Tripura State Electricity Corporation Ltd. vs North Eastern Electric Power Corporation Ltd. & Ors
- Court
- Appellate Tribunal For Electricity
Judgement in Appeal No. 184 of 2020 & IAs.
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL No. 184 of 2020 &
IA No. 1963 of 2024 and IA Nos. 374, 985 and 986 of 2026
Dated: 14.05.2026
Present: Hon’ble Mr. Virender Bhat, Judicial Member
Hon’ble Mr. Ajay Talegaonkar, Technical Member
IN THE MATTER OF
Tripura State Electricity Corporation Ltd.
Bidyut Bhawan, North Banamalipur,
Agartala, Tripura – 799 001.
… Appellant
Versus
1. North Eastern Electric Power Corporation Ltd.
Brookland Compound, Lower New Colony
Shillong, Meghalaya – 793 003
2. North Eastern Regional Power Committee
NERPC Complex, Dong Parmaw, Lapalang,
Shillong, Meghalaya – 793 006
3. North Eastern Regional Load Despatch Centre
Dongteih, Lower Nongrah, Lapalang,
Shillong, Meghalaya – 793 006.
4. Central Electricity Regulatory Commission
Through its Secretary
3rd & 4th Floor, Chanderlok Building
36, Janpath, New Delhi – 110 001.
… Respondent(s)
Counsel for the Appellant(s) : Mr. Basava Prabhu Patil, Sr. Adv.
Mr. Alabhya Dhamija
Mr. Vikas Maini
Mr. Samarth Kashyap
Mr. Ranjeet Mishra
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Counsel for the Respondent(s) : Ms. Ranjitha Ramachandran
Ms. Poorva Saigal
Ms. Anushree Bardhan
Mr. Shubham Arya
Mr. Arvind Kumar Dubey for R-1
Mr. Sethu Ramalingam for R-4
JUDGEMENT
PER HON’BLE MR. AJAY TALEGAONKAR, TECHNICAL MEMBER
1. The Present Appeal has been filed by Tripura State Electricity Corporation
Limited (in short “TSECL”) challenging the order dated 04.04.2019 passed by the
Central Electricity Regulatory Commission (in short “CERC”/ “Respondent No. 4”)
in Petition No. 128/GT/2017 with regard to approval of tariff of Tripura Gas Based
Power Plant (101 MW) for the period from COD of its Gas Turbine unit to
31.03.2019.
Description of the Parties
2. The Appellant, TSECL is a government company incorporated under the
provisions of the Companies Act pursuant to the restructuring of the Power
Department of the Government of Tripura in terms of the provisions of the
Electricity Act, 2003. The Appellant is a deemed licensee engaged in the business
of generation, transmission and distribution of electricity in the State of Tripura.
The Appellant is also the sole beneficiary and off-taker of power generated from
the Tripura Gas Based Power Project which is the subject matter of the present
Appeal.
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3. Respondent No. 1, North Eastern Electric Power Corporation Ltd.
(“NEEPCO”) is a Government of India undertaking engaged in the business of
generation and sale of electricity in the North Eastern Region of India. Respondent
No.1 is the developer of the Tripura Gas Based Power Project situated at
Monarchak, Sepahijala District, Tripura and was the Petitioner before the Central
Commission in Petition No.128/GT/2017 seeking approval of tariff for the said
generating station.
4. Respondent No. 2, North Eastern Regional Power Committee (“NERPC”) is
a Regional Power Committee constituted under the Electricity Act, 2003 for the
North Eastern Region.
5. Respondent No. 3, North Eastern Regional Load Despatch Centre
(“NERLDC”) is the Regional Load Despatch Centre for the North Eastern Region
established under the Electricity Act, 2003.
6. Respondent No. 4, the Central Electricity Regulatory Commission (CERC),
is a statutory regulatory body constituted under Section 76 of the Electricity Act,
2003.
Factual Matrix of the Case
7. Respondent No.1 entered into a Power Supply Agreement (“PSA”) dated
19.03.2008 with the Appellant for establishment of a Tripura Gas Based Power
Project. Under the said Agreement, NEEPCO was required to install a gas-based
power plant of 104 MW capacity against the availability of natural gas to the extent
of 0.5 MMACMD as confirmed by ONGC. The Appellant was designated as the
sole off-taker of power generated from the Project.
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8. The PSA further provided that NEEPCO would obtain the requisite approvals
and clearances from the competent authorities including approval of the capital
cost of the Project.
9. The Ministry of Power, Government of India accorded investment approval
for execution of the Tripura Gas Based Power Project of 100 MW (nominal) + 20%
at Monarchak, West Tripura vide communication dated 14.07.2009 at an approved
estimated cost of Rs.421.01 Crore including IDC of Rs.27.47 Crore at December
2008 price level with a debt-equity ratio of 70:30.
10. As per the approved schedule, the Gas Turbine (GT) was to be completed
within 26 months from the zero date and the Steam Turbine (ST) within 36 months
from the zero date, the zero date being reckoned from the date of investment
decision.
11. For implementation of the Project, NEEPCO awarded the Letter of Intent
dated 23.07.2010 to BHEL for execution of the Project. The commissioning period
stipulated therein was 32 months for the Gas Turbine and 36 months for the Steam
Turbine. Subsequently, revised investment approval on Revised Cost Estimate-I
(RCE-I) was accorded by the Ministry of Power on 23.02.2011 at a revised cost of
Rs.623.44 Crore including IDC of Rs.51.09 Crore at November 2010 price level
with debt-equity ratio of 70:30.
12. The actual commissioning was not achieved within the stipulated time. The
actual synchronization and commissioning of the units took place as under:
• Gas Turbine- March 2015;
• Steam Turbine- January 2016
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13. The Commercial Operation Dates declared for the units were:
• Gas Turbine- 24.12.2015;
• Steam Turbine- 31.03.2017
14. On 08.05.2017, NEEPCO filed Petition No.128/GT/2017 before CERC
seeking approval of tariff for the Tripura Gas Based Power Plant for the period from
COD of the Gas Turbine unit till 31.03.2019. CERC issued order dated 04.04.2019
(“Impugned Order”) in which it condoned the delay in commercial operation and
approved the capital cost claimed by the NEEPCO.
15. Aggrieved by the Impugned Order, the Appellant has preferred the present
appeal.
16. The Appellant has prayed for the following relief before us:
“(a) allow the present appeal and set aside order dated
04.04.2019 passed by the Central Commission in CERC No.
128/GT/2017 to the extent challenged in the present appeal.
(b) Pass such other Order(s) and this Hon’ble Tribunal may deem
just and proper.”
Issues for Consideration
17. We note from the Impugned Order that there was delay of 33 months in
commercial operation of GT block and 44 months in case of ST/combined cycle.
