HON’BLE THE CHIEF JUSTICE SRI G.S. SINGHVI AND HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY Writ Appeal Nos.358, 463, 482, 483, 484 and 485 of 2007 Writ Appeal No.358 of 2007 Between: Transmission Corporation of A.P. Limited (AP TRANSCO), represented by its Chairman and Managing Director, Hyderabad. …Appellant And M/s. Gautami Power Limited, Secunderabad, represented by its Director and others. …Respondents Counsel for the appellant : Sri T. Anantha Babu, Senior Advocate assisted by Sri N. Jayasurya. Counsel for respondent Nos.1 and 2 : Sri Parag Tripathi, Senior Advocate assisted by Sri V. Akshaya Babu. Counsel for respondent No.3 : Sri C.V. Mohan Reddy, Advocate General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent No.4 : None Counsel for respondent No.5 : Sri A. Rajashekar Reddy, Assistant Solicitor General. Counsel for respondent No.6 : Sri K. Venkata Rao Writ Appeal No.463 of 2007 Between: Transmission Corporation of A.P. Limited (AP TRANSCO), represented by its Chairman and Managing Director, Hyderabad. …Appellant And M/s. G.V.K. Power & Infrastructure Limited, New Delhi, represented by its Director and others. …Respondents Counsel for the appellant : Sri T. Anantha Babu, Senior Advocate assisted by Sri N. Jayasurya. Counsel for respondent Nos.1 and 2 : Sri S.R. Ashok, Senior Advocate assisted by Sri S. Chakrapani. Counsel for respondent No.3 : Sri C.V. Mohan Reddy, Advocate General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent No.4 : None Counsel for respondent No.5 : Sri A. Rajashekar Reddy, Assistant Solicitor General Counsel for respondent No.6 : Sri K. Venkata Rao Writ Appeal No.482 of 2007 Between: Transmission Corporation of A.P. Limited (AP TRANSCO), represented by its Chairman and Managing Director, Hyderabad. …Appellant And M/s. G.V.K. Power & Infrastructure Limited, New Delhi, represented by its Director and others. …Respondents Counsel for the appellant : Sri O. Manohar Reddy Counsel for respondent Nos.1 and 2 : Sri S.R. Ashok, Senior Advocate assisted by Sri S. Chakrapani. Counsel for respondent No.3 : Sri C.V. Mohan Reddy, Advocate General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent No.4 : None Counsel for respondent No.5 : Sri A. Rajashekar Reddy, Assistant Solicitor General. Counsel for respondent No.6 : Sri K. Venkata Rao Writ Appeal No.483 of 2007 Between: Government of Andhra Pradesh, represented by its Principal Chief Secretary (Energy), Secretariat, Hyderabad. …Appellant And M/s. Gauthami Power Limited, New Delhi, represented by its Director and others. …Respondents Counsel for the appellant : Sri C.V. Mohan Reddy, Advocate General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent Nos.1 and 2 : Sri Parag Tripathi, Senior Advocate assisted by Sri V. Akshaya Babu. Counsel for respondent No.3 : Sri T. Anantha Babu, Senior Advocate assisted by Sri N. Jayasurya. Counsel for respondent No.4 : None Counsel for respondent No.5 : Sri A. Rajashekar Reddy, Assistant Solicitor General. Counsel for respondent No.6 : Sri K. Venkata Rao Writ Appeal No.484 of 2007 Between: Transmission Corporation of A.P. Limited (AP TRANSCO), represented by its Chairman and Managing Director, Hyderabad. …Appellant And M/s. Gautami Power Limited, Secunderabad, represented by its Director and others. …Respondents Counsel for the appellant : Sri O. Manohar Reddy Counsel for respondent Nos.1 and 2 : Sri S.R. Ashok, Senior Advocate assisted by Sri S. Chakrapani. Counsel for respondent No.3 : Sri C.V. Mohan Reddy, Advocate General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent No.4 : None Counsel for respondent No.5 : Sri A. Rajashekar Reddy, Assistant Solicitor General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent No.6 : Sri K. Venkata Rao Writ Appeal No.485 of 2007 Between: Government of Andhra Pradesh, represented by its Principal Chief Secretary (Energy), Secretariat, Hyderabad. …Appellant And M/s. G.V.K. Power & Infrastructure Limited, New Delhi, represented by its Director and others. …Respondents Counsel for the appellant : Sri C.V. Mohan Reddy, Advocate General assisted by Sri A. Satya Prasad, Special Government Pleader. Counsel for respondent Nos.1 and 2 : Sri S.R. Ashok, Senior Advocate assisted by Sri S. Chakrapani. Counsel for respondent No.3 : Sri T. Anantha Babu, Senior Advocate assisted by Sri N. Jayasurya. Counsel for respondent No.4 : None Counsel for respondent No.5 : Sri A. Rajashekar Reddy, Assistant Solicitor General. Counsel for respondent No.6 : Sri K. Venkata Rao :: J U D G M E N T :: June 18, 2007 Per G.S. Singhvi, CJ These appeals by Transmission Corporation of Andhra Pradesh Limited (AP TRANSCO) and Government of Andhra Pradesh are directed against order dated 28.2.2007 passed by the learned Single Judge in WPMP.No.4878 of 2007 (in Writ Petition No.3827 of 2007), WPMP.No.4985 of 2007 (in Writ Petition No.3906 of 2007), and order dated 27.4.2007 passed in WPMP.No.10274 