
Commission in rejecting the prayers of the Appellant is extracted herein
below:-
“It is therefore evident from the above that CTU has granted
LTA for 379 MW in due consideration of the request of the petitioner.
The LTA application for balance capacity of 2121 MW has been put
on hold on the request of the petitioner. The petitioner is now
pleading that execution of the project has become impossibility and
has accordingly sought refund of bank guarantee. The request of
the petitioner amounts to withdrawal of its applications for LTA. The
question therefore arises as to whether the alleged impossibility of
performance furnishes a good ground to the petitioner to contend
that the Bank Guarantee ought not to been cashed. The
Connectivity Regulations do not anywhere state that if the applicant
is able to prove the existence of any circumstances beyond its
control or existence of any force majeure conditions, which
prevented it from performing the contract, its bank guarantee
should not be encashed. The Connectivity Regulations do not
prohibit the applicant to withdraw its LTA application. The
Connectivity Regulations and the Detailed Procedure provide that
if an applicant withdraws its application or does not sign the LTA
Agreement, then its bank guarantee shall be encashed by CTU.
A.No. 300 of 2015 Page 8 of 30
The rationale for encashment of bank guarantee has been
explained in the Statement of Reasons to the Connectivity
Regulations as under:
“68. We are of the view that furnishing of Bank Guarantee
is required to bring seriousness to the applications made by
the applicants. However, a provision has been made
requiring the bank guarantee to stand discharged with the
submission of bank guarantee required to be given by the
applicant to the Central Transmission Utility during the
construction phase when augmentation of transmission
system is required, in accordance with the provisions in the
detailed procedure. Furthermore, the amount of Bank
Guarantee has been reduced from the originally proposed
`1 lakh per MW to `10, 000 per MW.
69. It has been requested by MSEDCL that in the
detailed procedure to be laid down by the nodal agency, the
applicant may be allowed a time limit within which he may
withdraw the application, when the Bank Guarantee will be
returned to the applicants.
70. We are not in agreement with the suggestion made.
In fact, the revised regulation specifies that the bank
guarantee may be encashed by the nodal agency, if the
application is withdrawn by the applicant or the long term
access rights are relinquished prior to operationalization of
such rights when augmentation of transmission system is
not required.”
A.No. 300 of 2015 Page 9 of 30
Therefore, the provision of bank guarantee has been made to
ensure seriousness among the LTA applicants. In this connection,
observations of the Appellate Tribunal for Electricity in Appeal No.
197 of 2014 (Jayaswal Neco Urja Limited Vs Power Grid
Corporation of India Ltd. & Another) are relevant which are
extracted as under:
“32. ………..The purpose behind the requirement of
furnishing Bank Guarantee and the provisions for its
encashment if the LTAA is not signed is to ensure
commitment of the project developer to use the transmission
line for which LTA has been sought. It gives assurance to
Respondent No.1 that the transmission line would not be
stranded after it is built. If the LTA applicants are allowed to
withdraw the LTA applications without any deterrent like
encashment of Bank Guarantee, then the purpose behind
the scheme of grant of LTOA will be frustrated. We,
therefore, find encashment of the Appellant’s Bank
Guarantee to be perfectly legal.”
21. The petitioner has vehemently argued that since execution
of the project has become impossibility, the contract has been
frustrated. This argument cannot be accepted as the CTU has in no
way contributed to the impossibility of performance of contract. This
issue has also been dealt with by Appellate Tribunal in Appeal No.
197 of 2014 as under:
“ 33. Assuming that the Appellant’s contention about
the existence of force majeure conditions is correct, so long
A.No. 300 of 2015 Page 10 of 30
as Respondent No.1 by its acts of omission or commission
has not contributed to the Appellant’s being unable to
commence operation of its power plant, Respondent No.1
cannot be held responsible for it and encashment of Bank
Guarantee cannot be faulted on that count.”