Out of this delay, 8 months delay in case of GT and ST/combined cycle has been
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attributed by NEEPCO to the BHEL, the originally appointed EPC contractor. BHEL
wanted to offload part of the contract to NTPC BHEL Power Projects Private
Limited (“NBPPL”, a joint venture of NTPC and BHEL), which was agreed by
NEEPCO with initial resistance. Further, a delay of 25 months and 36 months in
commercial operation of GT and ST respectively, has been attributed to non-supply
of gas by ONGC.
18. Based on the submissions of the parties, we have framed following issues
for our consideration:
Issue No. 1: Whether CERC erred in allowing Time Overrun of 8
months for GT and ST attributable to BHEL?
Issue No. 2: Whether CERC erred in allowing Time Overrun of
25 months and 36 months for GT and ST respectively attributable
to ONGC?
Issue No. 3: Whether CERC erred in allowing the Cost-Overrun?
Submissions of the parties, and our Analysis and Conclusions thereon
“Contracts warrant crafting and not mere drafting.”
― Henrietta Newton Martin-Legal Professional & Author
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Issue No. 1: Whether CERC erred in allowing Time Overrun
of 8 months for GT and ST attributable to BHEL?
19. The Appellant has submitted that CERC erred in condoning the delay arising
from the decision of Ministry of Heavy Industries and Public Enterprises and
Ministry of Power, GoI to offload a portion of the EPC works awarded to BHEL to
the NBPPL. It was contended that this decision materially contributed to the delay
in project execution. The Appellant further submitted that NEEPCO had initially
declined to approve such offloading on the ground that it constituted a post-
contractual deviation and altered the proposal approved by PIB/CCEA. In this
context, reliance was placed on the communication dated 11.01.2011 issued by
Ministry of Heavy Industries and Public Enterprises to Ministry of Power, seeking
facilitation of the transfer of part EPC works to NEEPCO. Subsequently, after a
delay of nearly five months, the proposal was considered by the Board of Directors
of NEEPCO on 20.05.2011 and approved on 26.05.2011.
20. On this basis, the Appellant has contended that the time overrun was
attributable to the acts and omissions of NEEPCO and its agents/vendors,
particularly BHEL, and therefore such delay could not be passed on to the
consumers. It was argued that the matter constituted a bilateral dispute between
NEEPCO and its agents/vendors, for which consumers ought not to be burdened.
21. The Appellant has placed reliance upon the judgments of this Tribunal in
Power Grid Corporation of India Ltd. vs. CERC & Ors., Appeal No. 58 of 2012
and Power Grid Corporation of India Ltd. vs. CERC & Ors., Appeal No. 180 of
2011 wherein it was held that delays arising on account of defects in equipment,
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transportation issues or disputes between the utility and its vendor are bilateral
and contractual in nature and the consequential IDC and IEDC cannot be passed
on to the beneficiaries/consumers.
22. The Appellant has submitted that this Tribunal in the aforesaid judgments,
observed that the responsibility to ensure proper execution, transportation and
commissioning of equipment lies upon the utility and its contractor/vendor and
consumers cannot be burdened with additional tariff on account of such delays.
Reliance was also placed on the observations of the Tribunal that in terms of the
Preamble and Section 61(d) of the Electricity Act, 2003, consumer interest is
required to be safeguarded while determining tariff.
23. The Appellant further relied upon the judgment of this Tribunal in Pragati
Power Corporation Ltd. vs. Central Electricity Regulatory Commission &
Ors., Appeal No. 175 of 2015 wherein it was held that mere prudent selection of
an EPC contractor such as BHEL is not sufficient to absolve the generating
company of responsibility for delays in project execution.
24. It was submitted that selection of a contractor and execution of the project
are distinct aspects and the conduct of the parties during execution of the
contractual arrangement is required to be examined on a case-to-case basis. The
Appellant contended that the situations referred to in the Maharashtra State
Power Generation Company Limited vs. MERC (Judgment dated 27.04.2011
in Appeal No. 72 of 2010) were merely indicative and not exhaustive.
25. The Appellant submitted that neither the Appellant nor the consumers could
be made to bear the consequences of the acts, omissions and delays attributable
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to NEEPCO and its agents/vendors, including BHEL and ONGC and on this
ground alone the present Appeal deserves to be allowed.
26. On the other hand, Respondent No.1 has submitted that in April 2008
NEEPCO had invited tenders for appointment of an EPC contractor through the
International Competitive Bidding route. However, only one bid was received from
Gammon-Sadelmi which did not qualify on techno-commercial parameters
resulting in cancellation of the tender process. Thereafter, the EPC Contract was
awarded to BHEL following negotiations conducted by a high-level Negotiation
Committee comprising members of the Central Electricity Authority and officials of
NEEPCO since BHEL’s quoted price was initially found to be excessively high.
27. Respondent No.1 submitted that the EPC Contract was awarded to BHEL
on 23.07.2010. Subsequently, through letters dated 19.08.2010, 22.09.2010 and
12.10.2010, BHEL proposed offloading part of the EPC works to NBPPL. NEEPCO
initially expressed its inability to accept the proposal on the ground that such
offloading would constitute a post-contractual deviation and alter the proposal
originally placed before the PIB/CCEA which contemplated execution of the entire
EPC package by BHEL.
28. It was further submitted that the Ministry of Heavy Industries and Public
Enterprises by letter dated 11.01.2011 requested the Ministry of Power to facilitate
transfer of part of the EPC works to NBPPL,and thereafter the Ministry of Power
vide communication dated 26.04.2011 approved the offloading of a portion of the
EPC works from BHEL to NBPPL.
29. Respondent No.1 has contended that executive instructions issued by the
Government are binding and enforceable and in this regard reliance was placed
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on Kusum Ingots and Alloys vs. Union of India (2004) 6 SCC 254 . Accordingly,
NEEPCO was bound to comply with the directions issued by the Central
Government and therefore the delay arising therefrom could not be attributed to
NEEPCO.
30. Respondent No.1 has further submitted that CERC after examining the
justifications furnished by NEEPCO including the issues relating to mechanical
erection works by BHEL and non-availability of gas by ONGC correctly concluded
in the Impugned Order that the delay was not attributable to NEEPCO applying the
principles laid down by this Tribunal in Maharashtra State Power Generation
Company Limited vs. Maharashtra Electricity Regulatory Commission
(Judgment dated 27.04.2011 in Appeal No. 72 of 2010).
31. It was also contended that there was no imprudence on the part of NEEPCO
in selecting BHEL as contractor particularly when such actions were undertaken
pursuant to directions and approvals of the Government of India. Accordingly,
Respondent No.1 submitted that, in terms of Clause 3.2 of the PSA, the time and
cost overrun in the present case cannot be said to be attributable to NEEPCO.
Submissions of Respondent No. 4- CERC
32. CERC submitted that Clause 3.2 of the Power Purchase Agreement would
apply only in cases where the delay is attributable to NEEPCO. It was contended
that CERC had called upon NEEPCO to furnish detailed information regarding the
entire delay in commissioning of the Project and upon a thorough examination
concluded that there was no imprudence on the part of NEEPCO.
