GUJARAT URJA VIKAS NIGAM LIMITED & ORS. versus RENEW WIND ENERGY (RAJKOT) PRIVATE LIMITED & ORS
[2023] 7 S.C.R. 670, Supreme Court of India, 2023
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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   [2023] 7 S.C.R. 670
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GUJARAT URJA VIKAS NIGAM LIMITED & ORS.
v.
RENEW WIND ENERGY (RAJKOT) PRIVATE LIMITED
& ORS.
(Civil Appeal Nos. 3480-3481 of 2020)
APRIL 13, 2023
[SANJAY KISHAN KAUL, S. RAVINDRA BHAT AND
M.M. SUNDRESH, JJ.]
Electricity Act, 2003 – Central Electricity Regulatory
Commission (Terms and Conditions for Recognition and issuance
of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010 – Power Purchase Agreement (PPA) in terms of
the REC Regulations 2010 was entered into between the parties, on
29.03.2012, within the control period stipulated in the tariff order
of 2010 – On 10.07.2013, Central Commission amended the REC
Regulations 2010 (‘Second Amendment’), Explanation to Regulation
5 was amended – The pre-existing clause that the power would be
“at a price not exceeding pooled cost of the power purchase” was
altered to “at the pooled cost of power purchase” – It was clarified
that PPAs executed prior to this amendment at a tariff lower than
APCC would not be affected – Respondents filed petition before
the State Commission arguing that the terms of the PPA had to be
changed in view of the change in the REC Regulations – Allowed –
Appellant filed appeal before APTEL, rejected – Review petition
also dismissed – Held: There was never any provision which
mandated prior approval by the State Commission, of PPAs entered
into by parties, in exercise of their free choice, in
relation to
renewable energy sources – Findings of APTEL requiring approval
of the State Commission, unsustainable – Further, it is a matter of
record, that for the period between 29.03.2012 and 10.07.2013
and indeed, after the Second Amendment, no difficulty was
experienced in the pricing mechanism agreed by the parties under
the PPA – It was on 10.12.2013 that the respondent wind power
developer approached the State Commission for re-determination
of tariff – This was an opportunistic attempt to derive advantage
from the change, brought about by the Second Amendment, and
seek to have it applied to an existing contract, which cannot be
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countenanced – Thus, the reasoning of APTEL and the State
Commission cannot be upheld – PPAs entered into voluntarily by
the parties exercising equal bargaining power, before the Second
Amendment were not affected by its terms – Findings to the contrary
in the impugned order set aside – Furthermore, APTEL in the most
cavalier fashion virtually rubber stamped the State Commission’s
findings on coercion, in regard to the entering into the PPA by the
parties – There was no evidence or any pleadings beyond a bare
allegation of coercion against the appellant – Findings regarding
coercion are wholly untenable and therefore, set aside – Gujarat
Electricity Regulatory Commission (Procurement of Energy from
Renewable Sources) Regulations, 2010 – Regulation 4(1), 9(1).
Electricity Act, 2003– Central Electricity Regulatory
Commission (Terms and Conditions for Recognition and issuance
of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010 – Objective of – Discussed.
Electricity Act, 2003 – s.64 – Tariff Orders u/s.64 – Held: Are
quasi-judicial in nature and ipso facto binding on the parties unless
amended or modified through law.
Electricity – Power Purchase Agreements, if statutory contracts
– Held: Power Purchase Agreements are essentially not statutory
contract showever, certain terms contained in those contracts are
regulated by law, i.e. applicable regulations, under the Act – The
PPA between a generating company or, as in the instant
case, a
wind generator, and a distribution licensee, such as the appellant,
is the outcome of a carefully considered decision, whereby the
parties after due deliberations and negotiations agree on terms
based on existing law and regulations.
Pleadings – Standard of – Allegation of coercion/duress/fraud
– Findings on, not to be rendered casually by APTEL – Held: It is
incomprehensible how an allegation of coercion w.r.t entering into
the PPA by the parties could have been entertained and incorporated
as a finding, given that the respondents are established companies
who enter into negotiations and have the support of experts,
including legal advisers, when contracts are finalized – Casual
approach of APTEL in not reasoning how such findings could be
rendered cannot be countenanced – As a judicial tribunal, dealing
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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with contracts and bargains, which are entered into by parties with
equal bargaining power, APTEL is not expected to casually render
findings of coercion, or fraud, without proper pleadings or proof,
or without probing into evidence – Electricity Act, 2003.