In view of the above finding of the Appellate Tribunal, it can be
said that since CTU by its acts of commission or omission has not
contributed to the abandonment of the project by the petitioner,
CTU cannot be held responsible for it and no direction can be
issued prohibiting CTU to encash the bank guarantee.
22. In view of the above discussion, we reject the prayer
of the petitioner and accordingly, the petition is dismissed.”
12. Thus, the Commission has held that as per the Central Electricity
Regulatory Commission (Grant of Connectivity, Long-term Access and
Medium-term Open Access in inter-State Transmission and related
matters) Regulations, 2009 (hereinafter referred to as “Connectivity
Regulations, 2009” ), the long term access applicant being affected by
force majeure or reasons beyond its control cannot be a ground for non-
signing of Long Term Access Agreement and failure to sign the LTA
Agreement within the stipulated period, necessarily result in encashment
of bank guarantee submitted along with LTA application.
13. We have heard Shri Sanjeev Puri, Learned Senior Counsel for the
Appellant, Mr. Sitesh Mukherjee, Learned Senior Counsel for the
Respondent No.4 and Mr. Shubham Arya, Learned Counsel for the
Respondent No.2. We have also perused the written submissions filed by
the Appellant and Respondent No.4.
A.No. 300 of 2015 Page 11 of 30
14. The Appellant is assailing the impugned findings of the Commission
primarily on the following two grounds; (i) There has been no invocation
of application bank guarantee by the CTUIL which must necessarily
precede before the encashment and as such the encashment of the bank
guarantee is illegal in the eyes of law; and (ii) no loss has been suffered
by the CTUIL on account of LTA granted to the Appellant since the said
LTA has been without any system augmentation and in so far as the
application for grant of 1000 MW LTA is concerned the Appellant has been
granted LTA for only 379 MW. However, the bank guarantee of entire
Rs.1 Crore has been invoked instead of Rs. 37.9 lakhs corresponding with
the LTA quantum of 379 MW.
Our analysis:
15. We have already noted that in the impugned order, the Commission
has proceeded on the assumption that the provisions of the Connectivity
Regulations, 2009 and Detailed Procedure provide that failure to sign LTA
Agreement within the stipulated period will necessarily result in
encashment of Application Bank Guarantee whether or not the said failure
on the part of the LTA Applicant was occasioned by any event beyond its
control. In view of the said reasons given by the Commission in the
impugned order for rejecting the prayers of the Appellant, primary thrust
of this Appeal would be with regards to the interpretation of the Regulation
12 of the Connectivity Regulations, 2009 issued by the Commission.
16. We may also note that this Tribunal was confronted with the
interpretation of the said Regulation 12 of the Connectivity Regulations,
2009 in Appeal No. 99 of 2017 titled Chettinad Power Corporation Private
Ltd. Vs. Power Grid Corporation of India Limited & Ors. decided on
A.No. 300 of 2015 Page 12 of 30
11.09.2025 wherein this Tribunal held that Regulation 12(5) of the
Connectivity Regulations, 2009 is only directory or discretionary and it is
not mandatory for the nodal agency i.e. CTUIL to encash the Bank
Guarantee furnished along with the LTA application in case of default and
decision in this regard shall have to be taken by the CTUIL upon
considering all the relevant facts and circumstances which may have
prevented the LTA Applicant from complying with the conditions upon
which the LTA has been granted. We find it pertinent to extract the relevant
paragraphs of the said judgment: -
“13. In view of the factual matrix involved in this case and the
reasons given by the Commission in the impugned order for
rejecting the petition of the Appellant, the scope of this appeal is
limited to the interpretation of Regulation 12 of the Connectivity
Regulations, 2009 issued by the Commission. For the sake of
convenience, we reproduce herein after the said Regulation 12 of
the Connectivity Regulations, 2009 :-
“12. Application for long-term access
(1) The application for grant of long-term access shall
contain details such as name of the entity or entities to
whom electricity is proposed to be supplied or from whom
electricity is proposed to be procured along with the
quantum of power and such other details as may be laid
down by the Central Transmission Utility in the detailed
procedure:
Provided that in the case where augmentation of
transmission system is required for granting open access,
if the quantum of power has not been firmed up in respect
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of the person to whom electricity is to be supplied or the
source from which electricity is to be procured, the
