IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.06.2011 CORAM THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Writ Petition Nos.20820, 20821 of 2000, 20624 to 20629 of 2000, 20730 to 20733 of 2000 and 29752 to 29757 of 2010 E.I.D.Parry (I) Ltd, Dare House, 234, N S C Bose Road, Chennai. rep by its Director ... Petitioner in W.P.Nos.20820,20821, 20730 to 20733 of 2000 Thiru Arooran Sugars Ltd, "Eldorado' rep. By its Chairman ... Petitioner in W.P.Nos.20624 to 20629 of 2000 Rajasshree Sugars & Chemicals Limited rep. By its GeneralManagfer (Finance) and C ompany Secretary, The Uffizi, No.338, Avinashi Road, Peelamedu, Coimbatore 641 004. ... Petitioner in W.P.Nos.29752 to 29757 of 2000 -Versus- 1. The State of Tamil Nadu rep. By Principal Secretary to Government, Department of Industries, Fort St.George, Chennai.9 2. Tamil Nadu Electricity Board rep. By its Chairman, 800, Anna Salai,Chennai.2 3. Union of India rep. By Secretary, Ministry of Non-Conventional Energy Sources, Block No.14, C.G.O Complex, Lodi Road, New Delhi 10 003. ... Respondents in W.P.Nos.20820, 20821, 20624 to 20629 and 20730 to 20733 of 2000 https://hcservices.ecourts.gov.in/hcservices/ 1. The State of Tamil Nadu rep. By Principal Secretary to Government, Department of Industries, Fort St.George, Chennai.9 2. Tamil Nadu Electricity Board rep. By its Chairman, 800, Anna Salai,Chennai.2 ... Respondents in W.P.Nos.29752 to 29757 of 2010 Writ Petition No.20820 of 2000 has been filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Declaration declaring that Permanent B.P.(FB) No.96 dated 31.03.1995, B.P.(FB) No.1 dated 11.01.2000 and Permanent B.P.(FB)No.93 dated 16.05.2000 of the second respondent are illegal, without authority of law in so far as the said Board Proceedings are not in accordance with G.O.230 dated 16.06.1993. W.P.NO.20821 OF 2000: This Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of Declaration or any other Writ Order or direction declaring that G.O.230 dated 16.6.1993 issued by first respondent is binding on the Tamil Nadu Electricity Board and consequently direct Tamil Nadu Electricity Board to fix/refix which have set up co-generating plants in accordance with G.O.Ms.23 dated 16.6.93. W.P.No.20624/2000 This Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of Writ of Declaration or any other writ, order or direction declaring that B.P(F.B) No.93 dated 16.5.2000 of the Second respondent is arbitrary and violative of Article 14 of the Constitution of India in so far as the Tamil Nadu Electricity Board has fixed the price of co-generated power produced by the petitioner using lignite/coal as fuel during off Season at a rate lower than that fixed for the power generated during the season and pass such further or other orders. W.P.No.20625/2000:- This Writ Petition filed under Article 226 of the constitution of India pleased to issue a Writ of Declaration or any other Writ, Order or Direction declaring that permanent B.P.(FB) No.96 dated 31.3.1995 of the Second Respondent in without authority of law and arbitrary, violative of Article 14 of the Constitution of India in so far as the said BP adopts 1995-96 instead of 1994-95 as the base year for fixing the purchase price of Rs.2.25 per unit for the surplus https://hcservices.ecourts.gov.in/hcservices/ energy exported by the Co-generating Sugar Mills and consequently direct the Tamilnadu Electricity Board to refix the purchase price for the power purchased for the period from 1.4.1995 to 31.3.2000 under permanent B.P.(FB) No.96, dated 31.03.1995 adopting 1994-95 (1.4.1994 to 31.3.1995) as the base year and pay the differential price between the purchase price directed to be re-fixed and the price already fixed in permanent BP (FB) No.96 dated 31.3.1995 of the second respondent, together with interest at the rate of 18% per annum, with effect from the respective due dates. WP.No.20626/2000/- This writ petition filed under Article 226 of the constitution pleased to issue a writ of Declaration or any other writ, order or direction, declaration that permanent B.P. (FB) No.1, dated 11.01.2000, of the 2nd respondent fixing the purchase of Surplus energy exported by the co-generation sugar mills at Rs.2.73 per unit with effect from 1.4.2000 in without authority of law and arbitrary, Violative of Article 14 of the constitution of India and consequently direct the Tamilnadu Electricity Board to refix the purchase price for the power purchased/to be purchased for the period from 1.4.2000 to 31.3.2010 under permanent B.P.