of 2007 (in Writ Petition No.3827 of 2007) and WPMP. No.10275 of 2007 (in Writ Petition No.3906 of 2007). For deciding the issue raised in the appeals, we have culled out the relevant facts from the records of Writ Petition No.3827 of 2007 and Writ Appeal Nos.358, 483 and 484 of 2007. M/s.Gautami Power Limited (respondent No.1 in three writ appeals) through its Director Shri S. Bhupal, who has also, in his capacity as shareholder of the company, joined as petitioner No.2, filed writ petition under Article 226 of the Constitution of India for grant of a declaration that 1.96 Million Cubic Meters of natural gas is required per day for generation of electricity from the power project set up by respondent No.1. The petitioners have also prayed for issue of a mandamus to the Government of Andhra Pradesh, A.P. Transco and Andhra Pradesh Power Coordination Committee (APPCC) to make recommendation to the Government of India and Gas Authority of India Limited (respondent Nos.4 and 5 in the writ petition) for supply of natural gas to the project of respondent No.1 as per Gas Supply Agreement dated 9.10.2000 and to provide power supply interconnectivity in terms of Articles 2.7 and 7.2 of the Power Purchase Agreement (PPA). Along with the writ petition, the petitioners filed WPMP No.4878 of 2007 for issue of an interim direction to respondent Nos.1 to 3 in the writ petition to make recommendation to respondent Nos.4 and 5 on the lines of letters dated 13.7.2006 and 7.9.2006 written for supply of natural gas for a period of 18 weeks and to provide permanent power supply and interconnectivity to the power plant for the purpose of commissioning. The aforementioned prayers of the petitioners are founded on the following assertions: 1) That pursuant to the policy of the Government of India to invite private investment in the electricity sector and policy of the Government of Andhra Pradesh for setting up short gestation power projects by private sector, respondent No.1 submitted bid to design, finance, construct, complete, oven and operate a liquid based 300 MW capacity power project at Peddapuram, East Godavari District. The same was accepted by the State Government. Thereafter, respondent No.1 executed PPA with the then Andhra Pradesh State Electricity Board (predecessor of A.P. Transco). A similar agreement was entered by M/s.N.C.C. Power Corporation Limited, which, later on, merged with respondent No.1, and the erstwhile Andhra Pradesh State Electricity Board for setting up a 227 MW short gestation project. 2) On 22.5.1998, the Government of Andhra Pradesh agreed to the request of respondent No.1 for increase in the capacity of the power plant from 300 MW to 358.9 MW. The Government of Andhra Pradesh also recommended to the Ministry of Petroleum and Natural Gas for allocation of 1.222 MCMD to respondent No.1 and 0.74 MCMD of natural gas to M/s.N.C.C. Power Corporation Limited. 3) On 9.10.2000, respondent No.1 entered into Gas Supply Agreement with the Gas Authority of India Limited (respondent No.5 herein), which was amended from time to time and vide which respondent No.5 agreed to provide 1.96 MCMD of natural gas subject to availability. 4) That even though, pursuant to the policies framed by the Government of India and the Government of Andhra Pradesh for inviting private entrepreneurs to set up power projects, they have invested Rs.1700 crores and established the power project, the State Government, A.P. Transco and Andhra Pradesh Power Coordination Committee have not sent recommendations to Government of India and respondent No.5 to supply natural gas necessary for commissioning the project, as was done in the case of M/s.Vemagiri Power Generation Limited (for short, ‘M/s.VPGL’) vide its letters dated 13.7.2006 and 7.9.2006 and, in this manner, they have been discriminated. 5) That the failure of the State Government to make recommendation to respondent Nos.4 and 5 for supply of natural gas and provide power supply and interconnectivity in terms of Articles 2.7 and 7.2 of the PPA, as was done in the case of M/s.VPGL, is wholly arbitrary and discriminatory. The case set up by A.P. Transco, as is reflected in the affidavit of its Chief Engineer/RAC and Reforms, Shri G.V. Nagesh is that as per Gas Supply Agreement dated 9.10.2000, which was amended from time to time, respondent No.5 has agreed to supply 1.96 Million Cubic Meters of natural gas per day to respondent No.1 subject to availability of gas and that at present there is shortage of gas even for the four existing private generators who have agreements with APSEB and A.P. Transco for supply of electricity. Shri G.V. Nagesh has controverted the plea of discrimination by asserting that M/s.VPGL has entered into an amended contract for supply of electricity manufactured only from natural gas and the altered procedure for manufacturing electricity from Naptha has been abandoned whereas M/s.Gautami Power Limited (respondent No.1 herein) has not agreed to do so. For the sake of convenient reference, paragraphs 4, 7, 9 and 13 of the affidavit of Shri G.V. Nagesh are extracted below: 4. Presently, the situation with regard to supply of gas is critical. This has also resulted in the present shortage of electricity. There are four existing private generators who have agreements with APSEB and APTRANSCO for supply of electricity. These agreements stipulate, inter alia, that if gas was not available, they would be manufacturing electricity from Naptha and a separate price was fixed for such electricity. Purchase of electricity produced from Naptha is uneconomical and it is highly impossible for distribution licensees to purchase electricity manufactured from Naptha. This is only designed as an emergency provision. It now transpires that the existing gas fields are manufacturing progressively lesser gas with consequent reduction in supplies to A.P. State and its generators. The exploration of new gas fields is also going on and it is hoped that after some time in future when they go into operation, further gas would be available. But as the present, the availability of gas is insufficient to be supplied to any new project. This matter has engaged the attention of the State Government and the Government of India. The Ministry of Petroleum and Natural Gas is in charge of allotment of gas. The GAIL being a Central Government Company functioning in accordance with such directives of the Ministry of Petroleum and Natural Gas that in view of the shortage of gas, the available gas should be supplied only to the existing units and as and when new fields come into operation, that gas can be made available to new generators. After due examination of this proposal, the Government of India wrote a letter dated 5.12.2005 enclosing notes of discussions which contain the following: “MOP&NG would like to be guided by the views of the State Government and, therefore, gas supply to the existing power projects will not be curtailed. Gas supply to the upcoming 4 IPPs can only be given when additional gas becomes available.” 7. The petitioner seeks to support his untenable prayer by alleging that in the case of M/s.Vemagiri Power Generation Limited, gas has been supplied and this constitutes discrimination. The plea of discrimination is baseless. Firstly, the supply to M/s.Vemagiri Power Generation Limited is only limited for the purpose of testing the equipment and after the tests were completed, the supply was stopped. Further M/s.Vemagiri Power Generation Limited has entered into an amended contract whereunder it has agreed to supply electricity manufactured from natural gas alone and the alternate procedure for manufacturing electricity from costly Naptha was abandoned. This respondent and the four DISCOMs which are successors to the contract with the petitioner in terms of the third transfer scheme had petitioned the Regulatory Commission for amending the existing agreement with all the four new manufacturers for deletion of usage of costly alternate fuel, Naptha. After M/s.Vemagiri Power Genration Limited obliged with the request for not using the costly Naptha for manufacturing electricity, the arguments before the Regulatory Commission were interrupted and postponed at the specific request of the petitioner’s counsel. An affidavit was filed before the Regulatory Commission indicating that pursuant to signing of the amended Power Purchase Agreement (PPA) by M/s.Vemagiri Power Generation Limited, they were having a dialogue with their lenders to seek their consent for negotiation with Government of Andhra Pradesh to arrive at an amicable and viable understanding on the subject. They have submitted proposal dated 11.7.2006 to Government indicating that they are also willing to agree for amendments on similar lines of M/s.Vemagiri Power Generation Ltd. They have further through letters dated 3.10.2006, 5.10.2006, 13.10.2006 & 17.10.2006 accepted to follow the amendments as accepted by M/s.Vemagiri Power Generation Ltd. (Copies of letters enclosed). The present affidavit suppresses these developments. 9 . This respondent is no longer permitted to trade in electricity from June, 2005. It is not really a proper party to this writ petition. The petitioner has failed to implead necessary parties i.e. the four DISCOMs who may be regarded as successors to A.P. Transco as explained and to the extent of the provisions of the third transfer scheme issued under the provisions of the A.P. Electricity Reform Act, 1998. 