applicant shall indicate the quantum of power along with
name of the region(s) in which this electricity is proposed
to be interchanged using the inter- State Transmission
system;
Provided further that in case augmentation of transmission
system is required, the applicant shall have to bear the
transmission charges for the same as per these
regulations, even if the source of supply or off-take is not
identified;
Provided also that the construction of such augmentation
of the transmission system may be taken up by the CTU
or the transmission licensee in phases corresponding to
the capacity which is likely to be commissioned in a
given time frame after ensuring that the generating
company has released the advance for the main plant
packages i.e. Turbine island and steam generator island
or the EPC contract in case of thermal generating station
and major civil work packages or the EPC contract in case
of hydro generating stations for the corresponding
capacity of the phase or the phases to be commissioned,
subject to a minimum of 10% of the sum of such
contract values:
Provided that a generating company after firming up the
beneficiaries through signing of long term Power Purchase
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Agreement(s) shall be required to notify the same to the
nodal agency along with the copy of the PPA:
Provided also that in cases where there is any material
change in location of the applicant or change by more than
100 MW in the quantum of power to be interchanged using
the inter-State Transmission system or change in the region
from which electricity is to be procured or to which supplied,
a fresh application shall be made, which shall be
considered in accordance with these regulations.
(2) The applicant shall submit any other information
sought by the nodal agency including the basis for
assessment of power to be interchanged using the inter-
State Transmission system and power to be transmitted
to or from various entities or regions to enable the nodal
agency to plan the inter-State transmission system in a
holistic manner.
(3) The application shall be accompanied by a bank
guarantee of Rs 10,000/- (ten thousand) per MW of the
total power to be transmitted. The bank guarantee shall be
in favour of the nodal agency, in the manner laid down
under the detailed procedure.
(4) The bank guarantee of Rs. 10,000 /- (ten thousand)
per MW shall be kept valid and subsisting till the execution
of the long-term access agreement, in the case when
augmentation of transmission system is required, and till
A.No. 300 of 2015 Page 15 of 30
operationalization of long-term access when augmentation
of transmission system is not required.
(5) The bank guarantee may be encashed by the nodal
agency, if the application is withdrawn by the applicant or
the long-term access rights are relinquished prior to the
operationalization of such rights when augmentation of
transmission system is not required.
(6)
The aforesaid bank guarantee will stand discharged
with the submission of bank guarantee required to be given
by the applicant to the Central Transmission Utility during
construction phase when augmentation of transmission
system is required, in accordance with the provisions in the
detailed procedure.
(Emphasis supplied)
14. Perusal of the said Regulation would reveal that application
for Long-Term Access (LTA) has to be submitted containing all
such details as provided in the Detailed Procedure issued under
Regulation 27 of the connectivity Regulations. The application
shall be accompanied by a Bank Guarantee in the sum of
Rs.10,000 per MW of the total power to be transmitted in favour of
the nodal agency, in the manner laid down under the Detailed
Procedure. If as a result of system studies, it is found that no
further augmentation of the transmission system is required, the
application will be required to sign the LTA agreement and the
Bank Guarantee already submitted will remain valid till the
operationalization of the LTA. If it is found that the augmentation
A.No. 300 of 2015 Page 16 of 30
of the transmission system is required, the Appellant will be
required to enter into the LTA agreement and submit a fresh Bank
Guarantee for construction period calculated as per Detailed
Procedure and the Bank Guarantee given earlier along with LTA
application shall stand discharged. We may here note clause 24
of the Detailed Procedure laid down by the Commission providing
timeline for entering into LTA agreement :-
“24. Processing of Applications
ii) Where system strengthening is involved
(ii) The nodal agency shall intimate grant of long term
access on format [FORMAT LTA- 5] indicating identified
system strengthening with direction to the applicant to enter
into Long term access agreement, Bulk Power Transmission
Agreement (BPTA) with CTU within thirty days.”
