Full Judgment Text
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.
nd
1. The 2 respondent herein, the Gujarat Electricity
JUDGMENT
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),
nd
62(1)(a) and 86(1)(e) of the Act the 2 respondent issued Order
No.2 of 2010 dated 29.01.2010 (hereinafter referred to as the
st
“1 Tariff Order”) determining the tariff for procurement of
power by the Distribution Licensees in Gujarat from Solar
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Page 1
1
Energy Projects . 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
th
operation of the project and Rs.5 per kWh from the 13 year to
th
25 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
2
are mentioned at para 4 of the said Order . 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
JUDGMENT
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.”
st
2. The 1 respondent produces electric energy (power) from
st 3
one of the PROJECTS. The appellant and 1 respondent
entered into a Power Purchase Agreement (PPA) dated
09.12.2010 for sale and purchase of electricity from the 5 MW
st
project to be established by the 1 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.
JUDGMENT
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
th
Thereafter Rs.5/kWh from 13 Year
th
To 25 Year.
st
Above tariff shall apply for solar projects commissioned on or before 31
December 2011. In case, commissioning of Solar Power Project is delayed
st
beyond 31 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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4 5
and Clauses 12.8 & 12.10 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.
nd
4. 2 respondent passed another order dated 27.01.2012
nd
(hereinafter referred to as the “2 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
JUDGMENT
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.
st
5. The 1 respondent commissioned its PROJECT only on
6
2.3.2012, i.e., beyond the “control period ” of tariff specified
st
under the 1 Tariff Order. The said “control period” ended on
st
28.01.2012. The 1 respondent admittedly did not avail the
accelerated depreciation under Section 32 of the Income-tax
Act.
st
6. The 1 respondent, therefore, filed a petition no.1270 of
JUDGMENT
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;”
nd
7. The 2 respondent by its order dated 08.08.2013 held
st
that the 1 respondent is entitled for the benefit of the tariff
nd 7 nd
specified in the 2 Tariff Order dated 27.01.2012 . The 2
respondent also held that the benefit of its adjudicatory order
JUDGMENT
st
should not only go to the 1 respondent but also to others who
nd
have commissioned their PROJECTS subsequent to the 2
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
nd
Tribunal confirmed the order of the 2 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
th th
Rs.5 per kWh from 13 year to 25 year, provided the Solar Project is
st
commissioned on or before 31 December 2011. However, in case
st
commissioning of the project is delayed beyond 31 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.
JUDGMENT
(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.
st nd
10. Both the 1 Tariff Order and the 2 Tariff Order issued
nd
by the 2 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:
st
(I) 1 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
th th
13 (Thirteenth) year to 25 (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
th
the project and Rs. 4.00 per kWh from the 13 (Thirteenth) year to
th
25 (twenty fifth) year.
JUDGMENT
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.”
nd
(II) 2 Tariff Order, on the other hand, fixed the tariff for
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8
both the classes of PROJECTS 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 .”
st
11. The case of the 1 respondent is that notwithstanding the
fact that it entered into a PPA during the “control period”
st
specified in the 1 tariff order, it is not obliged to sell power to
the appellant for the price specified in Article 5.2 of the PPA
JUDGMENT
nd
and is legally entitled to seek (from the 2 respondent) fixation
st
of a separate tariff. It is the further case of the 1 respondent
that under the PPA, the appellant is under an obligation to
st
procure the power from the 1 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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st
years if the 1 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
st
PPA. But the obligation of the 1 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
st
the two contingencies, i.e., the 1 respondent (i) commencing
the generation of power within the “control period” stipulated
st
under the 1 Tariff Order; and (ii) choosing to avail the “benefit
of accelerated depreciation” under the Income Tax Act.
st st
According to the 1 respondent, the stipulation under the 1
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
JUDGMENT
separate tariff taking into account all the relevant facts from
st
not” would only imply that tariff fixed under the 1 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
st
has been that the 1 respondent clearly knew when it entered
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st
into the PPA that the tariff propounded under the 1 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
nd
determination of the tariff by the 2 respondent. Having
st
chosen to enter into a PPA, the 1 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
st
the 1 Tariff Order and claim the benefit of a more
nd
advantageous tariff fixed in the 2 Tariff Order in favour of the
PROJECTS which do not avail the “benefit of accelerated
depreciation”.
JUDGMENT
st
13. We have already noticed that the 1 respondent did not
commence generation of power within “control period”
st
stipulated under the 1 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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st
depreciation” mentioned in the 1 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
st
nature, being intangible assets acquired on or after the 1 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 .”
JUDGMENT
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
st
the Act in respect of depreciation of assets acquired on or after 1 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
st
which began to generate power prior to 1 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.
JUDGMENT
16. The argument of the first respondent throughout has
st
been that the stipulation in the 1 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
st
1 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/
9
undertaking engaged in the generation of power 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.