13. The APTRANSCO has really no legal part to play in this matter. The State Government has also been impleaded unnecessarily to create confusion. The Court may also take into consideration the crucial fact that the dispute involved is basically a dispute between the generator and a licensee and so should be decided by the State Regulatory Commission under Section 86 (1)(f) of the Electricity Act, 2003. It is respectfully submitted that since the State Regulatory Commission is presently engaged in considering the questions relating to the power purchase agreement between the petitioner and the DISCOMs, it is open to the petitioner to approach the State Regulatory Commission for proper relief. Its invitation to the Court to intervene in the matter which is engaging the attention of the Regulatory Commission is not proper. It is also a matter for consideration that the interim relief and the final relief are one and the same. There is no justification for granting any interim relief without the writ being heard.” M/s.G.V.K. Power and Infrastructure Limited (respondent No.1 in Writ Appeal Nos.463, 482 and 485 of 2007) and another filed Writ Petition No.3906 of 2007 with identical prayer. They also filed WPMP No.4985 of 2007 for grant of similar interim relief. By an order dated 28.2.2007, the learned Single Judge disposed of WPMP Nos.4878 and 4985 of 2007 and directed respondent Nos.4 and 5 in the writ petition (respondent Nos.5 and 6 herein) to extend the same facility to the petitioners as was done in the case of M/S.VPGL with the rider that A.P. Transco shall not be exposed to any additional financial commitment or burden on account of commissioning of the power project. The relevant portions of the order passed by the learned Single Judge are extracted below: “The feasibility of granting the main relief claimed in the writ petition can be considered, after all the respondents file their counter-affidavits or put forward their contentions. The limited question, at this stage, is as to whether necessary directions need to be issued to the respondents concerned, to ensure supply of gas and connectivity of power to the petitioners, to enable the petitioners to commission the plants. The existence of the corresponding agreements, between the concerned agencies is not disputed. In the State of Andhra Pradesh, as many as eight such units have been permitted to come into existence. Out of them, four have become operational, one is in the process of commissioning and the other three including the petitioners, are yet to commence their production. For their functioning, the units depend almost exclusively upon the supply of gas by the fifth respondent. It may be that the agreements provide for alternative method of production of power also. That, however, became a bone of contention between the units and the second respondent, which is reluctant to purchase the power produced through the alternative fuels. The matters in this regard are said to be pending before the Regulatory Commission. It hardly needs any mention that on the basis of the commitment received from various agencies, including respondents 2 and 5, the petitioners have incurred huge expenditure. Construction and installation of plants entail in agreements with Indian and foreign agencies. The installation of the plants is said to have been completed. Unless the plants are commissioned, the petitioners would be exposed to damages by different agencies. It is represented that by now one of the petitioners had to shell down 200 crores in the form of damages, paid to the foreign companies, on account of the delay in commissioning. Respondents 2 to 5 contend that the gas is not available in such a quantity to fulfil the commitments to the various power plants to enable them to operate, to the optimum capacity or to commission, as the case may be. The situation as of now is that four plants are already functioning, one is on the test run and the three are yet to be commissioned. The petitioners have placed voluminous record before this Court in support of their contention that there is adequate quantity of gas with the fifth respondent and that, at any rate, the available quantity must be supplied pro rata. Though it is stated that a change of policy has ensued since then, it is yet to crystalise into an enforceable one. Be that as it may, the commissioning of plant of the petitioner, if at all anything, would be beneficial to the second respondent. The reason is that the power generated through gas is said to be cheaper when compared to the one produced through other fuel. The apprehension of the second respondent that it may be exposed to severe financial burden, if the petitioners resort to production of power through other methods such as NAFTHA can be allayed by directing that the gas that may be supplied to the petitioners for the present shall be limited to the extent of enabling them to commission the units and not beyond that. Even the method of commissioning is prescribed under the relevant clauses of agreement and the programmes have already been scheduled for this purpose. The period is spread over 19 weeks. Further, such a commissioning would extricate the petitioners from the liability, to which they may be exposed vis-à-vis the EPC contractors engaged by it as