15. Accordingly, in view of the provisions of the Connectivity
Regulations and Detailed Procedure, the application who has
been granted long-term access is required to sign LTA agreement,
with the nodal agency i.e. CTUIL or any other inter State
Transmission Licensee, if involved, within a period of 30 days from
the date of grant of LTA. Where system strengthening is involved,
the applicant shall be required to submit a fresh Bank Guarantee
and the Bank Guarantee earlier submitted along with LTA
application shall stand discharged.
16. Regulation 12(5) of the Connectivity Regulations, 2009,
envisages that the Bank Guarantee submitted along with LTA
application may be encashed by the nodal agency, if the
A.No. 300 of 2015 Page 17 of 30
application is withdrawn by the applicant or the long-term access
rights are relinquished prior to the operationalization of such rights
when augmentation of transmission system is not required.
17. Clause 23(5) of the Detailed Procedure also assumes
importance on this aspect which provides that bank guarantee
may be encashed by the nodal agency: (i) if the application is
withdrawn by the applicant; or (ii) if the long-term access rights are
relinquished prior to the operationalization of such long-term
access when augmentation of transmission system is not
required; or (iii) If the applicant fails to sign the Long Term Access
Agreement with CTU or a tripartite agreement with CTU and
transmission licensee, as the case may be, and fails to furnish
appropriate BG for construction phase, within stipulated time as
indicated in the intimation letter; (iv) if the applicant fails to
revalidate the earlier furnished BG at least 30 days prior to its
expiry; and (v) If the applicant fails to firm up beneficiaries in terms
of clause 22.7, 3 years prior to intended date of Long Term Access.
18. Thus, upon conjoint reading of Regulation 12(5) of
Connectivity Regulations, 2009 and Clause 23(5) of the Detailed
Procedure, following are the valid grounds for the nodal agency
i.e. CTUIL for encashing the Bank Guarantee submitted along with
the LTA application;
a) Withdrawal of LTA application;
b) Relinquishment of LTA rights prior to the operationalization
of such rights. When augmentation of transmission system
is not required;
c) Not signing of LTA agreement within stipulated period of 30
days from the date of grant of LTA.
d) Failure to furnish Bank Guarantee for construction phase.
A.No. 300 of 2015 Page 18 of 30
19. The power/authority to encash the Bank Guarantee of LTA
applicant has been given to the nodal agency under Regulation
12(5) of the Connectivity Regulations, 2009, which has already
been quoted herein above. We may emphasize here that the word
used in the said Regulation is “May”.
20. The issue which arise for consideration is whether the Bank
Guarantee of LTA applicant is to be necessarily encashed by the
nodal agency i.e. CTUIL on the basis of any of the grounds
existing in a particular case, as noted herein above, or the nodal
agency is required to exercise its discretion in doing so on case to
case basis in view of the facts and circumstances involved in a
particular case. In other words, the issue to be decided would be
whether the word “May” used in Regulation 12(5) is merely
directory in nature or has a mandatory force.
21. According to the Commission, as held in the impugned
order, the said Regulation 12(5) is mandatory in nature and the
expression “May” has to be read as “Shall”.