(FB) No.1, dated 11.01.2000 adopting Rs.3.01 per unit as the price for the base year viz., 2000-2001 and pay the differential price between the purchase price directed to be refixed and the price already fixed in BP No.1 dated 11.01.2000 of the Second respondent together with interest at the rate of 18% per annum with effect from the respective due date. WP 20627/2000: To issue writ of Declaration or any after writ order or direction declaring that permanent B.P.(FB) No.96 dated 31.3.95 permanent B.P.(FB) No.1 dated 11.1.2000 and permanent B.P. (FB) No.93 dated 16.5.2000 of the second respondent are illegal and without authority of law in so far as the said Board proceedings are not in accordance with G.O.230 dated 16.6.1993. WP No.20628/2000: To issue a declaration or any other writ order direction declaring that G.O.Ms.No.230 dated 16.6.1993 issued by the first respondent binding on the Tamil Nadu Electricity Boar an consequently direct Tamil Nadu Electricity Board to fix/refix the tarriff payable to the sugar mills which have set co-generation plants in accordance with G.O.Ms.230 dated 16.6.1993. WP.No.20629/2000: to issue a writ of Mandamus or any other writ, order or direction directing the Tamil Nadu Electricity Board to forthwith pay the arrears of purchase price, as per the annexure I to the Affidavit to the petition for the power exported by the petitioner under the power purchase Agreements executed between the petitioner and the TNEB together with interest @ 18% per annum from the respective due dates and continue to pay the purchase price for the power to be exported by the petitioner within 30 days of presentation of the invoices. https://hcservices.ecourts.gov.in/hcservices/ W.P.No.20730/2000:- To issue a writ of Declaration or any other writ, order or direction, declaring that permanent B.P.(FB) No.93, dated 16.05.2000 of the second respondent is not applicable for the petitioner and that the Tamil Nadu Electricity Board in under legal obligation to pay a uniform purchase price for power supported by the petitioner without any distinction between crushing and non crushing season. W.P.No.20731/2000: To issue a writ of Declaration or any other writ, order or direction declaring that permanent B.P (FB) No.93 dated 16.5.2000 of the second respondent is arbitrary and violative of Article 14 of the Constitution of India in so far as Tamil Nadu Electricity Board has fixed the price of co-generated power produced by the petitioner using bagasse purchased from other sources during off season at the rate of Rs.2.48 per unit as against Rs.2.73 per unit as per the agreement executed and fixed under permanent B.P (FB) M.1 dated 11.01.2000 of the second respondent and pass such further or other orders. WP NO.20732/2000 To issue a writ of Mandamus or any other writ, order or direction directing the Tamilnadu Electricity Board to forthwith pay the arrears of puchase price as per the Annexure I to the affidavit to the petition for the power exported by the petitioner under the power purchase agreements executed between the petitioner and the TNEB together with Interest @ 18% per annum from the the respective due dates and continue to pay the purchase price for the power to be exported by the petitioner within 30 days of presentation of the invoices. WP NO.20733/2000 To issue a writ of Declaration or any other writ, order or direction directing that permanent B.P. (FB) No.96, dated 31.03.1995, in without authority of law and arbitrary, violative of article 14 of the constitution of India, in so far as the said BP adopts 1995-96 instead of 1994-1995 as the base year for fixing the purchase price of Rs.2.25 per unit for the surplus energy exported by the cogenerating sugar mills and consequently direct the Tamilnadu Electricity Board to refix the purchase price for the power purchased for the period from 1.4.1995 to 31.3.2000 under permanent B.P.