Nodal agency liable for additional costs necessitated by inaccurate tender specifications despite subsequent restrictive contractual terms.

PEDA invited bids in 2009 for a 500 kW Mini Hydel Project at Terkiana, assuring a water discharge of 350 cusecs in the Holy Bein rivulet

APPL won the bid by offering PEDA an "energy share" of 20% for 10 years and 30% thereafter

After commissioning on August 31, 2010, the plant was shut down in January 2011 due to local protests over water-logging caused by the 350-cusec discharge, which the rivulet could not handle

To resolve this, a Tripartite Agreement (TPA) was signed on August 10, 2011, for APPL to construct an "Escape Channel"

Clause 15 of the TPA stated APPL would bear the construction costs

APPL subsequently petitioned PSERC for tariff re-determination, citing increased project costs and seeking a waiver of the energy share

PSERC refused to re-determine the tariff but ordered that the Escape Channel costs (without interest) be recovered from PEDA’s energy share

Both PEDA and APPL appealed this order

1. Whether the construction of the Escape Channel constitutes a Force Majeure event warranting the addition of its cost to the capital cost for tariff re-determination.

2. Whether PEDA is liable to compensate APPL for the cost of the Escape Channel despite Clause 15 of the Tripartite Agreement.

3. Whether the State Commission acted within its jurisdiction under Section 86(1)(a) of the Electricity Act, 2003, by adjusting compensation against PEDA’s energy share.

4. Whether APPL is entitled to additional compensation for interest, O&M expenses, and carrying costs during the project shutdown.

The court applied Section 86(1)(a) of the Electricity Act, 2003, which empowers the State Commission to determine the tariff for generation and supply

It relied on the principle of "economic duress," holding that contracts signed under financial vulnerability and dominant bargaining positions may be reviewed for equity

The court further applied administrative law principles regarding tender transparency, asserting that an inviting agency is bound by the technical assurances (e.g., water discharge) provided in bid documents

It also cited Gujarat Urja Vikas Nigam Ltd. v. Essar Power Limited to affirm the Commission's jurisdiction over such disputes

The Tribunal found that the inability of the Holy Bein to handle 350 cusecs was not a Force Majeure event but a failure of due diligence by PEDA during the bidding stage

Consequently, while the generic tariff could not be re-determined as it was part of a competitive bid process, APPL deserved compensation for unforeseen infrastructure costs

The Tribunal observed that APPL signed the TPA under "economic duress" while its plant was shut down, meaning Clause 15 did not bar compensation

PEDA, having derived a commercial advantage (the energy share) based on a flawed technical premise, was held liable

The Tribunal rejected PEDA’s argument that APPL could be compensated via "20% extra generation," noting that machines designed for 350 cusecs cannot safely or efficiently produce extra power simply by increasing water flow

Finally, the Tribunal held that while the principal cost was recoverable, APPL could not claim interest or O&M expenses as it had not timely protested the costs post-TPA

Tariff re-determination is denied

APPL is entitled to the actual cost of the Escape Channel (without interest)

This cost must be adjusted against PEDA’s energy share

PEDA cannot transfer its share to PSPCL until APPL is fully compensated

The matter was remanded to PSERC to conduct a "prudence check" to finalize the actual construction costs incurred by APPL

All pending applications were disposed of