well as the financial institutions for delay in this regard. The purport of the stand taken by the fifth respondent in W.P.No.22051 of 2005 in its counter-affidavit or its effect on the agreements entered into in favour of the agencies, needs to be considered at the final hearing of the writ petition. Another fact, which persuades this Court to grant interim relief, is that on its own accord, the fifth respondent extended gas supply to a unit by name Vemagiri in the recent past. The power supply was followed by a recommendation by the State Government itself through letter dated 13.07.2006. The petitioners stand on the same footing. There is no reason why the same treatment cannot be extended to the petitioners also. For the foregoing reasons, the W.P.M.Ps. are ordered. Respondents 4 and 5 shall extend the same facility to the petitioners as they did to Vemagiri Power Generation Limited, and subject to the same terms except as to amendment of power purchase agreement. Further, the second respondent shall not be exposed to any additional financial commitment or burden on account of such a commissioning. It is also made clear that the observations made herein shall not be treated as any final pronouncement and the proceedings pending before the A.P. Electricity Regulatory Commission between the parties herein shall be adjudicated on their own merits, uninfluenced by any observations made in this order.” On 17.4.2007, the petitioners of both the cases filed miscellaneous petitions, which were registered as WPMP Nos.10274 and 10275 of 2007 with the prayer that respondent No.5 be directed to supply gas in accordance with order dated 28.2.2007 passed in WPMP Nos.4878 and 4985 of 2007. In the affidavit filed by him in support of the miscellaneous petitions, Shri S. Bhupal referred to letter dated 23.3.2007 sent by respondent No.5 and averred that non-implementation of the direction given by the Court on 28.2.2007 is causing heavy financial loss to the writ petitioners and they are being threatened by EPC Contractors – M/s.Alstom to decommission from the project site. The appellants contested the second set of miscellaneous petitions by asserting that in view of acute shortage of power during the summer season, it may not be feasible or advisable to divert the gas supply to the petitioners and that allocation of gas to the petitioners will result in curtailment of supply to the existing units. The learned Single Judge took cognizance of the aforementioned assertion made on behalf of the appellants and passed order dated 27.4.2007 whereby he directed that respondent No.5 should supply gas to the petitioners with effect from 15.7.2007 with a further direction that in the meanwhile, the A.P. Transco, State Government and the Government of India shall undertake necessary correspondence so as to enable respondent No.5 to commence supply by the specified date for the limited purpose of commissioning of the project. The last two paragraphs of the second order of the learned Single Judge are extracted below: “The petitioners are the units, which have come into existence, on the basis of a multilateral agreement, among the petitioners and several agencies. The agreements provide for supply of gas by the 5th respondent to the petitioners and purchase of the generated power by the 2nd respondent. It is no doubt true that several claims and counter claims are being made by the respective parties, against each other, as regards enforcement of their respective rights. The purport of the order passed by this Court on 28.2.2007 is very limited. Directions were issued to the respondents therein, to supply gas to the petitioners, only to the limited extent of commissioning the units. A rider was added to the effect that mere commissioning of the units, shall not result in any additional financial commitment, or burden, to the respondents. For the submissions made on behalf of the various respondents, it now emerges that it would not be possible to divert any gas to the petitioners and that any such diversion would result in shortage of supply to the existing functional units. An apprehension expressed on their behalf is that the petitioners may declare the Commercial Operation Date (COD), soon after commissioning, and that the same would entail in financial liability of high magnitude to the respondents. On a consideration of the various issues involved in the matter, this Court is of the view that the gas supply to the petitioners can be commenced from the 2nd week of July 2007, and that the petitioners be required to declare the COD, only with the leave and permission of the Court. Hence, both the petitions are ordered, directing that: a) The supply of gas to the petitioners shall be commenced by the 5th respondent, with effect from 15.7.2007, and in the meanwhile, the respondents, and in particular, the A.P. Transco, Government of Andhra Pradesh and Government of India, shall