(FB) No.96, dated 31.3.95 adopting 1994-95 (01.04.94 to 31.3.95) as the base year and pay the differential price between the purchase price directed to be re-fixed and the price already fixed in permanent B.P. (F.B) No.96 dated 31.3.95, of the second respondent together with interest at the rate of 18% per annum, with effect from the respective due dates. https://hcservices.ecourts.gov.in/hcservices/ W.P.29752/2010: To issue a declaration or any other writ order or direction Declaring that G.O.Ms.No.230 dt.16.6.1993 issued by the First Respondent is binging on the Tamil Nadu Electricity Board and consequently direct Tamil Nadu Electricity Board to fix/refix the tariff payable to the Sugar Mills which have set up co-generation plants in accordance with G.O.Ms.No.230 dt.16.6.1993 and pass such further or other orders. W.P. No.29753/2010: To issue a writ of Declaration or any other writ, order of direction declaring that B.P.(FB)No.96 dt.31.3.1995 B.P.(FB) No.1 dt.11.1.2000 and B.P.(FB) No.93 dt.16.5.2000 of the 2nd respondent are illegal and without authority of law in so far as the said Board Proceedings are not in accordance with G.O.Ms.No.230 dt.16.6.1993 and pass such further or other orders. W.P.29754/2010: To issue a writ of Declaration or any other writ, order or direction, declaring that B.P.(F.B) No.96, dated 31.3.95 of the 2rd respondent is without authority of law and arbitrary, violative of Article 14 of the Constitution of India in so far as the said BP adopts 1995-96 instead of 1994-95 as the base year for fixing the purchase price of Rs.2.25 per unit for the surplus energy exported by the petitioner and consequently direct the Tamilnadu Electricity Board to refix the purchase price for the power purchased for the period from 26.3.1996 to 25.3.2001 under permanent B.P. (FB) No.96 dt 31.3.1995 adopting 1994-95 (01.04.1994 to 31.3.1995) as the base year and pay the differential price between the purchase price directed to be refixed and the price already fixed in B.P. (PB) No.96, dated 31.03.1995 by the 2nd Respondent together with interest at the rate of 18% per annum, with effect from the respective due dates and pass such further or other orders. W.P.No.29755 of 2010: Pleased to issue a Writ of declaration or any other Writ order or direction Declaring that B.P. (FB) No.1 dt 11.1.2000 of the 2nd respondent fixing the purchase price of surplus energy exported by the co-generating Sugar Mills at Rs.2.73 per unit with effect from 1.4.2000 is without authority of law and arbitrary violative of Article 14 of the Constitution of India and consequently direct the Tamilnadu Electricity Board to refix the purchase price for the power purchased/to be purchased for the period from 1.4.2000 to 31.3.2010 under B.P. (FB) No.1 dt 11.1.2000 adopting Rs.3.01/- per unit as the price for the based year viz. 2000-2001 and pay to the differential price between the purchase price directed to be re fixed and the price already fixed in B.P.No.1 dt 11.1.2000 by the 2nd respondent together with interest at the rate of 18% per annum with effect from the respective due dates. https://hcservices.ecourts.gov.in/hcservices/ W.P.No.29756/2010:- to issue a writ of Declaration Declaring that B.P.(FB) No.93 dated 16.05.2000 of the 2nd Respondent is arbitrary and violative of Article of the Constitution of India in so far as the Tamil Nadu Electricity Board has fixed the price of Co-generated power produced by the sugar mills during off season at a rate lower than that fixed for the power generation during the season. W.P.No.29757/2010: To issue a writ of mandamus or any other writ or direction Directing the Tamil Nadu Electricity Board to forthwith pay the arrears of purchase price to the Petitioner for the power exported by the Petitioner under the Power Purchase Agreements executed between the Petitioner and the Tamil Nadu Electriciy Board together with interest at 18% per annum from the respective due dates and continue to pay the purchase price for the power to be exported by the Petitioner within 30 days of presentation of the invoices. For petitioner in W.P.Nos. 20820, 20821, 20730 to 20733 