22. According to the Appellant, the Commission has proceeded
on an erroneous interpretation of Regulation 12(5) for the reasons
that the purpose of requirement of Bank Guarantee along with the
LTA application is only to provide a security to CTUIL against any
potential damage and is not meant as a measure of liquidity
damages or penalty. Reliance placed upon decision of Delhi High
Court in NSL Nagapatnam Infrastructure Pvt. Ltd. Vs. Central
Electricity Regulation Commission and Ors., W.P.(C) 6791 of
2017, decided on November 24, 2022. It is further argued that the
CTUIL was not entitled to encash the Appellant’s Bank Guarantee
in the absence of a provision for liquidated damages as well as in
the absence of any proof of loss or damages suffered by it on
A.No. 300 of 2015 Page 19 of 30
account of delay on the part of the Appellant in executing the LTA
agreement.
rd
23. On behalf of the 3 Respondent – CTUIL, it is argued that
as per settled law of statutory interpretation, the word “May” and
“Shall” can be used interchangeably depending upon the context.
It is argued that a plain reading of the said Regulation 12 would
make it abundantly clear that only discretion which the nodal
agency is required to exercise is to satisfy itself about the
occurrence of either of the two events namely (a) withdrawal of
application by the applicant or (b) the LTA has been relinquished
prior to the operationalization of such rights when augmentation of
transmission system is not required. Reliance is placed upon
judgement of the Hon’ble Supreme Court in Smt. Bachahan Devi
and Anr. vs. Nagar Nigam, Gorakhpur and Anr. AIR 2008 SC 1282
and judgment of this Tribunal in Appeal No. 197 of 2014 Jayaswal
th
Neco Urja Limited Vs. PGCIL and Anr. decided on 15 April, 2015.
24. We have given thoughtful consideration to the detailed rival
submissions made by the Learned Counsels and have also gone
through the Written Submission filed by them. The judgements
cited by the Learned Counsels in support of their arguments have
also been perused.
Our Analysis :
25. At the outset like to refer to what the Hon’ble Supreme Court
has observed/held on the aspect of interpretation of words “May”
and “Shall” used in a statute in Bachahan Devi’s case. The same
are quoted herein below : -
"31 . It is well-settled that the use of word 'may' in a statutory
provision would not by itself show that the provision is
directory in nature. In some cases, the legislature may use
A.No. 300 of 2015 Page 20 of 30
the word 'may' as a matter of pure conventional courtesy
and yet intend a mandatory force. In order, therefore, to
interpret the legal import of the word may', the court has to
consider various factors, namely, the object and the scheme
of the Act, the context and the background against which the
words have been used, the purpose and the advantages
sought to be achieved by the use of this word, and the like.
It is equally well-settled that where the word 'may' involves
a discretion coupled with an obligation or where it confers a
positive benefit to a general class of subjects in a utility Act,
or where the court advances a remedy and suppresses the
mischief, or where giving the words directory significance
would defeat the very object of the Act, the word 'may'
should be interpreted to convey a mandatory force. As a
general rule, the word 'may' is permissive and operative to
confer discretion and especially so, where it is used in
juxtaposition to the word 'shall', which ordinarily is
imperative as it imposes a duty. Cases however, are not
wanting where the words 'may 'shall', and 'must' are used
interchangeably. In order to find out whether these words
are being used in a directory or in a mandatory sense, the
intent of the legislature should be looked into along with the
pertinent circumstances. The distinction of mandatory
compliance or directory effect of the language depends
upon the language couched in the statute under
consideration and its object, purpose and effect. The on
conferment of power. Depending upon the context, 'may'
does not always mean may. 'May' is a must for enabling
compliance of provision but there are cases in which, for
A.No. 300 of 2015 Page 21 of 30
various reasons, as soon as a person who is within the
statute is entrusted with the power, it becomes his duty to
exercise that power, Where the language of statute creates
a duty, the special remedy is prescribed for non-
performance of the duty.
32. If it appears to be the settled intention of the legislature
to convey the sense of compulsion, as where an obligation
is created, the use of the word 'may' will not prevent the court
from giving it the effect of Compulsion or obligation. Where
the statute was passed purely in public interest and that
rights of private citizens have been considerably modified
and curtailed in the interests of the general development of
an area or in the interests or removal of slums and
unsanitary areas. Though the power is conferred upon the
statutory body by the use of the word 'may that power must
be construed as a statutory duty. Conversely, the use of the
term 'shall' may indicate the use in optional or permissive
sense. Although in general sense 'may' is enabling or
discretional and shall' is obligatory, the connotation is not
inelastic and inviolate." Where to interpret the word 'may' as
directory would render the very object of the Act as nugatory,
the word 'may' must mean 'shall."