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33. CERC submitted that the Impugned Order specifically dealt with the different
components of delay, namely:
(i) delay of 8 months in mechanical erection of equipment applicable to the
Gas Turbine (“GT”) and combined cycle Steam Turbine (“ST”) discussed
in paragraphs 17 and 18 of the Impugned Order;
(ii) delay of 25 months in commissioning of the GT on account of non-
availability of gas, discussed in paragraphs 19 to 22; and
(iii) delay of 36 months in commissioning of the Steam Turbine Generator
(“STG”) combined cycle discussed in paragraphs 23 and 24 of the
Impugned Order.
34. According to CERC, after conducting a detailed analysis of the aforesaid
factors, the Respondent Commission rightly concluded that the delay in
commissioning of the Project was not attributable to NEEPCO. Consequently,
Clause 3.2 of the PPA was held to be inapplicable to the facts and circumstances
of the present case.
35. CERC further submitted that the Appellant’s reliance upon Maharashtra
State Power Generation Company Limited vs. Maharashtra Electricity
Regulatory Commission (Judgment dated 27.04.2011 in Appeal No. 72 of
2010) was misplaced in light of the findings recorded in paragraph 15 of the
Impugned Order.
36. These submissions of CERC are common to Issue nos. 1 and 2.
Analysis and Conclusion on Issue No. 1
37. We note that the Respondent No. 1 have relied on the judgement of this
Tribunal dated 27.04.2011 in MSPGCL vs MERC, Appeal No. 72 of 2010
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(“MSPGCL judgement”). This judgement has also been relied upon by CERC in
the Impugned Order. The relevant extract of this judgement is reproduced below:
“7.4. The delay in execution of a generating project could occur due to
following reasons:
i) due to factors entirely attributable to the generating company, e.g.,
imprudence in selecting the contractors/suppliers and in executing
contractual agreements including terms and conditions of the
contracts, delay in award of contracts, delay in providing inputs like
making land available to the contractors, delay in payments to
contractors/suppliers as per the terms of contract, mismanagement
of finances, slackness in project management like improper co-
ordination between the various contractors, etc.
ii) due to factors beyond the control of the generating company e.g.
delay caused due to force majeure like natural calamity or any other
reasons which clearly establish, beyond any doubt, that there has
been no imprudence on the part of the generating company in
executing the project.
iii) situation not covered by (i) & (ii) above.
In our opinion in the first case the entire cost due to time over run has to be
borne by the generating company. However, the Liquidated Damages (LDs)
and insurance proceeds on account of delay, if any, received by the
generating company could be retained by the generating company. In the
second case the generating company could be given benefit of the
additional cost incurred due to time over-run. However, the consumers
should get full benefit of the LDs recovered from the contractors/suppliers
of the generating company and the insurance proceeds, if any, to reduce
the capital cost. In the third case the additional cost due to time overrun
including the LDs and insurance proceeds could be shared between the
generating company and the consumer. It would also be prudent to consider
the delay with respect to some benchmarks rather than depending on the
provisions of the contract between the generating company and its
contractors/suppliers. If the time schedule is taken as per the terms of the
contract, this may result in imprudent time schedule not in accordance with
good industry practices.”
38. It is seen from the Impugned Order that the CERC has concluded that there
is no imprudence on the part of the NEEPCO in selection of the BHEL as contractor
and that the resons for delay fall under para 7.4(ii) of the MSPGCL judgement i.e.
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reasons beyond the control of the generating company NEEPCO. The same
argument has been put forward before us by NEEPCO.
39. In the case in hand, based on the circumstances mentioned by NEEPCO
leading to appointment of BHEL as EPC contractor, we are satisfied there was no
imprudence in appointment of BHEL as EPC contractor. However, we note that in
the reasons attributable to the generating company under para 7.4 (i) of the
MSPGCL judgement also includes imprudence “in executing contractual
agreements including terms and conditions of the contracts”; and we need to
examine whether conduct of NEEPCO falls under this categoty.
40. The Appellant has raised several issues relating to the way the original EPC
contractor namely BHEL was allowed to jettison part of the contract in favour of
NBPPL. The thrust of the Appellant’s argument is that the contractual issues
between generating company and its contractors are bilateral in nature and should
not lead to increased capital cost for tariff determination to the beneficiary who had
no say in these matters. To buttress their argument, the Appellant has referred to
this Tribunal’s judgements dated 10.05.2012 in PGCIL vs CERC & Ors, Appeal
No. 180 of 2011 and dated 24.09.2013 in PGCIL vs CERC & Ors, Appeal No. 58
of 2012. Since the latter judgement relies on the former, we are only extracting
relevant portion of judgement in Appeal No. 180 of 2011:
“12. The facts in the reported case are completely different as the Hon’ble
Court was referring to the bilateral contract between the parties where the
clause appeared. The Central Commission has not unjustifiably held that
the damages in the form of IDC and IEDC should not be passed on to the
beneficiaries. The manufacturer of ICT and its transportation is essentially
a matter between the appellant and its vendor. This is a matter contractual
between them alone. A number of factors, namely, whether in the
construction of the ICT at the manufacturer’s end there were defects or not,
whether adequate precautionary measures were taken for transportation of
the machine or not, whether the ICT was sent back with utmost dispatch or
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not, whether there was any delay in effecting repairs or not, whether there
was any agreement between the appellant and the manufacturer or not,
what were the terms and conditions, if any, so agreed to between the
manufacturer and the appellant, in this regard are all unknown and in the
circumstances it cannot be said in a broad sweep that the delay can not be
attributed to appellant and/or the manufacturer. Rightly the Commission has
said in the impugned order that it is a bilateral issue between the
manufacturer and the appellant. Responsibility is upon both to ensure that
the machine is transported and journeyed safely and it cannot be said that
the parties must not take into account the condition of road for
transportation. It is not a case of breakdown, while working without any
human fault, of machinery all on a sudden over which the party could not
have any prior control. In the circumstances, it cannot be said that the order
complained of is devoid of reasonable analysis of the factual situation and
the Commission committed any illegality.”
41. Though the above mentioned judgment is about manufacturing defects but
the broad principle that contractual issues are bilateral in nature between the
generating company and its contractor can be applied here. Similarly, as in the
case referred to above where issues arose concerning the contractual provisions
relating to manufacturing defects and the manner of their implementation, the
present case also gives rise to several questions pertaining to the contractual
framework, namely:
(i) whether the contract contained any provision permitting full or part exit or
termination by a party;
(ii) if such an exit provision existed, whether the contract contemplated
payment of any compensation or damages upon exercise of such right of
exit;
(iii) if compensation or damages were indeed contemplated, whether the
same were enforced or sought to be enforced by the generating company;
and
(iv) if the contract neither contained an effective exit provision nor provided
for any meaningful compensatory mechanism, whether the same would
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not indicate inadequacy or weakness in the contractual arrangement
itself.