of 2000 : Mr.Gopal Choudary, Senior Counsel for M/S.ABdul Hameed For Petitioner in W.P.Nos. 20624 to 20629 of 2000 : Mrs.Nalini Chidambaram, Senior Counsel and Mr.Rahul Balaji for M/S.S.Silambanan For Petitioner in W.P.Nos. 29752 to 29757/2010 : Mrs.Nalini Chidambaram, Senior Counsel for M/S.S.Silambanan For respondents in all Writ Petitions : Mr.V.Srikanth, Addl. Government Pleader (R1) : Mr.P.S.Raman, Advocate General for Mr.A.Selvlendran (R2) : Mr.V.M.G.Rama Kannan (R3) COMMON ORDER The petitioners in these writ petitions are all Sugar Mills in the State of Tamil Nadu who have set up Co-generation plants to generate electricity and to supply the surplus electricity to the Tamil Nadu Electricity Board as per the agreements entered into with the Tamil Nadu Electricity Board in accordance with the provisions of the Electricity (Supply) Act of 1948. The main dispute in all these writ petitions is in respect of the fixation of price for the electricity supplied by these sugar mills to the Tamil Nadu Electricity Board. 2. Since common issues are involved in these writ petitions, they were all heard together and disposed of by means of this common order. https://hcservices.ecourts.gov.in/hcservices/ 3. These writ petitions have come to be filed in the following background:- Prior to 1991, private sector entrepreneurs cannot set up thermal projects, coal/lignite or gas based hydel projects and wind/solar energy projects of any size. However, the Electricity (Supply) Act, 1948 was so amended in 1991 by which private sector entrepreneurs were allowed to set up enterprises, either as Licensees, or as generating companies. Now, licenses under Section 3 of the Indian Electricity Act can be issued by the State Governments to private units willing to enter the electricity sector as licensee companies to supply and distribute energy in a specified area, who may or may not have a generating station. Prior to 1991, generating companies could be set up only by the Central or State Governments or both. After 1991, generating companies can now be set up and such companies can set up one or more generating stations and offer to sell electricity to the grid, unlike licensees, who supply and distribute energy within a specified area and who may or may not have generating stations. It is thus possible for an enterprise to combine the functions of a generating company in one area and that of a lincensee in another area. The generating company, will sell power to State Electricity Boards (SEBs), on the basis of an agreement, and, at tariff based on parameters applicable to generating companies. Power plants in the private sector are captive power plants, set up to serve an industrial or other unit, where the requirement of that unit is for a large/continuous supply of electricity and a reliable source of electricity is necessary. Surplus electricity from captive power plants can be offered for sale to the State Electricity Boards. In this regard, the Government of India, Ministry of Power, issued a policy known as "Policy on Private Participation in the Power Sector" dated 22.10.1991. 4. As per Clause 4(5) of the said policy published in the Government Gazette of India dated 22.10.1991, generating companies can enter into a contract for the sale of electricity generated by it with the State Electricity Board in any State where it owns/operates generating station(s) or in any other State where it is carrying on its activities or with any other person with the consent of the competent Government. To suit this, amendment has been incorporated in Section 43(A) of the Electricity (Supply) Act,1948. 