26. Thus generally the word “May” is permissive or directory in
nature and confers discretion whereas the word “shall” is
imperative in nature as it imposes a duty. However, there may be
cases where the word “May” used in a Statute or Regulation ought
to be interpreted to convey a mandatory force. In order to
A.No. 300 of 2015 Page 22 of 30
ascertain that a word “May” used in a Statute or a Regulation is
directory, merely conferring discretion or conveys a mandatory
force, the Court or Tribunal must consider :-
a) The object and scheme of the Act/Regulations;
b) The context and the background in which the word has been
used;
c) The purpose and the advantages sought to be achieved by
the use of word;
d) Whether giving the word directory significance would render
the very object of the Acts/Regulations as nugatory; and
e) The intent of the legislature along with the relevant
circumstances.
27. Here we are concerned with the interpretation of the word
“May” used in Regulation 12(5) of the Connectivity Regulations,
2009 which is reproduced here at the cost of repetition:-
“(5) The bank guarantee may be encashed by the nodal
agency, if the application is withdrawn by the applicant or
the long-term access rights are relinquished prior to the
operationalization of such rights when augmentation of
transmission system is not required.”
28. In order to find out whether the word “May” has been used
in a directory sense or in a mandatory sense in the said Regulation
12(5), we need to refer to the Statement of reasons to the
Connectivity Regulations, 2009, in which it is found. The same
reads as under :-
“ 68. We are of the view that furnishing of Bank Guarantee
is required to bring seriousness to the applications made by
applicants. However, a provision has been made requiring
A.No. 300 of 2015 Page 23 of 30
the bank guarantee to stand discharged with the
submission of bank guarantee required to be given by the
applicant to the Central Transmission Utility during
construction phase when augmentation of transmission
system is required, in accordance with the provisions in the
Detailed Procedure. Furthermore, the amount of Bank
Guarantee has been reduced from the originally proposed
Rs. 1 lakh per MW to Rs. 10,000 per MW.”
29. It is limpid from these statement of reasons that the only
object/purpose of requiring and LTA applicant to annex the Bank
Guarantee of requisite amount along with LTA application is to
bring seriousness to the application made by the applicants.
30. The Bank Guarantee so annexed to the LTA application
would automatically stand discharged upon submission of another
Bank Guarantee required to be given by the applicant to the CTUIL
during construction phase when augmentation of transmission
system is required. We may also note that in the draft
Regulations, the Commission had proposed a Bank Guarantee of
Rs.1,00,000/- per MW which was later on reduced to Rs.10,000/-
per MW.
31. This would definitely indicate that the encashment of Bank
Guarantee furnished along with LTA application is at the discretion
of the nodal agency i.e. CTUIL and the Regulation 12(5) of the
Connectivity Regulations cannot be construed to make it
mandatory or necessary for the CTUIL to encash the Bank
Guarantee in all cases where the LTA applicant does not execute
the LTA agreement within a stipulated period of 30 days from the
date of grant of LTA. The purpose of requiring an LTA applicant to
A.No. 300 of 2015 Page 24 of 30
furnish Bank Guarantee along with LTA application manifestly
appears to be only to ensure that serious applicants alone apply
for LTA and do not submit such application for mere fancy.