42. These matters clearly fall within the exclusive domain of the generating
company, including the negotiation, drafting and enforcement of the contractual
terms. The beneficiary-Appellant neither had any role in nor any control over the
terms and conditions of such contract. In Coats Viyella India Ltd. vs. India
Cement Ltd. and Anr. (2000) 9 SCC 376 , the Hon’ble Supreme Court has held
that where the agreement was a principal-to-principal contract, the liabilities arising
thereunder remained confined to the contracting parties and could not be diverted
to third parties merely because of separate arrangements entered into by one of
the parties.
43. We are also not impressed with the argument of NEEPCO that it had initially
resisted exit of BHEL and handing over of the contract to NBPPL; and that it had
to follow the executive instruction. The letter dated 26.04.2011 from Joint
Secretary, Ministry of Power, which NEEPCO as termed as executive instructions
is actually a D.O letter. The content of this letter dated 26.04.2011 is reproduced
below:
“ Please refer to your letter no. NEEPCO/D(T)/TGBP-18 dated
th
4 April, 2011. It has been decided in the meeting of Secretaries,
Power and Dept. of Heavy Industry that BHEL will off-load the work
of Monarchak Project (100 MW) to NBPPL. However, BHEL will
continue with all its contractual obligation.
You are requested to convey your consent on the above to
BHEL with a copy to this Ministry at the earlies.”
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44. NEEPCO has relied upon the Kusum Ingots and Alloys vs Union of India,
(2004) 6 SCC 254 to contend that executive instructions are binding and
enforceable. We find the said judgement to be wholly inapplicable to the present
case. The issue before the Hon’ble Supreme Court in Kusum Ingots case was
confined to determination of territorial jurisdiction of a High Court under Article 226
(2) of the Constitution and the question as to when a cause of action can be said
to arise.
45. In that context, the Hon’ble Supreme Court observed that legislation may
include delegated legislation, subordinate legislation, executive orders and even
executive instructions and further examined whether issuance of such orders/
instructions could give rise to a part of the cause of action for the purposes of
territorial jurisdiction. However, the judgment nowhere lays down any proposition
regarding the binding nature, enforceability or legal sanctity of executive
instructions inter se parties. The reliance placed by NEEPCO on the said judgment
for that proposition is therefore misplaced. In any case, the letter in question here
is a D.O. letter that too making a request to NEEPCO to offload a part of EPC work
from BHEL to NBPPL. In our view D.O letter is not an executive instruction. We
note a judgement regarding implementability of advice in D.O letter in judgement
dated 04.11.2020 of Madhya Pradesh High Court in Suresh Madhukar Ganorkar
vs Union Of India, (W.P No. 11076/2020). The relevant extract of this judgement
is reproduced below:
“10. By said D.O private establishment are advised to extend their coordination
by not terminating their employees particularly casual or contractual workers
from job or reduce wages.
Letter is given number DO which means Demi
Official Letter. Demi Official Letters are different from Official Letters in
that they are in formal. Demi Official Communication is resorted to when
writer wishes to make clear to addressee that he, the writer, is not using
his authority rather his relationship with addressee to communicate a
request or suggestion. Impugned letter is only an advice to private
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establishment so that consequences of pandemic can be dealt with
effectively. On going through order dated 17.05.2020, it is clear that certain
directions were issued by National Disaster Management Authority in excise of
their power under Section 6 of Disaster Management Act, 2005, such order
is dated 24.03.2020, 14.04.2020, 01.05.2020. Said orders are passed as lock-
down measures to contain the spread of COVID-19 in the country. NEC in
exercise of power under Section 10(2)(l) of Disaster Management Act, 2005 has
issued orders in respect of lock-down measures on 24.03.2020, 29.03.2020,
14.04.2020, 15.04.2020 and 01.05.2020. From perusal of all the documents
filed by petitioners as well as by respondents, it is clear that letter dated
20.3.2020 relied upon by petitioners is not a direction or advisory issued
under Disaster Management Act, 2005 but only a Demi Official Letter in form of
an advice issued to Chief Secretary of the State's. Such letter does not have
statutory force and it cannot be implemented. Petition for implementation of
such advisory is not maintainable before High Court.”
(Emphasis supplied)
46. The Appellant has also relied on the clause 3.2 and 12 of the PSA. These
clauses are extracted below:
“3.2 NEEPCO shall obtain in principle clearance for setting up the
project from appropriate commission/authority including approval of
capital cost of project. No time and cost overrun due to reasons
attributable to NEEPCO shall be entertained by the Bulk Power
Customer.
…
12.0 Force Majeure:
Both the parties shall ensure compliance of the terms of this
agreement. However, no party shall be liable for any loss or damage
whatsoever arising out of failure to carry out the terms of this
agreement to the extent that such failure is due to force majeure
events such as rebellion, mutiny, civil commotion, riot, strike, lock
out, fire, explosion, flood, drought, cyclone, lightening, earthquake,
war or other forces, accident, landslide, sabotage, terrorism,
malicious act of kidnapping or act of God. But, any party claiming the
benefit of this clause shall satisfy the other party of the existence of
such an events).”
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47. However, the setteled position is that regulations on a specific subject can
make inroads into the agreements (PTC India Limited vs. CERC (2010) 4 SCC
603). When we go through the Central Electricity Regulatory Commission (Terms
and Conditions of Tariff) Regulations, 2014 (“CERC Tariff Regulations 2014”),
which were applicable during the period of 2014-19 when the generating station
was commissioned, we come across Regulation 3 (54) (definition of SCOD),
Regulation 10 (Prudence Check of Capital Expenditure), Regulation 11 (Interest
during construction (IDC), Incidental Expenditure during Construction (IEDC)) and
Regulation 12 (Controllable and Uncontrolable factors). These Regulations are
extracted below:
“(54) ‘Scheduled Commercial Operation Date or SCOD’ shall mean the
date(s) of commercial operation of a generating station or generating unit or
block thereof or transmission system or element thereof as indicated in the
Investment Approval or as agreed in power purchase agreement or
transmission service agreement as the case may be, whichever is earlier;
…
10. Prudence Check of Capital Expenditure: The following principles shall
be adopted for prudence check of capital cost of the existing or new projects:
(1) In case of the thermal generating station and the transmission system,
prudence check of capital cost may be carried out taking into
consideration the benchmark norms specified/to be specified by the
Commission from time to time:
Provided that in cases where benchmark norms have not been
specified, prudence check may include scrutiny of the capital expenditure,
financing plan, interest during construction, incidental expenditure during
construction for its reasonableness, use of efficient technology, cost over-
run and time over-run, competitive bidding for procurement and such
other matters as may be considered appropriate by the Commission for
determination of tariff:
Provided further that in cases where benchmark norms have been
specified, the generating company or transmission licensee shall submit
the reasons for exceeding the capital cost from benchmark norms to the
satisfaction of the Commission for allowing cost above benchmark norms.