JUDGMENT
18. Assuming for the sake of argument that in law such a
possibility exists, the construction such as the one sought to
st
be placed on the relevant portion of para 5 of the 1 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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st
that portion of the para 5 of the 1 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.”
nd
It is not the case of either the appellant or the 2 respondent
that Section 32(1)(i) of the Income Tax Act does not apply to
nd
some PROJECTS. The tenor of the statement is clear. The 2
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
nd
Income Tax Act. The 2 respondent must be presumed to
st
have known at the time of propounding the 1 tariff order that
the Income Tax Act and the Rules thereunder provide an
option to the assessee (producer of power) either to claim or
JUDGMENT
not the ‘benefit of accelerated depreciation’. Hence, the
stipulation. The submission of the appellant regarding the
st
construction of the above extracted clause of the 1 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
st
interpretation placed by the 1 respondent on the above
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st
extracted portion of para 5 of the 1 Tariff Order is correct (in
fact it would be the logical consequence of the rejection of the
st
submission of the appellant), would the 1 respondent have a
right to exercise the choice not to avail the ‘benefit of
accelerated depreciation’ after signing the PPA? (ii) Whether
st
the 1 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
st
PPA to purchase the power generated by the 1 respondent for
st
a period of 25 years without knowing the price at which the 1
respondent would be obliged to supply the power?
nd
20. These questions were raised and argued before the 2
respondent but unfortunately the issue was unnecessarily
10
complicated by the arguments based on promissory estoppel .
JUDGMENT
After noticing the issue, the appellate tribunal elaborately
nd
extracted from the order of the 2 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.”
nd
[Extracted portion of the order of the 2 respondent
in the impugned order]
nd
It can be seen from the above that the 2 respondent noticed
st
the stipulation in the PPA that if the 1 respondent does not
commission the PROJECT during the control period specified
st
under the 1 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
JUDGMENT
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
nd
present case.” The 2 respondent noticed the stipulation of
st
the PPA regarding the applicable tariff in the event of the 1
respondent not commissioning the PROJECT would be the
lower of the two tariffs. Without examining the legal effect of
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nd
such stipulation, the 2 respondent went into the analysis of
nd
the 2 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
nd
elaborate consideration bestowed on it by the 2 respondent
did not record in the impugned order its view regarding the
nd
correctness of the above extracted conclusion of the 2
respondent. We can only presume that the appellate tribunal
nd
approved the reasoning and the conclusion of the 2
nd
respondent since it did not reverse the 2 respondent’s order.
st
22. One of the submissions of the 1 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
JUDGMENT
th 11
dated 30 April, 2013 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
st
1 Tariff Order. Eventually, Rasna commissioned its power
plant on 31.12.2011 within the control period stipulated in the
st nd
1 Tariff Order. However, Rasna filed a petition before the 2
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
JUDGMENT
nd
from seeking the relief such as the one sought by it. The 2
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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12
had signed the PPA.
13
24. The Tribunal rejected the said objection of GUVNL. 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.
st
The tribunal’s reasons for such a conclusion are that (i) the 1
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.
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(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
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for the determination of a separate tariff applicable to it. In
st
the instant case, the prayer of the 1 respondent is not for
st
fixation of separate tariff but for a declaration that the 1
respondent is entitled for claiming the benefits of the tariff
nd
determined under the 2 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
st
1 Tariff Order and provides that in such an eventuality what
st
should be the tariff applicable to the sale of power by the 1
st
respondent. Secondly, the PPA does not ‘entitle’ the 1
nd
respondent to the “tariff as determined by the” 2 respondent
nd
by the 2 Tariff Order. On the other hand, the PPA clearly
stipulates that in such an eventuality;
st
“ Above tariff shall apply for solar projects commissioned on or before 31
December 2011. In case, commissioning of Solar Power Project is
st
delayed beyond 31 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.”
st
The right of the 1 respondent not to avail the “benefit of
accelerated depreciation” flows from the Income Tax Act. It is
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st st
only the 1 Tariff Order which gives an option to the 1
respondent (for that matter to all the power producers who are
st
similarly situated as the 1 respondent) not to sell the power
st
produced by it at the price specified in the 1 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
nd
exercise such option at a point of time specified in the 2
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
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st
appellant for the power purchased by it from the 1
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
st
producers. Though the 1 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
st
that the 1 respondent as a power producer has the freedom of
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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.
st
30. The 1 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
st
appellate tribunal failed to notice and the 1 respondent
conveniently ignored one crucial condition of the PPA
contained in the last sentence of para 5.2 of the PPA:-
st
“In case, commissioning of Solar Power Project is delayed beyond 31
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
st
period” stipulated in the 1 tariff order. It also visualised that
for the subsequent control period, the tariffs payable to a
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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
st
1 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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st
32. The 1 respondent created enough confusion. While on
st
one hand the 1 respondent asserted a right to seek
determination of a separate tariff independent of the tariff
st
fixed under the 1 Tariff Order in view of the stipulation
st
contained in the 1 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
nd
the relevant facts” did not seek a relief before the 2
respondent to determine a separate tariff but claimed the
nd
benefit of the 2 Tariff Order. Assuming for the sake of
st
argument that the petition filed by the 1 respondent
(1270/2012) is to be treated as an application for
determination of separate tariff which would be identical with
nd st
the tariff fixed under the 2 Tariff Order, whether the 1
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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
nd
the 2 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
nd
2 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
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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.
st
2 lakhs payable by the 1 respondent herein. The interim
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Page 27
orders granted earlier stand dissolved. The amounts, if any,
paid by the appellant pursuant to the interim orders of this
st
Court shall be adjusted towards the payments due to the 1
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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