5. In pursuance of the above policy decision, the petitioners herein, who are the companies manufacturing sugar in their respective mills in various places in the State of Tamil Nadu offered to set up co-generation units in their respective factories. The main by- product which emerges in the manufacture of sugar in these factories is bagasse which is used in co-generation plants as fuel. 6. On account of the above policy and the amendments brought in the Electricity (Supply) Act 1948, they set up co-generation plants in their respective sugar mills after getting necessary https://hcservices.ecourts.gov.in/hcservices/ consent under Section 44 (1) of the Electricity (Supply) Act. After erecting power generation units, they entered into Power Purchase Agreements with Tamil Nadu Electricity Board. As per the said Power Purchase Agreements (hereinafter referred to as PPA), the surplus power exported by Sugar Mills to Tamil Nadu Electricity Board grid as recorded by the export meter will be purchased by the Tamil Nadu Electricity Board on outright basis at the rate of Rs.2 per unit and the rate will be reviewed and refixed if different norms are fixed by the Central Government/Government of Tamil Nadu. 7. Even before the setting up of generation units by the petitioners mills and the execution of PPAs the Government of Tamil Nadu under G.O.Ms.No.724 (Industries (MIC.I) Department dated 23.12.1992, based on the D.O letter No.11152/B1/89 dated 06.11.1992, from the Commissioner of Sugar, constituted a Committee known as "Co-generation (Sugar Mills) Committee" to go into the issues concerning Co-generation of electricity in Sugar Mills and make suitable recommendations to the Government. The Commissioner of Sugar was the Member Secretary of the said Committee, besides the Principal Secretary, Industries Department, Secretary, Public Works Department, Secretary, Finance Department, Member (Accounts) and Member (Generations) Tamil Nadu Electricity Board as the members of the Committee. The purposes for which the Co-generation (Sugar Mills) Committee was constituted are as follows:- i. To evolve a methodology for pricing of electricity purchased by Tamil Nadu Electricity Board from Sugar Mills Co-generating electricity; ii. To establish a formula for regular revision of the price at Fixed intervals to reflect changes in costs and other prices; iii. To establish the mode and terms of payment by Tamil Nadu Electricity Board to the Co- generation Units. iv. To review the scheme of wheeling and banking to make it more effective by allowing wheeling to any party at market driven price to be mutually negotiated between the co-generator and the end user. 8. In paragraph 4 of the said G.O, the Government directed as follows: "Based on the recommendations of this Committee, the Government shall take decisions on pricing, payment terms, wheeling etc., and finalise suitable programmes to set up co- generation plants in the sugar mills in Tamil Nadu". 9. The Committee, accordingly, went into all the issues and finally submitted a report to the Government making various recommendations in respect of the price of co-generated power, time https://hcservices.ecourts.gov.in/hcservices/ limit for payment, banking and wheeling of power, and exemption from Electricity Generation Tax. The report of the Committee was accepted by the Government and thereafter, the Government issued G.O.Ms.No.230, Industries (MISC.I) Department dated 16.06.1993. In the said G.O., the Government has directed as follows:- "The Committee has now given its report. The Government have considered the recommendations contained therein. Accordingly, the following orders are issued by the Government. "i. Price of Co-generated Power: For the power supplied to the State grid by the co-generating sugar mills, Tamil Nadu Electricity Board shall pay a price equal to HT-1 tariff charged for industrial consumers less 2% for transmission cost. ii. Time Limit for payment: The Tamil Nadu Electricity Board shall be required to make the payments for the power purchased from the co-generating mills within 30 days of the date of receipt of invoices from the mills with a suitable rebate/surcharge for earlier/later payments. The rebate/surcharge shall be decided taking into account the prevailing bank interest rates. iii. Banking and Wheeling: The Co-generating sugar mills shall be permitted to tank the power generated and wheel it through the Tamil Nadu Electricity Board, grid for sale to other consumers at mutually agreed rates subject to approval by the Government and the Tamil Nadu Electricity Board, shall charge 10% of the power for wheeling through the grid and 2% of the power for banking. iv. Exemption from Electricity Generation Tax: Co-generating sugar mills shall be exempted from the Electricity Generation Tax both for power consumed captively as well as power supplied to the Tamil Nadu Electricity Board, and other third parties." 