(2) The Commission may issue new guidelines or revise the existing
guidelines for vetting of capital cost of hydro-electric projects by an
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independent agency or an expert and in that event the capital cost as
vetted by such agency or expert may be considered by the Commission
while determining the tariff for the hydro generating station.
(3) The Commission may issue new guidelines or revise the existing
guidelines for scrutiny and approval of commissioning schedule of the
hydro-electric projects in accordance with the tariff policy issued by the
Central Government under section 3 of the Act from time to time which
shall be considered for prudence check.
(4) Where the power purchase agreement entered into between the
generating company and the beneficiaries provides for ceiling of actual
capital expenditure, the Commission shall take into consideration such
ceiling for determination of tariff for prudence check of capital cost.
11. Interest during construction (IDC), Incidental Expenditure during
Construction (IEDC)
(A) Interest during Construction (IDC):
(1) Interest during construction shall be computed corresponding to the loan
from the date of infusion of debt fund, and after taking into account the
prudent phasing of funds upto SCOD.
(2) In case of additional costs on account of IDC due to delay in achieving the
SCOD, the generating company or the transmission licensee as the case may
be, shall be required to furnish detailed justifications with supporting
documents for such delay including prudent phasing of funds:
Provided that if the delay is not attributable to the generating company or
the transmission licensee as the case may be, and is due to uncontrollable
factors as specified in Regulation 12 of these regulations, IDC may be
allowed after due prudence check:
Provided further that only IDC on actual loan may be allowed beyond the
SCOD to the extent, the delay is found beyond the control of generating
company or the transmission licensee, as the case may be, after due
prudence and taking into account prudent phasing of funds.
(B) Incidental Expenditure during Construction (IEDC):
(1) Incidental expenditure during construction shall be computed from the
zero date and after taking into account pre-operative expenses upto SCOD:
Provided that any revenue earned during construction period up to SCOD
on account of interest on deposits or advances, or any other receipts may be
taken into account for reduction in incidental expenditure during construction.
(2) In case of additional costs on account of IEDC due to delay in achieving
the SCOD, the generating company or the transmission licensee as the case
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may be, shall be required to furnish detailed justification with supporting
documents for such delay including the details of incidental expenditure
during the period of delay and liquidated damages recovered or recoverable
corresponding to the delay:
Provided that if the delay is not attributable to the generating company or
the transmission licensee, as the case may be, and is due to uncontrollable
factors as specified in regulation 12, IEDC may be allowed after due
prudence check:
Provided further that where the delay is attributable to an agency or
contractor or supplier engaged by the generating company or the
transmission licensee, the liquidated damages recovered from such agency
or contractor or supplier shall be taken into account for computation of capital
cost.
(3) In case the time over-run beyond SCOD is not admissible after due
prudence, the increase of capital cost on account of cost variation
corresponding to the period of time over run may be excluded from
capitalization irrespective of price variation provisions in the contracts with
supplier or contractor of the generating company or the transmission
licensee.
12. Controllable and Uncontrollable factors: The following shall be
considered as controllable and uncontrollable factors leading to cost
escalation impacting Contract Prices, IDC and IEDC of the project :
(1) The “controllable factors” shall include but shall not be limited to the
following:
a) Variations in capital expenditure on account of time and/or cost overruns
on account of land acquisition issues;
b) Efficiency in the implementation of the project not involving approved
change in scope of such project, change in statutory levies or force majeure
events; and
c) Delay in execution of the project on account of contractor, supplier or
agency of the generating company or transmission licensee.
(2) The “uncontrollable factors” shall include but shall not be limited to the
following:
i. Force Majeure events.; and
ii. Change in law.
Provided that no additional impact of time overrun or cost over-run shall
be allowed on account of non-commissioning of the generating station or
associated transmission system by SCOD, as the same should be recovered
through Implementation Agreement between the generating company and
the transmission licensee:
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Provided further that if the generating station is not commissioned on the
SCOD of the associated transmission system, the generating company shall
bear the IDC or transmission charges if the transmission system is declared
under commercial operation by the Commission in accordance with second
proviso of Clause 3 of Regulation 4 of these regulations till the generating
station is commissioned:
Provided also that if the transmission system is not commissioned on
SCOD of the generating station, the transmission licensee shall arrange the
evacuation from the generating station at its own arrangement and cost till
the associated transmission system is commissioned.”
48. We note that in this case, the PSA does not mention any completion date.
However, from the clause 3.2, it is clear that it relies on the investment approval
for referencing time and cost over-run. We also notice from the Impugned Order
that CERC has also rightly computed time over run with reference to the definition
of SCOD which in turn gives upper limit as per investment approval. However,
CERC has erred in not considering Regulation 12 which puts “ Delay in execution
of the project on account of contractor, supplier or agency of the generating
company or transmission licensee ” under the category of controllable factors.
Therefore, according to CERC’s own tariff regulation (Regulation 11 read with
Regulation 12), the cost escalation empacting Contract Prices, IDC and IEDC
should not have been allowed. Even NEEPCO has attributed the delay to BHEL;
the only contention advanced by NEEPCO is that it cannot be held responsible for
the same.
49. Further, NEEPCO initially opposed the proposal of BHEL for off-loading a
part of the contract to NBPPL, though the same was subsequently accepted. The
record indicates that considerable time was consumed in the process of
deliberation and approval of the said proposal, which contributed to the delay in
execution. Without expressing any opinion on whether BHEL was justified in
seeking such off-loading or whether the initial stand of NEEPCO was correct, it
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cannot be denied that the delay arising from the decision-making process is
attributable, at least in part, to NEEPCO.
50. In view of the above analysis, we are of the opinion that NEEPO can not
absolve itself from the responsibility of time over run of 8 months by attributing it
to BHEL. Further, according to Regulation 11 and 12 of the CERC Tariff
Regulations 2014, the factors attributable to the contractors falls in the category of
controllable factors and calls for disallowance of the cost escalation impacting
contract prices, IDC and IEDC. Therefore, we conclude that CERC erred in
allowing time over-run of 8 months, which was attributed by NEEPCO to
BHEL.
Issue No. 2: Whether CERC erred in allowing Time Overrun
of 25 months and 36 months for GT and ST respectively
attributable to ONGC?
51. The Appellant has submitted that CERC erred in condoning the delay
attributed to non-supply of gas by ONGC.The Appellant has pointed out that under
the Gas Supply Agreement (“GSA”) dated 05.06.2008, ONGC was required to
commence supply of gas with effect from 23.03.2013; however, the actual supply
commenced only on 03.02.2015. The Appellant has contended that the dispute
pertaining to delay in gas supply was purely contractual and bilateral in nature
between NEEPCO and ONGC. It was submitted that the Appellant was not a privy
to the GSA executed between the parties and, therefore, no liability arising out of
such contractual issues could be fastened upon the consumers.