Allowing the appeals, the Court
HELD: 1. Did the PPA in the present case, require prior
approval of the state commission
RWE and the other respondents urge that the PPA was
unenforceable because it was not approved by the State
Commission. The argument is unmerited and insubstantial. From
a reading of the State Commission’s regulations (Renewable
Sources Regulations) relating to procurement of energy from
Renewable Sources, it is evident that there was never any
provision, which mandated prior approval by the state commission,
of PPAs entered into, by parties, in exercise of their free choice,
in relation to renewable energy sources. As a matter of fact, in
the case of renewable power, the state commission had approved
a model PPA. Further, the tariff terms and conditions to the extent
decided are by the Central Commission and not by the State
Commission. These are incorporated in the model PPA. Neither
the commission, nor the contesting respondents, during the
hearings in the present appeals, were able to point out any
provision in the PPA in the present case, which conflicted with
any provision of the model PPA, or any express regulation.
Furthermore, it was not
established how in the absence of any
reference to the Multi Year Tariff Regulations, they were
applicable to PPAs relating to renewable energy sources. In the
absence of specific norms prescribing prior approval of PPAs like
in the case of provisions of Regulation 21 of the Maharashtra
Electricity Regulatory Commission (Multi Year Tariff)
Regulations, 2019; Regulation 45 of the Delhi Electricity
Regulatory Commission Comprehensive (Conduct of Business)
Regulations 2001 and Regulation 36 of the Andhra Pradesh
Electricity Regulatory Commission (Distribution Licensee)
Regulations, 2013, the respondent’s arguments on this aspect
cannot be accepted. In these circumstances, the findings of
APTEL, not based on any stipulated obligations under provisions
of the state regulations, requiring approval of the state
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commission, for its operation, cannot be sustained. [Paras 45-
48][699-F-G; 700-B-F]
2. Whether change in the REC Regulations obliged revision
of the PPA in this case
Section 61 of the Act enacts the basis for tariff
determination. On the other hand, Section 62 is concerned with
the fixation of various other charges and tariffs. Section 64 lists
the manner and procedure for tariff determination by the
Commission. Section 86 lists the functions of the Commission
and reiterates the determination of tariffs to be a prominent task
of the commission. Tariff determination no doubt, comprehends
the exercise of regulatory function, including purchase, sourcing,
procurement of electricity from generators, by distribution and
other licensees, and their sales. This part involves generating
companies entering into PPA(s) with procuring entities or
licensees. Tariff fixation is a statutory function. Yet, by virtue of
Section 42, it is subject to open access determination of the price
of power, and subject to Section 63 wherever it involves open
bidding. In the facts of this case, the PPA incorporated a tariff
between the respondents and Gujarat Urja constituted the tariff
fixed by the State Regulatory Commission in the exercise of its
statutory powers. The issue and sale of RECs, constituted an
important part of that bargain, between the two parties, based on
the assessment of their commercial interest. The important
feature of the REC Mechanism is that in it, WPDs
(i.e.
respondents) had to sell power to distribution licensees at a
mutually agreed price, not exceeding the Average Power Purchase
Cost (‘APPC’) of the DISCOMs, (such as Gujarat Urja). The
WPDs were entitled to the additional benefit of Renewable Energy
Certificates issued to it which could be traded in Power Exchange
for a price. The consideration payable to WPDs consisted of firstly,
a mutually agreed power Component and secondly a green
component through RECs traded in the Exchange. The
alternative to the WPDs was to sell to licensees at a preferential
tariff, determined by the state commission. In the latter event,
WPDs were not entitled to the additional benefit of the green
component, which was the tradable RECs the sale of which would
have led to increased revenues. The respondent WPDs chose
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the REC mechanism, while entering into PPAs in these cases,
with Gujarat Urja. The PPAs entered by WPDs provided for the
fixed tariff of  2.64/kWh for the entire term (25 years), as mutually
agreed (Article 5.2 of PPA). WPDs were entitled to and were
trading RECs in the power exchange, deriving extra monetary
benefits: which, at the relevant period was   1.50/kWh (floor
price at the time of signing of PPA). The Preferential Tariff
determined by the state commission, for WPDs not opting for
the REC Mechanism was 
  3.56/kWh. The WPDs were not
entitled to any additional REC benefits, had they adopted the
preferential tariff route. Regulation 9 of the REC Regulations
2010 prescribes the price determination mechanism for RECs in
the power exchange. Proviso to Regulation 9 (1) of the REC
Regulations 2010 empowers the central commission, in
consultation with the Central Agency and the Forum of
Regulators, to provide the floor price and forbearance price
separately for solar and non-solar certificates. This provision is
important because it enables regulatory intervention in the public
interest: if the price went below a certain limit, the floor price
was to be prescribed, to take care of the interests of generators-
like the respondents; if the price went too high, a forbearance
price could be fixed, to take care of the interests of the consumers
and distributors. By Regulation 9 (2) of the REC Regulations
2010, the Central
Commission, was to be guided, in determining
the floor and forbearance price, by diverse factors, such as (a)
variation in cost of generation of different renewable energy
technologies falling under solar and non-solar category, across
states in the country; (b) variation in the Pooled Cost of Purchase
across States in the country; (c) Expected electricity generation
for non-renewable energy sources [including (i) expected
renewable energy capacity under preferential tariff (ii) expected
renewable energy under mechanism of certificates] (d) Renewable
purchase obligation targets set by various State Commissions.