10. According to the petitioners, when the petitioners approached Tamil Nadu Electricity Board seeking permission for establishment of co-generation units offering to sell the surplus co- generated energy to the Tamil Nadu Electricity Board, they were under the impression that the purchase of power will be governed by G.O.Ms.No.230 dated 16.06.1993 and the price equal to HT-1 tariff will be paid less 2% for transmission cost as per the said G.O. When the petitioners approached the Tamil Nadu Electricity Board, for entering into PPAs, the Tamil Nadu Electricity Board, according to https://hcservices.ecourts.gov.in/hcservices/ the petitioners, forwarded a draft agreement, wherein, to their surprise, they noticed that the price for power supply shall not be paid as per G.O.Ms.No.230 and instead, it will be paid as per B.P. (FB) 96 dated 31.03.1995. 11. At this juncture, it is worthwhile to refer to B.P.(FB) 96, (Technical Branch) issued by the Tamil Nadu Electricity Board on 31.03.1995. The said B.P. relates to the fixation of price for the energy sold to Tamil Nadu Electricity Board by sugar mills. The B.P (FB) 96 reads as follows: "In the Board's Proceedings Permanent (FB) No.241 (Tech.Br) dt.20.08.1994, the cost at which the surplus energy sold to TNEB by the Sugar Mills was fixed at Rs2/- per unit. In order to encourage further private sector participation in power generation through Co- generation, the purchase price of surplus energy to the grid by Co-generating sugar mills is revised to Rs.2.25 ps (Rupees two and paise twenty five only) per unit with effect from 01.04.1995 and with a price increase of 5% over the previous year for a period of five years. This will be reviewed after five years. Till the review is made and new rates are finalised, the rate at which the payment is made at the fifth year will continue. The wheeling charges of 2% for wheeling power to their sister concerns of sugar mills is also approved. The Sugar Mills are permitted to wheel the power to their sister concerns which are situated within 2 kilometers radius from the Sugar Mills. The Government may be requested to revise the G.O.Ms.No.230 dt.16.06.1993 of Industries Department." 12. In the Power Purchase Agreements entered into between the petitioners and the Tamil Nadu Electricity Board after the coming into being of B.P.(FB) 96, it was specifically mentioned that the purchase price for surplus energy to be supplied by Sugar Mills from co-generating units will be paid as per B.P.(FB) 96. When the draft agreements were forwarded, they raised objection for the same, instead they stated that they were made to believe all along that the price will be paid as per G.O.Ms.No.230 and the contrary stand taken by the Tamil Nadu Electricity Board that it would pay the charges only as per B.P.(FB)96 is arbitrary, illegal and void. 13. However, the Sugar Mills, according to them, signed the Power Purchase Agreements because they were kept under constant pressure. According to them, the co-generation plants had already been set up by investing huge money and by raising huge loans from financing institutions. Further, if the co-generating units were https://hcservices.ecourts.gov.in/hcservices/ not commissioned soon, it would have been impossible for the Mills even to go for crushing sugar cane. Therefore, subject to protest, according to the petitioners, they entered into the Power Purchase Agreements reserving their right to claim the purchase price as per G.O.Ms.No.230 dated 16.06.1993. 14. Subsequently, the Tamil Nadu Electricity Board issued B.P. (FB) No.91 (Technical Branch) dated 10.06.1998 wherein after referring to B.P.(FB) No.96, the Board directed as follows:- "The purchase price of power generated by the sugar Mills during off-season, using lignite as fuel, is fixed on par with the rate applicable for the bagasse based co- generated power contemplated vide B.P (FB). No.96 dt.31.03.1995 i.e.Rs.2.25 per unit with effect from 1.04.1995 with 5% annual increase for a