All India Power Engineer Federation & ... vs Sasan Power Ltd. & Ors. Etc

2. On 19.1.2005, the Central Government, in exercise of powers under Section 63 of the Electricity Act, 2003 issued guidelines for a tariff based competitive bid process to be initiated by distribution licensees /procurers for procurement of power from generating companies. The electricity to be procured by such procurers is for the purpose of distribution and retail supply to consumers generally. On 10.2.2006, in pursuance of these guidelines, procurers in different States, namely, appellants 1 to 3 and respondents 5 to 15 (in Civil Appeal Nos.5239-5240 of 2016) nominated Power Finance Corporation Limited, a Government of India undertaking as the Nodal Agency to complete a competitive bid process for development of an ultra mega power project based on linked coalmines using super critical technology of units of 660 mega watts (MW) each, plus or minus 20%, in Sasan District, Singrauli, Madhya Pradesh. On 10.2.2006, Sasan Power Limited was incorporated as a special purpose vehicle by Power Finance Corporation in order to implement the aforesaid purpose. On 1.8.2007, based on the competitive bidding process held by Power Finance Corporation, Reliance Power Limited, having quoted the lowest amount, was selected as the successful bidder, and a letter of intent was issued to Reliance Power Ltd. The quoted tariff, year by year, for a period of 25 years, which was accepted and incorporated as Schedule 11 in the Power Purchase Agreement dated 7.8.2007 (PPA) had tariffs at an extremely depressed rate for the first two years, after which the tariffs were fixed at a significantly higher rate. On the very day that the PPA was executed between Sasan Power Limited and the procurers for generation and sale of electricity, 100% share holding of the special purpose vehicle was acquired by Reliance Power Limited. The PPA contains detailed clauses with respect to generation of power and the tariffs payable for the period of 25 years. Apart from other provisions, we are really concerned with Article 6 read with Schedule 5 which provides for pre-conditions to be satisfied for declaration of a generating unit as Commercial Operation Date, “COD”, namely readiness to commence commercial operations. This happens only when a performance test, by operating the generating unit at 95% of the contracted capacity as existing on the Effective Date on a continuous running basis for 72 hours, has been certified by an independent engineer, by giving a final test certificate to the aforesaid effect. The PPA also contains various other clauses which will be set out during the course of this judgment.

4. The date for commissioning the first unit was fixed under the PPA as 7th May, 2013. However, under Schedule 11 thereof, this date was preponed to 27th November, 2012. As Sasan kept postponing this date, it appears that the commissioning tests for generating Unit No.3 commenced from 20.3.2013. Various emails were exchanged from 27.3.2013 to 30.3.2013 between Sasan and the Western Region Load Dispatch Centre (hereinafter referred to as “the WRLDC”), a statutory authority under the Electricity Act, 2003. It is the case of Sasan that though they were ready to deliver electricity on 31.3.2013 at 95% of the contracted capacity of 620 MW of the unit, they could not do so as WRLDC did not give them the necessary green signal to go ahead. They relied heavily upon the independent engineer’s test certificate dated 30.3.2013 to show that a COD took place on the following day, which we will consider in some detail later. At this stage, suffice it to say that a petition was filed by WRLDC before the Central Electricity Regulatory Commission (CERC) on 25.4.2013, in which it was prayed:-

This finding was set aside by the Appellate Tribunal by its judgment dated 31.3.2016, in which the Appellate Tribunal found that though COD had not been achieved on 31.3.2013 in accordance with the PPA, but that the procurers under the PPA had waived their right to demand performance at 95%, and that the performance of Unit No.3, which was only roughly 17% of its contracted capacity, was accepted by all the procurers, and that therefore there was a waiver of this essential condition, which would then entitle the generator to treat 31.3.2013 as the date on which commercial operation of Unit No.3 commenced. It is the correctness of this judgment which has been assailed by the various appellants before us.