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52. The Appellant submitted that the case sought to be set up by NEEPCO/
Respondent No.1 that the commissioning delay was caused due to force majeure
events beyond its control is wholly misconceived and unsupported by the
contractual framework between the parties.
53. The Appellant contended that Clause 12 of the Power Sale Agreement
specifically enumerates the circumstances constituting force majeure including
events such as rebellion, riots, strikes, fire, explosion, flood, earthquake, war,
landslide, sabotage, terrorism and acts of God. It was submitted that the clause
further mandates that the party claiming force majeure must establish the
existence of such events to the satisfaction of the other party.
54. According to the Appellant, in view of the express terms of Clause 12 of the
PSA, NEEPCO is estopped from enlarging the scope of the force majeure
provision by treating executive directions, delays by contractors or difficulties faced
by agents/vendors in procurement of raw materials as force majeure events. It was
further submitted that no force majeure notice was ever invoked by Respondent
No.1 under the PSA seeking protection under the said clause. Hence, the PSA,
being a commercial contract is required to be interpreted strictly in accordance
with its terms and no meaning beyond the express provisions thereof can be
imported. In support thereof, reliance was placed on Nabha Power Ltd. vs.
PSPCL & Ors., (2018) 11 SCC 508 .
55. The Appellant further submitted that both parties were bound by the terms of
the PSA which clearly delineated their respective rights and obligations and
therefore Respondent No.1 could not raise pleas dehors the agreement. It was
also contended that neither Clause 12 of the PSA nor Regulation 3(25) of the
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CERC Tariff Regulations 2014 was considered or discussed by CERC in the
Impugned Order.
56. According to the Appellant, there was no finding whatsoever regarding force
majeure in the Impugned Order and the plea has been raised by Respondent No.1
for the first time in the present Appeal. The Appellant additionally submitted that
the GSA executed between NEEPCO and ONGC contained specific provisions
under Clause 23.2 enabling termination and other legal remedies in the event of
breach.
57. However, Respondent No.1 failed to disclose any action or remedy pursued
against ONGC for non-performance under the said agreement. It was therefore
contended that, having waived its contractual remedies under the GSA,
Respondent No.1 cannot seek to pass on the consequences of such breach to the
Appellant and the consumers.
58. The Appellant submitted that CERC erred in condoning the delay which was
solely attributable to NEEPCO. It was contended that CERC failed to appreciate
the true import of Clause 3.2 of the Power Sale Agreement which specifically
provides that NEEPCO shall obtain the requisite approvals, including approval of
the capital cost of the Project and that no time or cost overrun attributable to
NEEPCO shall be entertained by the Bulk Power Customer.
59. The Appellant submitted that the aforesaid clause must be interpreted to
include delays caused not only directly by NEEPCO but also by its agents/vendors,
including BHEL and ONGC. It was further contended that Clause 3.2 of the PSA
is required to be read conjointly with Clause 6 of the Investment Approval on the
Revised Cost Estimate-I dated 23.02.2011 which stipulates that any increase in
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cost beyond the approved RCE-I, except on account of foreign exchange variation
as per contract shall be borne by NEEPCO from its own resources/borrowings and
that NEEPCO shall not seek any budgetary support from the Government.
60. Respondent No.1 referred to Clauses 3.2 and 7 of the PSA executed
between the parties on 19.03.2008. Clause 3.2 provides that NEEPCO shall obtain
the requisite approvals including approval of the capital cost of the Project and that
no time and cost overrun attributable to NEEPCO shall be entertained by the Bulk
Power Customer. Reliance was also placed on Clause 7 of the PSA relating to
tariff determination which stipulates that tariff for supply of power from the Project
shall be determined by the Central Commission and pending such determination,
provisional tariff could be worked out by NEEPCO based on the applicable CERC
Regulations and estimated completion cost subject to subsequent adjustment
upon final tariff determination by the Central Commission.
61. On the other hand, the Respondent No.1 submitted that the delay in
commissioning of the GT and the combined cycle ST Generator was not
attributable to NEEPCO.
62. Respondent No.1 has submitted that the delay in commissioning of the
Project was primarily caused by non-supply of gas by ONGC under the GSA. It
was contended that although ONGC was contractually required to commence gas
supply from 23.03.2013, actual supply commenced only on 03.02.2015.
63. According to Respondent No.1, the delay occurred due to reasons beyond
its control, particularly the delay on the part of ONGC in laying the gas pipeline. It
was further submitted that considering the terrain and location of the Project,
procurement of gas from any alternate source was not feasible. Respondent No.1
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submitted that the Gas Turbine (65.42 MW) had already been made ready by
September 2013 as per the letter dated 11.07.2013 issued by the Central
Electricity Authority to ONGC. It was further pointed out that the Government of
Tripura, through letters dated 14.08.2013 and 07.09.2013 addressed to the
Ministry of Petroleum and Natural Gas had also intimated that the Gas Turbine
would be ready from September 2013 onwards. Despite the readiness of the Gas
Turbine, Respondent No.1 submitted that synchronization could only take place
on 11.03.2015 and commercial operation was declared on 24.12.2015 due to
delayed and intermittent gas supply by ONGC.
64. It was submitted that gas supply commenced only on 03.02.2015 and
remained intermittent during the periods from 24.08.2015 to 07.09.2015 and from
05.10.2015 to 16.10.2015. According to Respondent No.1, continuous gas supply
was available only between 27.11.2015 and 29.02.2016 after which the supply was
again discontinued.
65. Respondent No.1 further relied upon the letter dated 25.05.2016 issued by
the Secretary, Ministry of Petroleum and Natural Gas following a meeting involving
the Ministry of Power, ONGC, and NEEPCO wherein it was intimated that ONGC
would be in a position to supply the full contracted quantity of gas on a sustained
basis only by the end of December 2016.
66. Respondent No.1 submitted that the delay was wholly beyond its control and
that it had taken all possible steps to mitigate the consequences thereof. It was
therefore contended that the case squarely falls within scenario (ii) contemplated
in MSPGCL vs. MERC & Ors. (Judgment dated 27.04.2011 in Appeal No. 72 of
2010 .
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Analysis and Conclusion on Issue No. 2
67. We note that to support the case of the delay due to the non-suply of gas by
the ONGC, the Appellant has advanced similar argument as in case of delay
attributable to BHEL, namely the matter is bilateral contractual issue and as a
beneficiary it had no control over it.
68. In this case also, we find no imprudence in selection of ONGC as supplier of
the gas. We are also unable to agree with Appellant that NEEPCO could have
simply terminated the GSA. In the absence of an operational gas grid in the North-
Eastern Region at the relevant time (the implementation of the North East Gas
Grid project having commenced much later), there appears to have been little
practical alternative but to continue the contractual arrangement with ONGC.