By virtue of Explanation to Regulation 5 (1) of the REC
Regulations, “the weighted average pooled price at which the
distribution licensee has purchased the electricity including cost of
self-generation, if any, in the previous year from all the energy
suppliers long-term and short-term, but excluding those based on
renewable energy sources, as the case may be.” An important factor
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which cannot be lost sight of is that all the respondent’s WPDs
were registered, under the REC Regulations, based on the state
commission’s tariff order, of 2010. It is undisputed, that to register
under the REC Regulations 2010, an entity (such as WPDs) had
to be (a) accredited, with a State Agency [(defined by Regulation
2 (n) of the REC Regulations as an agency “designated by the
State Commission to act as the agency for accreditation and
recommending the renewable energy projects for registration”) and
an entity “not having any power purchase agreement for the
capacity related to such generation to sell electricity at a preferential
tariff determined by the Appropriate Commission]. Furthermore,
the state commission, in its tariff order, dated 30.01.2010 (which
was operative for three years, with the control period beginning
from 10.08.2009) while determining the preferential tariff, had
observed that it would apply for 25 years. In the present case,
the PPA was entered into by the parties on 29.03.2102, within the
control period stipulated in the tariff order of 2010. The change in
the REC Regulations 2010, whereby the Explanation to
Regulation 5 was amended resulted in a change. The pre-existing
clause that the power would be “at a price not exceeding pooled
cost of the power purchase” was altered to “at the pooled cost of
power purchase”. This change, was through the Second
Amendment (to the REC Regulations), carried out on 10.07.2013.
It is a
matter of record, that for the period between 29.03.2102
and 10.07.2013 - and indeed, after the Second Amendment, no
difficulty was experienced in the pricing mechanism agreed by
the parties, under the PPA. It was on 10.12.2013 that the
respondent WPD approached the state commission for re-
determination of tariff. Clearly, this was an opportunistic attempt
to derive advantage from the change, brought about by the Second
Amendment, and seek to have it applied to an existing contract,
which cannot be countenanced. In view of these reasons, it is
held that the reasoning of APTEL, and the State Commission
cannot be upheld. [Paras 55-59][707-G; 708-A-H; 709-B-H; 710-
A-B, E-G]
Transmission Corporation of Andhra Pradesh Ltd v Sai
Renewable Power Private Limited (2010) 8 SCR 636;
Gujarat Urja v. Solar Power Company India Pvt. Ltd.
[2017] 14 SCR 115; Bangalore Electricity Supply Co.
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[2023] 7 S.C.R.
Ltd. vs. Konark Power Projects Ltd. & Ors. (2016) 13
SCC 515 – referred to.
3. Applicability of the Second Amendment to pre-existing
contracts- the general law
In the present case, the PPAs were entered into in the
exercise of equal bargaining power, after due negotiation by the
parties, and within the framework of existing regulations: both
central and state. Therefore, unless any later amendment
expressly overrides existing contracts, the terms of such
agreements bind the parties. Thus, agreements such as the PPAs
in the present case, entered into, voluntarily by the parties, before
the Second Amendment, were not affected, by its terms. The
findings to the contrary in the impugned order, are set aside.
[Paras 63, 66][714-C; 715-G; 716-A]
PTC India Ltd. v. CERC [2010] 3 SCR 609 –
distinguished.
Purbanchal Cables & Conductors (P) Ltd. v. Assam State
Electricity Board & Ors. [2012] 6 SCR 905;
Commissioner of Income Tax v Vatika Township (P) Ltd.
[2014] 12 SCR 1037 – relied on.