Schedule 5: Commissioning and Testing 1.1 Performance Test i. (a) The Performance Test shall be conducted under any and all ambient conditions (temperature, humidity etc.) and any and all Fuel qualities that may exist during the time of the Performance Test and no corrections in final gross and net output of the Unit will be allowed as a result of prevailing ambient conditions or Fuel quality.

(c) The Performance Test shall be deemed to have demonstrated the Contracted Capacity of the Unit under all designed conditions and therefore no adjustments shall be made on account of fuel quality or ambient conditions.

(2) Every licensee, generating company, generating station, sub- station and any other person connected with the operation of the power system shall comply with the directions issued by the Regional Load Despatch Centres under subsection (1).

(4) The Regional Power Committee in the region may, from time to time, agree on matters concerning the stability and smooth operation of the integrated grid and economy and efficiency in the operation of the power system in that region.

Corporate Office & Correspondence address:

The salient details of the Performance Test are as follows:

i) Main Steam Pressure: 247 kg/cm2 (abs)

ii) Main Steam Temperature: 535 deg C.

i) Main Steam Pressure: 77.36 Kg/cm2 (abs)

ii) Main Steam Temperature: 535.64 deg.C.

iii) Reheat Temperature: 575.04 deg C.

8. All the systems and equipment have been commissioned and are operational with two coal mills which were taken into service. The balance mills could not be taken into service due to the restrictions imposed by the grid. The furnace was found to operate stably even at a low load of 101.38 MW (ex-bus) and the parameters of Turbine shaft vibrations, Generator slot temperature and Generator core temperature were found to be well within the equipment limits recommended by OEM.

9. In view of the above, the Unit-3 is certified to have achieved Commercial Operation, with a tested capacity of 101.38 MW (ex bus) since:

For Lahmeyer International s(India) Sd/-

R.K. Soni Project Manager Dated: 30th March 2013”

40. It is now important to examine the correspondence between the parties in order to ascertain whether the Appellate Tribunal is correct in stating that waiver had in fact taken place. At this stage, it is important to advert to an email dated 31.3.2013 sent by the lead procurer to Sasan. This email categorically states as follows:

rated capacity of 101.38 MW, the same could be agreed by us.”

Thanking you, Yours faithfully, Sd/-

Executive Director (IPC)”

45. In contrast to the aforesaid emails, the acceptance emails of BYPL and BRPL, both Reliance Group Companies, may now be quoted:-

46. This acceptance email is in stark contrast with the acceptance email of the lead procurer, in that it unequivocally accepts COD of the first Unit of 660 MW as declared by Sasan. It is therefore clear that on facts in this case there is no waiver and the Appellate Tribunal in coming to an opposite conclusion, is clearly erroneous.

48. We thus find that the Appellate Tribunal is wholly incorrect in accepting the case of waiver put forward by learned counsel for Sasan, and is equally incorrect in absolving the independent engineer for the test certificate given by him on 30.3.2013. We, therefore, set aside the Appellate Tribunal’s judgment, and reinstate the judgment dated 8.8.2014 of the Central Electricity Regulatory Commission.

49. Shri Sibal’s last argument is that there is no substantial question of law so as to attract Section 125 of the Electricity Act, 2003 in these appeals. We are afraid that we cannot agree. One substantial question of law is whether, when public interest is involved, waiver can at all take place of a right in favour of the generator of electricity under a PPA if the right also has an impact on consumer interest. This substantial question of law has been answered by us in the course of the judgment. We have also pointed out that the Appellate Tribunal’s finding that the Independent Engineer’s test certificate can pass muster and that there is a waiver on facts is not a possible conclusion, and such finding is, therefore, perverse and hence set aside. That apart, we have also pointed out the contradictory nature of the judgment of the Appellate Tribunal, when it points out that the requirement of Article 6.3.1 is not merely for the private benefit of the procurers of electricity, but is as a matter of general policy; and then later on in the judgment finds that no question of public interest or public policy arises in the present case. In these circumstances, this plea must also be turned down. In the result, the appeals are allowed but with no order as to costs.

December 08, 2016.