However, NEEPCO could have secured itself (and in turn the beneficiary) by
having appropriate provision for penalty in case of breach of contract in general
and non-supply of gas in particular. It appears that either such penalty provision
was not there in the GSA or it was not enforced. In this case too, the analysis about
delay attributable to suppliers falling in the category of controllable factors is
equally applicable in accordance with Regulation 11 and 12 of the CERC Tariff
Regulations 2014.
69. We do not find force in the contention of the NEEPCO that non-supply of gas
is a Force Majeure event. Even if for the time being we disregard the rival
contention of the Appellant that there was not even whisper of such argument
before CERC, and that this has been put forward for the first time before us at the
appellate stage, we find that the nature of this event matches neither with the
definition of Force Majeure as contained in clause 12 of the PSA nor with that in
Regulation 3 (25) of the CERC Tariff Regulations 2014. If it was Force Majeure
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event of the ONGC for the purpose of GSA, such event does not become Force
Majeure event of NEEPCO, since this has not been specificcaly mentioned in the
PSA.
70. In view of the above analysis, in response to question (ii) also we
conclude that CERC erred in allowing time over-run of 25 months and 36 for
delay in commercial operation of GT and ST respectively attributable by
NEEPCO to the non-supply of gas by ONGC.
Issue 3: Whether CERC erred in allowing the Cost-Overrun?
71. The Appellant has submitted that CERC erred in allowing the cost overrun
claimed by Respondent No.1. It was contended that the principal components
contributing to the cost overrun included;
(i) freight and insurance costs,
(ii) cost of plant civil works executed by BHEL,
(iii) establishment expenses, and
(iv) Interest During Construction (IDC).
72. According to the Appellant, the increase in such costs occurred due to the
acts, omissions and delays attributable to NEEPCO and/or its agents and vendors.
The Appellant further submitted that CERC failed to appreciate that the issues
relating to both time overrun and cost overrun were essentially bilateral and
contractual disputes between NEEPCO and its contractors/vendors and therefore
the consequences thereof could neither be condoned nor passed on to the
Appellant and the consumers.
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73. It was argued that consumers/beneficiaries cannot be burdened with higher
tariff arising out of delays attributable to Respondent No.1 and its vendors. The
Appellant also contended that in terms of the Preamble and Section 61(d) of the
Electricity Act, 2003, the Commission is under a statutory obligation to safeguard
consumer interests and ensure supply of electricity at reasonable rates. It was
submitted that permitting the claims of Respondent No.1 to be added to the capital
cost would impose an unwarranted financial burden upon consumers contrary to
the mandate of the Act.
74. The Appellant has submitted that CERC erred in relying upon the letter dated
14.06.2017 issued/vetted by the Central Electricity Authority (“CEA”) while
determining tariff for FY 2017-19. It was contended that CERC failed to appreciate
that due to delays attributable to NEEPCO, the project cost had escalated to Rs.
1062.24 Crores at October 2016 price level which was still pending approval from
the Ministry of Power (“MoP”).
75. The Appellant has pointed out that the Impugned Order itself records that
Revised Cost Estimate-II (“RCE-II”) for Rs. 1062.24 Crores was submitted to the
MoP on 27.02.2018 and approval thereof was still awaited. Despite acknowledging
the absence of approval, CERC proceeded to determine tariff on the basis of the
said projected cost which according to the Appellant is contrary to Section 61(d) of
the Electricity Act, 2003.
76. The Appellant further submitted that there was a substantial and unjustified
escalation in various cost components between the approved RCE-I and the
projected RCE-II, resulting in an overall financial impact of Rs. 341.64 Crores. The
increase included freight and insurance costs from Rs. 6 Crores to Rs. 39.44
Crores (557% increase), plant civil works by BHEL from Rs. 55.66 Crores to Rs.
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178.63 Crores (220.93% increase), establishment expenses from Rs. 10 Crores
to Rs. 103.08 Crores (930% increase) and IDC from Rs. 51.09 Crores to Rs.
143.24 Crores (180% increase).
77. According to the Appellant, such steep escalation would impose an undue
burden upon the beneficiaries and consumers. In view thereof, the Appellant
contended that reliance upon the CEA-vetted letter dated 14.06.2017, in the
absence of final approval from the MoP was wholly misplaced and ought not to
have been considered by CERC while passing the Impugned Order.
78. The Appellant further submitted that if the capital cost determined by CERC
is not aligned with the terms of the PSA and the approved RCE-I cost sanctioned
by the MoP, the end consumers would be burdened with an increased retail tariff
of approximately Rs. 0.57/kWh which would be contrary to Section 61(d) of the
Electricity Act. In support thereof, reliance was placed upon MSPGCL vs. MERC
& Ors., Appeal No. 72 of 2010.
79. The Appellant submitted that the tariff determination undertaken by CERC
defeats the very purpose and object behind the establishment of the gas-based
power plant in the State of Tripura. It was contended that the Project was
conceived with the objective of ensuring supply of electricity at reasonable and
affordable tariff to consumers in the State.
80. According to the Appellant, if the tariff determined under the Impugned Order
is allowed to prevail, the substantial escalation in project cost would compel the
Appellant to levy higher tariff in order to meet mounting arrears and recurring tariff
liabilities. Consequently, the consumers of the State would be deprived of the
intended benefit of affordable electricity from the gas-based generating station.
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81. On the other hand, the Respondent No.1 has submitted that although the
actual capital cost approved under RCE-I by the Ministry of Power vide approval
dated 23.02.2011 was Rs. 623.44 Crores at November 2010 price level, the
completion cost subsequently escalated to Rs. 1062.24 Crores at October 2016
price level. However, it was contended that such escalation was not attributable to
NEEPCO.
82. Respondent No.1 submitted that similar to RCE-I, the RCE-II for Rs. 1062.24
Crores was also examined by the Central Electricity Authority, Ministry of Power,
Government of India, which, vide letter dated 14.06.2017 found the revised cost
estimate to be “generally in order.” The letter dated 14.06.2017 is as follows:
“The RCE-11 (October, 2016 Price Level) for Tripura Gas Based Power
Project, Monarchak is estimated as Rs. 1062.24 crore (as per NEEPCO
letter dated 26.05.2017) including the hard cost of Rs. 919.00 crores and
IDC, FC & actual FERV amounting to Rs. 143.24 crore based on the
debt/equity ratio 70:30 and is generally in order.”
83. The said estimate included hard cost of Rs. 919 Crores along with IDC,
financing charges and actual FERV amounting to Rs. 143.24 Crores based on a
debt-equity ratio of 70:30. Respondent No.1 reiterated that the delay and
consequent cost escalation were not attributable to NEEPCO.
84. Respondent No.1 further submitted that substantial dues amounting to Rs.
103,68,43,949/- for the period 2017-19 remained outstanding from the Appellant
despite repeated demands for payment. It was further contended that vide letter
dated 03.03.2022, the Appellant itself admitted liability to the extent of 50% of the
total arrears.