4. Were the respondents coerced into entering into PPAs
APTEL, in the most cavalier fashion, virtually rubber
stamped the State Commission’s findings on coercion, in regard
to the entering into the PPA by the parties. There was no shred
of evidence, nor any particularity of pleadings, beyond a bare
allegation of coercion, alleged against Gujarat Urja. It is
incomprehensible how such an allegation could have been
entertained and incorporated as a
finding, given that the
respondents are established companies, who enter into
negotiations and have the support of experts, including legal
advisers, when contracts are finalized. The findings regarding
coercion are, therefore, wholly untenable. The casual approach
of APTEL, in not reasoning how such findings could be rendered,
cannot be countenanced. As a judicial tribunal, dealing with
contracts and bargains, which are entered into by parties with
equal bargaining power, APTEL is not expected to casually render
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findings of coercion, or fraud, without proper pleadings or proof,
or without probing into evidence. The findings of coercion are
therefore, set aside. [Para 71][717-F-G; 718-A-B]
Shanti Budhiya Vesta Patel &Ors. v. Nirmala
Jayprakash Tiwari & Ors. [2010] 4 SCR 958;
BishundeoNarain v. Seogeni Rai [1951] 1 SCR 548;
New Indian Assurance Co. Ltd v. Genus Power
Infrastructure Ltd [2014] 12 SCR 360 – relied on.
Gujarat Urja Vikas Nigam Limited v. EMCO Limited
[2016] 1 SCR 857; Gujarat Urja Vikas Nigam Limited
v. ACME Solar Technologies (Gujarat) Pvt Ltd & Others
[2017] 16 SCC 498; Central Bank of India v. Hartford
Fire Insurance Co. Ltd AIR 1965 SC 1288; Her
Highness Maharani Shantidevi P Gaikwad v. Savjibai
Haribai Patel & Ors 2001 (5) SCC 101: [2001] 2 SCR
590; Hindustan Zinc Ltd. v. Rajasthan Electricity
Regulatory Commission [2015] 7 SCR 1104; Gujarat
Urja Vikas Nigam Ltd. v. Tarini Infrastructure Ltd.
[2016] 5 SCR 990; Union of India v. Indusind Bank
Ltd. [2016] 11 SCR 700; Kerala State Electricity Board
& Anr v. Principal Sir Syed Institute for Technical
Studies [2020] 7 SCR 885; Gujarat Urja Vikas Nigam
Limited v. Solar Semi-Conductors Power Limited
Company (India) Private Limited [2017] 14 SCR 115 –
referred to.
Case Law Reference
[2020] 7 SCR 885
referred to
para 4
[2017] 14 SCR 115
referred to
para 15
[2010] 8 SCR 636
referred to
para 23
[2016] 1 SCR 857
referred to
para 23
[2017] 16 SCC 498
referred to
para 23
[2001] 2 SCR 590
referred to
para 25
[2010] 3 SCR 609
distinguished
para 33
[2015] 7 SCR 1104
referred to
para 41
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[2017] 14 SCR 115
referred to
para 52
[2016] 5 SCR 990
referred to
para 52
(2016) 13 SCC 515
referred to
para 54
[2012] 6 SCR 905
relied on
para 64
[2014] 12 SCR 1037
relied on
para 65
[2016] 11 SCR 700
referred to
para 65
[2010] 4 SCR 958
relied on
para 69
[1951] 1 SCR 548
relied on
para 69
[2014] 12 SCR 360
relied on
para 70
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.3480-
3481 of 2020.
From the Judgment and Order dated 06.12.2018 in AN No.209 of
2015 and dated 24.07.2020 in RP No.3 of 2019 of the Appellate Tribunal
for Electricity at New Delhi.
C. A. Sundaram, M. G. Ramachandran, Sr. Advs., Ms. Hemantika
Wahi, Anand Ganesan, Ms. Swapna Sesadri, Ms. Jesal Wahi, Ms. Srishti
Khindaria, Advs. for the Appellants.
Shyam Divan, Basava P. Patil, Dhruv Mehta, Sr. Advs., Venkatesh,
Ms. Kanika Chugh, Nitin Saluja, Siddharth Joshi, Suhael Buttan, Punyam
Bhvtani, Ms. Nishtha Kumar, Apoorva Misra, Shri Venkatesh, Vishal
Gupta, Ms. Suparna Srivastava, Tushar Mathur, Nikilesh Ramachandran,
Advs. for the Respondents.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. The current civil appeals,1 under Section 125 of the Electricity
Act, 2003, (hereafter, “the Act”) challenge orders of the Appellate
Tribunal for Electricity (hereafter, “APTEL”), dated 06.12.2018 (“first
impugned order”)2 and order dated 24.07.2020 (“second impugned
order”)3. The APTEL had, by those orders, rejected the appeals preferred
by the
present appellant, and the review petition, as well. Resultantly,
1 Civil Appeals Nos. 3480 and 3481 of 2020
2 in Appeal No 209/2015
3 in Review Petition No 03/2019
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the order of the Gujarat Electricity Regulatory Commission (hereafter
“the State Commission”), dated 01.07.20154 was affirmed.