32. We may note here that even the maker of the Connectivity
Regulations, 2009 i.e. the Commission itself has conveyed to the
Delhi High Court in W.P.(C) 6791 of 2017 that Commission’s
intention was never that Regulation 12(5) be read as mandatory
requiring encashment of Bank Guarantee in all cases. This is
th
evident from the following portion of the judgement dated 24
November, 2022 passed by the High Court in the said writ
petition:-
“10. Mr T.V.S. Raghvendra Sreyas, learned counsel
appearing for CERC, submits that present petition is not
maintainable. He also submits that the word “may” is used
in Regulation 12(5) of the Connectivity Regulations as
encashment of the bank guarantees furnished along with the
application for LTA is at the discretion of CTU. He submits
that Regulation 12(5) of the Connectivity Regulations cannot
be read as mandatory and necessarily requiring the CTU to
encash the bank guarantee in all cases where the
application does not proceed to the construction phase or
result in grant of LTA.
11. He referred to the Statement of Reasons for framing
the Connectivity Regulations and drew the attention of this
Court to paragraph 68 of the said Statement of Reasons,
which reads as under:
“68. We are of the view that furnishing of Bank
Guarantee is required to bring seriousness to
the applications made by applicants. However, a
A.No. 300 of 2015 Page 25 of 30
provision has been made requiring the bank guarantee
to stand discharged with the submission of bank
guarantee required to be given by the applicant to the
Central Transmission Utility during construction phase
when augmentation of transmission system is required,
in accordance with the provisions in the detailed
procedure. Furthermore, the amount of Bank
Guarantee has been reduced from the originally
proposed Rs. 1 lakh per MW to Rs. 10,000 per MW.”
12. He contended that it was never the intention of CERC
that the Regulation 12(5) of the Connectivity Regulations be
read as necessarily requiring encashment of bank
guarantee in all cases. He emphasized that the purpose
was to ensure that only serious applicants apply for LTA and
do not move the application at a premature stage.”
33. In the said Writ Petition also, the High Court was called upon
to interpret Regulation 12(5) of Connectivity Regulations, 2009
and upon consideration of all the relevant aspects, the High Court
has held as under:-
“15. We are of the view that Regulation 12(3) – which, it is
important to note, has not been impugned by the petitioner
– requiring furnishing of the bank guarantee in the sum of
₹10,000/- per MW, cannot be considered as a penal
provision. The requirement of furnishing the bank guarantee
may also be considered as a regulatory measure.
Concededly, CERC has the power to impose a regulatory
fee. The fact that the bank guarantee is discharged in terms
of Regulation 12(6) of the Connectivity Regulations, with the
CTU undertaking the construction phase, indicates that the
A.No. 300 of 2015 Page 26 of 30
said security dovetails into a higher security – bank
guarantee in the sum of ₹5,00,000/- per MW – which is
furnished at that stage. There is no dispute that thereafter, if
there is any failure on the part of the applicant to proceed
further, the requisite compensatory payment is required to
be made and recovered from the bank guarantee.
16. Having stated the above, there is much merit in the
contention that Regulation 12(5) of the Connectivity
Regulations cannot be read to mean that the CTU must
necessarily, in all cases, encash the bank guarantee where
the applicant does withdraw the application or relinquishes
his rights prior to operationalization.
17. The word “may” can never be read as “must” (see
Nicholas v. Baker: 59 LJ Ch 661 ). In certain
circumstances, the use of the word “may”, in a statutory
provision, indicates an enabling power that is coupled with a
duty to exercise the same. In such cases, use of the word
“may” would not change the mandatory character of the said
provision. However, in this case, requirement of furnishing a
bank guarantee is to screen the applicants to ensure that
only serious applicants apply. To that extent, it is meant to
regulate the applicants.
18. In the aforesaid context, it is difficult to accept that
there is a necessary requirement for the CTU to encash the
bank guarantee in all cases. The question, whether a bank
guarantee is required to be encashed, would have to be
determined by the CTU, keeping in mind the facts of each
case. There may be cases of genuine hardship where an
applicant, who has already committed sufficient resources,
A.No. 300 of 2015 Page 27 of 30
is unable to proceed further. It would be erroneous to accept
that in such cases, the encashment of the bank guarantee
is required to serve as a further deterrent.”