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85. Respondent No.1 has also submitted that the Appellant had signed the
reconciliation statement of outstanding dues as on 31.12.2022 which incorporated
the revised project cost and tariff determined by CERC in its Order dated
26.06.2021 passed in Petition No. 271/GT/2019 concerning truing-up of tariff for
the period 24.12.2015 to 31.03.2019.
86. According to Respondent No.1, the Appellant by signing the reconciliation
statement accepted the capital cost and tariff determined in the truing-up
proceedings. It was further submitted that no appeal had been preferred against
the said truing-up order and, therefore, the Order dated 26.06.2021 had attained
finality.
87. Respondent No.1 additionally contended that the Appellant was aware of the
escalated project cost as early as 2015. It was submitted that the Appellant had
been given the option either to surrender or continue with the allocated power in
terms of the PPA.
Submissions of Respondent No. 4- CERC
88. With regard to the revised capital cost, Respondent No. 4 relied upon
paragraph 34 of the Impugned Order wherein the Respondent Commission
observed that since the time overrun had been condoned and the Central
Electricity Authority had recommended the completion cost of Rs. 1062.24 Crores,
the said cost was considered for tariff determination.
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89. In response to the Appellant’s contention that the approved tariff would
impose an undue burden, Respondent No. 4 submitted that the tariff had been
computed strictly in accordance with the applicable statutory provisions.
Analysis and Conclusion on Issue No. 3
90. We have extracted clause 3.2 of the PSA in earlier part of this judgement.
This clause refers to in-principle approval including that of the capital cost of the
project from appropriate commission/ authority. Since Ministry of Power, GoI had
conveyed the original investment approval vide letter dated 14.07.2009 and
Revised Estimate (RCE-I) vide letter dated 23.02.2011, it is clear that the GoI is
the appropriate authority in this case. The second sentence of this clause also
mentions that no time or cost overrun attributable to NEEPCO shall be entertained
by the TSECL . This effectively means that the capital cost contained in such
approval will be the ceiling limit. It is clear from paragraphs 29 and 34 of the
Impugned Order that CERC has treated letter dated 06.10.2015 from Director,
CEA to Under Secretary, Ministry of Power as revised approved cost estimate
(RCE-II). In view of the forgoing, we find considerable weight in the contention of
the Appellant that aforesaid letter from CEA was recommendation to the Ministry
of Power and that CERC has erred in assuming this to be the revised investment
approval.
91. We are conscious of the fact that regulations on a specific subject have
overriding effect on the provisions of the agreement, and therefore, the capital cost
mentioned in the RCE-I would not automatically become a ceiling. In this regard,
Regulation 10 of the CERC Tariff Regulation 2014 is relevant, which we have
extracted in the earlier part of this judgement. Sub-Regulation (4) of this Regulation
provides that if the power purchase agreement between the generating company
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Judgement in Appeal No. 184 of 2020 & IAs.
and the beneficiaries provide for the ceiling limit of capital expenditure, the same
shall be taken into consideration by the Commission. Therefore, in accordance
with CERC Tariff Regulation, the least CERC should have done was to carry out
the prudence check on the capital cost with RCE-I as reference. However, since
RCE-I is at 2010 price level, the capital cost mentioned in it may have to be brought
to the appropriate price level.
92. In the earlier part of this judgement, we have also extracted Regulation 12
of the CERC Tariff Regulations 2014 which requires CERC to consider controllable
and uncontrollable factors leading to cost escalation impacting Contract Prices,
IDC and IEDC of the project. This Regulation also inter-alia places delay in
execution of the project on account of contractor, supplier or agency of the
generating company in the category of controllable factors. In our analysis on Issue
Nos. 1 and 2, we have already concluded that NEEPCO is not entitled to IDC and
IEDC for the delay, which has been attributed by it to BHEL and ONGC. In view of
the Regulation 12, we are of the opinion that any cost escalation impacting
Contract Prices due to delay also need to be disallowed.
93. Since we have disallowed any cost attributable to the period of delay, any
performance guarantee, LD, penalty or insurance proceeds relating to delay, if
received, shall be retained by the NEEPCO.
94. We are not impressed with the argument of Respondent No.1 that the
Appellant had signed the reconciliation statement of outstanding dues as on
31.12.2022, which incorporated the revised project cost and tariff determined by
CERC in its Order dated 26.06.2021. There was no stay on the Impugned Order
and therefore signing of the reconciliation by the Appellant only reflcts legally
prevailing position, and in no way forfeits their right to appeal.
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95. Therefore, in view of the forging we conclude that the prudence of the
capital cost need to be checked with reference to RCE-I and not in
accordance with cost mentioned in the letter dated 14.06.2017 vetted by
CEA. The RCE- I was at 2010 price level and therefore the capital cost
mentioned in it has to be brought to the appropriate price level. Further, any
cost escalation impacting Contract Prices due to delay also need to be
disallowed.
96. We find it pertinent to state that after we had reserved Judgement in this
Appeal, the Appellant had filed two IAs Nos. 986 and 985 of 2026 with the prayer
for urgent listing and directions to Respondent No. 1 to withdraw invoices dated
02.03.2026 from PRAAPTI Portal respectively. These IAs were in view of the
trigger date being 17.05.2026. Since, we are pronouncing the judgment before this
trigger date, no further directions are required in the aforesaid IAs. The same stand
disposed off as having become infructuous.
ORDER
For the reasons as stated above, we are of the considered view that the captioned
Appeal No. 184 of 2020 has merit and is allowed.
The Impugned Order dated 04.04.2019 passed by the CERC in Petition No.
128/GT/2017 is set aside to the extent it:
a) condones the time overrun of 8 months attributable to BHEL in execution of
the EPC contract;
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Judgement in Appeal No. 184 of 2020 & IAs.
b) condones the time overrun of 25 months and 36 months attributable to
delay in supply of gas by ONGC for commissioning of the GT and ST
respectively; and
c) allows capitalization of cost escalation, including escalation impacting
contract prices, IDC and IEDC, arising out of the aforesaid delays.
The matter is remanded to CERC for fresh determination of tariff and admissible
capital cost in terms of the observations made in this Judgment. CERC shall carry
out prudence check of the capital cost with reference to RCE-I and not in
accordance with cost mentioned in the letter dated 14.06.2017 vetted by CEA.
The capital cost approved in the RCE- I was at 2010 price level and may have to
be brought at the appropriate price level.
The Captioned Appeal and pending IAs, if any, are disposed of in the above terms.
th
PRONOUNCED IN THE OPEN COURT ON THIS 14 DAY OF MAY, 2026.
(Ajay Talegaonkar)
(Virender Bhat)
Judicial Member
REPORTABLE / NON-REPORTABLE
kns/mkj/kks
Technical Member
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