2. The first appellant – Gujarat Urja Vikas Nigam Limited
(hereafter “Gujarat Urja”) had approached this court previously
challenging the order of APTEL, which was disposed of by this court5
granting liberty to it, to seek review/rectification. Gujarat Urja then
preferred a review petition, which was rejected by APTEL, by the second
impugned order. When this appeal was taken up for hearing, on
14.10.2020, this court had issued notice and stayed the impugned order
of APTEL.
Background
3. Gujarat Urja procures power in bulk on behalf of distribution
licensees in the state of Gujarat; it is an authorized licensee within the
meaning of the term under the Act. The second, third, fourth and fifth
appellants are distribution licensees in the State of Gujarat. The first
respondent, Renew Wind Energy (Rajkot) Pvt Ltd (hereafter “RWE”)
is a wind generator which had set up 25.2 MW Wind Turbine Generators
at District Rajkot, Gujarat under the Renewable Energy Certification
scheme notified by the Central Electricity Regulatory Commission
(hereafter, “Central Commission”). The second respondent is the Wind
Independent Power Producers Association (hereafter “Association”).
The Respondent No 3, Gujarat Electricity Regulatory Commission
(hereinafter “the State Commission”) is the regulatory commission under
the Act, for the State of Gujarat. The
fourth respondent, Wish Wind
Infrastructure LLP (“Wish Wind” hereafter) is a wind generator.
4. By Section 86 of the Act6 , State Commissions discharge several
functions- which include the determination of tariff “for generation,
4 in petition No 1363/2013
5 Civil Appeal No 1253/2019 by order dated 15.02.2019
6 The relevant extract of Section 86 is as follows:
 “86. Functions of State Commission.-(1) The State Commission shall discharge
the following functions, namely:-
 (a) determine the tariff for generation, supply, transmission and wheeling of
electricity, wholesale, bulk or retail, as the case may be, within the State:
 ……
 (b) regulate electricity purchase and procurement process of distribution licensees
including the price at which electricity shall be procured from the generating companies
or licensees or from other sources through agreements for purchase of power for
distribution and supply within the State;
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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supply, transmission and wheeling of electricity, wholesale, bulk or
retail, as the case may be, within the State”. The tariff determination
process should accord with Sections 62 and 64 of the Act. Section 62,
requires “the Appropriate Commission” (in this case, the State
Commission) to determine tariffs in accordance with the provisions of
the Act for – among other purposes, retail supply of electricity. The
State Commissions are also empowered to frame regulations, under
Section 181 of the Act. That power includes the formulation of the “terms
and conditions for determination of tariff Under Section
61”.7Additionally, the tariff order can be modified or imposed with
conditions under Section 64(3). The State Commission is guided by the
principles specified in Section 61 of the Act while formulation of the
tariff regulations. This court has held that state commissions as expert
bodies have to strike a balance between various competing concerns
and interests while framing such regulations.8 The Gujarat State
Commission, for a Multi-Year period (also called the “control period”),
frames Regulations for determination of tariff. The state commission
then determines the Multi-Year Tariff Order based on the data available.
Furthermore, Section 64 (6) prescribes that tariff orders “shall continue
to be in force for such period as may be specified in the Tariff
Order unless amended or revoked”. If any party is aggrieved by
any
 (c) facilitate intra-State transmission and wheeling of electricity;
 …..
 (e) promote co-generation and generation of electricity from renewable sources of
energy by providing suitable measures for connectivity with the grid and sale of electricity
to any person, and also specify, for purchase of electricity from such sources, a percentage
of the total consumption of electricity in the area of a distribution licensee;
 …. [..]”
7 Clause 181(2)(zd) of the Act.
8 Kerala State Electricity Board & Anr v. Principal Sir Syed Institute for Technical
Studies, 2020 7 SCR 885:
 7. [..] “While fixing tariff, the Commission cannot show undue preference to any
consumer of electricity. The Commission, however, is vested with the power to prescribe
differential rates according to the consumers’ load factor, power factor, voltage, total
consumption of electricity during any specified period of time at which supply is required.