34. We find ourselves in total agreement with the decision of the
High Court in the said Writ Petition. It is amply clear that the only
purpose requiring the Bank Guarantee to be submitted along with
the LTA application is to have an overview of the applicants and to
screen the applicants to ensure that only serious applicants apply.
At best, the requirement for furnishing Bank Guarantee along with
application may be considered as a regulatory measure. The fact
that the Bank Guarantee submitted along with LTA application gets
automatically discharged upon submission of fresh Bank
Guarantee by the LTA applicant for construction period as per the
Detailed Procedure, also indicates that the object of the initial
Bank Guarantee submitted along with the LTA application is
merely to demonstrate the seriousness of the LTA applicant and
nothing more and hence its encashment by the CTUIL is not
necessary or mandatory merely for the reason that the LTA
applicant fails to sign the LTA agreement within the stipulated
period.
35. Hence, we are of the firm opinion that the word “May” used
in Regulation 12(5) of Connectivity Regulations does not convey
any mandatory force and the said Regulation cannot be read to
mean that CTUIL must necessarily encash the Bank Guarantee in
all cases where the applicant withdraws the LTA application or
relinquishes its LTA rights prior to operationalization or fails to sign
LTA agreement within the stipulated period. Whether the Bank
Guarantee submitted along with LTA application is required to be
encashed or not would depend upon the facts and circumstances
A.No. 300 of 2015 Page 28 of 30
of each case and shall have to be determined by the CTUIL having
regard to all those facts and circumstances. There may be cases
where the applicant, who has been granted LTA, is prevented from
executing the LTA agreement within the stipulated period by some
genuine hardship or by the reasons beyond its control. Serious
mis-carriage of justice would entail if Regulation 12(5) is termed
as mandatory in nature requiring encashment of Bank Guarantee
in those cases also.
36. Accordingly, the impugned order of the Commission can not
be sustained. Same is hereby set aside. Appeal stands allowed.
37. We hold and declare that Regulation 12(5) of the
Connectivity Regulations, 2009 is only directory or discretionary
and it is not mandatory for the nodal agency i.e. CTUIL to encash
the Bank Guarantee furnished along with LTA application in every
case of default. Decision in this regard shall have to be taken by
the CTUIL upon considering all the relevant facts and
circumstances which may have prevented the LTA applicant from
complying with the conditions upon which LTA has been granted.”
17. It is manifest that in view of the factual matrix involved in the instant
Appeal, the law laid down by this Tribunal in the aforementioned judgment
is squarely applicable to the instant Appeal also and the claims of the
Appellant ought to be decided in the light of what has been observed in
the aforesaid judgment. Therefore, the matter at hand also needs to be
remanded back to the Commission for fresh consideration in order to
determine whether the CTUIL was justified in encashing the Bank
Guarantee of the Appellant and pass a fresh order accordingly.
A.No. 300 of 2015 Page 29 of 30
18. In so far as the contention of the Appellant that there has been no
invocation of the Application Bank Guarantee by CTUIL which must
necessarily precede before the encashment, is concerned we refrain from
giving any finding on the same for the reasons that we are remanding the
matter back to the Commission for fresh consideration. Therefore, the
Appellant is at liberty to raise this contention also before the Commission
during the re-hearing of its petition upon remand.
Conclusion:
19. Accordingly, we hereby set aside the impugned order of the
Commission and remand the matter back to the Commission with the
directions to conduct a fresh hearing in order to determine whether the
CTUIL was justified in encashing the Bank Guarantee of the Appellant in
this case and pass a fresh consequential order in this regard within two
months from the receipt of the judgment. We make it clear that all other
contentions raised by the Appellant in this Appeal are also left open to be
raised before the Commission during the re-hearing of the petition.
20. The Appeal stands disposed of in these terms.
rd
Pronounced in the open court on this the 3 day of July, 2026.
Virender Bhat Seema Gupta
Judicial Member Officiating Chairperson
mk
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