So far as fixing different rates for these two categories of the educational institutions,
these factors did not come into play. The other permissible differentiating factors
are geographical position of any area, the nature of supply and the purpose for which
the supply is required. As regards this set of differentiating factors, the tariff advantage
for government run and aided educational institutions do not appear to be based on
geographical position or nature of supply. The Commission however has justified the
classification of the aforesaid two sets of
tariffs on the basis of purpose for which supply
is required by the consumers.”
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conditions of a given Tariff Order, it can seek its amendment or revocation.
Orders are also appealable under Section 111 to APTEL, and thereafter
to this court under Section 125 of the Act. Tariff Orders under Section
64 of the Act are quasi-judicial in nature and ipso facto binding on the
parties unless amended or modified through law.
5. On 29.01.2010, the Central Electricity Regulatory Commission
(Terms and Conditions for Recognition and issuance of Renewable
Energy Certificate for Renewable Energy Generation) Regulations, 2010
(hereafter “REC Regulations 2010”) were framed by the Central
Commission for the development of a power market for non-conventional
sources of energy by the issuance of tradable and saleable credit
certificates (hereafter “RECs”). Regulation 5 of the said REC
Regulations 2010 provides for the required eligibility for the renewable
generators for participating in the RE Certificates:
“5. Eligibility and Registration for Certificates:
(1) A generating company engaged in generation of electricity
from renewable energy sources shall be eligible to apply for
registration for issuance of and dealing in Certificates if it
fulfills the following conditions:
a. it has obtained accreditation from the State Agency;
b. it does not have any power purchase agreement for the
capacity related to such generation to sell electricity at a
preferential tariff determined by the Appropriate Commission;
and
c. it sells the electricity generated
either
(i) to the distribution licensee of the area in which the eligible
entity is located, at a price not exceeding the pooled cost of
power purchase of such distribution licensee, or
(ii) to any other licensee or to an open access consumer at a
mutually agreed price, or through power exchange at market
determined price.
Explanation. - for the purpose of these regulations ‘Pooled
Cost of Purchase’ means the weighted average pooled price
at which the distribution licensee has purchased the electricity
including cost of self generation, if any, in the previous year
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from all the energy suppliers long-term and short-term, but
excluding those based on renewable energy sources, as the
case may be.”
6. The objective of the REC Regulations 2010 was to separate
the physical electrical component and the environmental (renewable)
component of the energy for issuance of RECs. This was an alternate
mechanism developed for the sale of renewable energy at a preferential
tariff to any licensee or directly to any consumer. The REC Regulations
2010 aimed at selling the renewable component through the RE
Certificates containing promotional benefits of renewable energy while
the physical electrical component was sold as any other conventional
electricity. The REC Regulations 2010 also provided that generators
based on the REC mechanism had the option to sell physical energy to
the distribution licensee at a “price not exceeding the Average Pooled
Power Purchase Cost” (hereinafter as “APPC”) of the distribution
licensee9. This was to ensure that generators did not benefit twice over,
by selling RECs and also selling physical energy at higher promotional
tariffs or taking concessional benefits from the concerned distribution
licensee.
7. Under the REC Regulations 2010, distribution licensees were
not obliged to purchase the physical component of electricity from
renewable energy generators set up under the REC mechanism since
such REC based generators had alternative options with regard to the
physical component of electricity, namely, (i) sale of electricity power
exchanges (ii) wheeling of power for sale to third parties at mutually
agreed rates or (iii) wheeling of power for their own consumption. In the
case of the sale of the physical component of electricity, the price for
the electrical component could not exceed average pooled cost of the
distribution licensees. The regulations also provided that the generators
(of renewable energy) were not eligible for any benefits including banking
facilities, exemption from payment of cross subsidy surcharge etc.
amongst other things. The stated promotional benefits were applicable
only in terms of trading and selling of the RE Certificates.
8. The REC Regulations 2010 provided for floor price and
forbearance price i.e. minimum price and maximum price respectively
at which RECs could be traded in the power exchange. Those prices
9 Regulation 5(1)(c) of REC Regulations 2010.
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i.e. floor price and the forbearance prices were to be determined by the
central commission for the entire country.
9. In the present case, the State Commission by its order10
determined the tariff for procurement of power by distribution licensees
from wind energy generators and also ruled on other commercial issues
for wind energy generators set up under a preferential tariff mechanism.
The order provided for a preferential levelized tariff of   3.56 per kWh
for the supply of energy to the distribution licensee for meeting it’s
Renewable Power Purchase Obligation (RPO). The “control period” of
the Order [dated 30.1.2010] was for the period 11.08.2009 to
10.08.201211. The order, inter alia, also provided the following
promotional benefits for wind generators set up for third party sale under
a preferential mechanism:
(a) Exemption from cross subsidy charges for the sale of wind
energy to open access users in the State.
(b) Payment for excess (over and above that set off against
monthly consumption in the 15 minutes time block) would be
treated as a sale to the distribution licensee concerned at a rate of
85% of the preferential tariff determined by commission for such
renewable energy sources.
10. On 17.04.2010, the State Commission notified Gujarat Electricity
Regulatory Commission (Procurement of Energy from Renewable
Sources) Regulations, 2010 (hereafter “State Regulations”). The State
Regulations provided for the percentage of total consumption that
distribution licensees were to purchase from RPOs and further
recognized that RPO could be fulfilled by the purchase of such RECs.
Further, obligated entities could fulfil their renewable purchase obligation
through two sources:
10 Dated 30.01.2010 in Order No 1/2010
11 The relevant provision of the Order reads as follows:
 “2.2 Control period The Commission had, vide its Order No.2 of 2006 dated
11th August,2006, determined the Wind Energy Tariff for a period of three years, i.e.
upto 10th August,2009. The draft for the present order was published on 17.05.2009
and it was proposed to be effective from 1st July, 2009.However, some of the objectors
suggested that the present order be made effective from the end of previous control
period. Since the previous control period expired on 10th August, 2009, the Commission
decides that the control period for this order will be 3 (three) years w.e.f. 11th August,
2009.”
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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(a) Purchase of renewable energy directly (at preferential tariff
determined by State Commission); and
(b) Purchase of RECs at a market price between Floor Price and
Forbearance price determined by Central Commission
11. A Power Purchase Agreement (hereafter “PPA”) in terms of
the REC Regulations 2010, was entered into between the Gujarat Urja
and the wind power developers (hereafter, “WPDs”) including respondent
RWE on 29.03.2012. The agreement provided for a ceiling on tariff at 
2.64 per unit for 25 years. In addition to the tariff, WPDs were eligible
for the issue of RECs for each unit of electricity generated and supplied
by them to the appellants. The alternate route available for the WPDs
(such as RWE, Wish Wind etc.) at the time of entering into the PPA was
to sell electricity at a promotional tariff of  3.56 per unit - as determined
by the State Commission. By choosing the option, the WPDs were
ensured tariff at  2.64 per unit plus tradable RECs whose price was
determined on the basis of the “weighted average pooled price”12.
Distribution licensees were enabled to adjust such quantum of power
purchased towards RPO specified under Section 86(1)(e) of the Act.
Thus, the interests of both segments of the industry were taken care of.
12. The State Commission by its order dated 08.08.201213
determined the tariff at which the power could be procured by the
distribution licensees and others from wind power projects
commissioned
in the control period from 11.08.2012 to 31.03.2016.
13. On 11.07.2013, Central Commission amended the REC
Regulations 2010 (hereafter “Second Amendment”) and replaced “at a
price not exceeding pooled cost of the power purchase “with” at
the pooled cost of power purchase”14 along with the relevant statement
12 See Explanation to Regulation 5 of the REC Regulations 2010 which defines average
pooled price as follows:
 “the weighted average pooled price at which the distribution licensee has purchased
the electricity including cost of self-generation, if any, in the previous year from all the
energy suppliers long-term and short-term, but excluding those based on renewable
energy sources, as the case may be.”
13 in Order No. 2/2012
14 The relevant amendment to Regulation 5 (c), reads as follows:
  “(2) In sub-clause (c) of clause (1) of Regulation 5 of the Principal Regulations, the
words “at price not exceeding the pooled cost of the power purchase of such distribution
licensee” shall be substituted with the words “at the pooled cost of power purchase of
such distribution licensee as determined by the Appropriate Commission”.”
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of reasons for the said amendment. It was clarified in the amendment
that PPAs already executed prior to this amendment at a tariff lower
than APCC would not be affected. The first two respondents were
aggrieved by the order of the Central Commission. They filed a petition15
before the State Commission arguing that the terms of the PPA had to
be changed in view of the change in the REC regulations. This petition
was allowed by the State Commission directing that the order of the
Central Commission was general and was therefore applicable to all
similarly situated wind power generators. Aggrieved by the order of the
State Commission, Gujarat Urja had preferred an appeal16 before
APTEL. This appeal was rejected by APTEL by order dated 06.12.2018.
The appellants preferred review petition against APTEL’s order rejecting
their appeal against State Commission’s order; that too was dismissed
by APTEL vide order dated 24.07.2020.
Arguments of the Appellant
14. The learned senior counsel for the appellant, Mr. C.A.
Sundaram submitted that governing regulations for the PPAs in question
were the CERC Regulations 2010. Therefore, the State Commission
had no jurisdiction to decide the tariff contrary to the agreement. Further,
counsel argued that Central Commission itself has clarified by the Second
Amendment that in respect of PPAs entered into prior to 11.07.2013,
tariffs mutually agreed upon between the parties would be valid for the
entire duration of the PPA
(i.e. 25 years) and they could not be substituted
or re-determined by the State Commission. It was further argued that
had the appellants known about the APPC on year-on-year basis at the
time of signing the agreement, they would not have adopted the REC
mechanism but instead would have availed a different method whereby
prices were fixed and appellants would have been entitled to RPO benefits
as well.
15. Reliance was placed on this court’s judgment in Gujarat Urja
Vikas Nigam Limited v. Solar Semi-Conductors Power Limited
Company (India) Private Limited17 to argue that if the State Commission
re-determines the tariff amongst the parties, then the aggrieved party
cannot be compelled to continue the said agreement or enter into a new
agreement on such increased tariff.
15 Petition No. 1363 of 2013
16 Appeal No. 209/2015
17 (2017) 14 SCR 115
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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16. The appellants further submitted that State Commission had
no jurisdiction to reopen the PPA as the same was entered into in terms
of the REC Regulations 2010 that was framed by the Central Commission
and was within its exclusive jurisdiction. Moreover, it was argued that
the appellants would fail in their duty towards their consumers if they
cannot negotiate for a lower tariff or if they agree to purchase power at
a higher tariff despite the availability of power at a lower tariff. In such
an event, the higher cost of procurement of power so imposed would be
ultimately passed on to the consumers which would be contrary to a
specified public interest, under the Act.
17. The learned senior counsel argued that the definition of the
“APPC” cannot be relied upon in the present case18 and the PPA in
question provided for a tariff. There was consequently no bar in any law
or regulations for the parties to agree to such tariff and in fact, REC
Regulations 2010 itself recognized that the PPA can be “at a price not
exceeding the pooled purchase cost”. Likewise, for the sale of such
power to customers or the licensees, reference is made to “mutually
agreed price” and therefore reference to “mutually agreed price”
can mean that price can also be a fixed price and need not mean that it
has to be dynamic and varying every year.
18. It was argued that the interpretation placed by APTEL is not
founded on any express provision in
the regulations, or anything arising
out of necessary implication. The change in regulations, unless made
specifically operable for a prior period, cannot be construed to be
retrospective. Thus, contracts concluded prior to the entered into prior
to the amendment [in 2013] cannot be governed by amended provisions.
Doing so would not only be contrary to the express terms of the amended
regulations but would also be contrary to the terms of the PPA which do
not accommodate or provide for such change in regulations.
19. The appellants further urged that the PPA was consciously
entered into by the respondents on 29.03.2012, which was before the
18 APPC as clause 1.1 of the PPA is defined as:
“Average Power Purchase Cost” means the weighted average pooled price at
which the distribution licensee has. Purchased the electricity including cost of self-
generation, if any, in the previous year from all the energy suppliers long-term and
short-term; but excluding those based on renewable energy sources, as the case may be.
Further, for this agreement, Average Power Purchase Cost for the term of the agreement
shall be as per Article No. 5.2
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state commission’s tariff order dated 08.08.2012. The PPAs were
signed by the respondents before 11.07.2013, (when the amendment
was made to the REC regulations) voluntarily without any reservation.
The terms of the PPA were binding and enforceable, unaffected by the
Second Amendment, which applied prospectively. Learned counsel relied
on the clarification by the CERC in the Statement of Reasons published
in this regard.19
20. It is argued that the National Action Plan on Climate Change
and the Union Ministry of Power resolution dated 28-01-2016 and Tariff
Policy underline the necessity of the co-generation of renewable sources
of energy, progressively, so that it reaches a greater proportion. The
policy aims at increasing investment, and ensuring that viable units
generating renewable energy are set up.
21. It was argued that the PPA was a commercial transaction,
freely entered into between the parties. Neither the appellants nor the
first Respondent was obliged to enter into the PPA nor agree to any
specific terms or conditions. In case the terms were not acceptable,
both parties had the freedom to reject the transaction and seek to sell or
buy power through other alternative available options as provided under
the REC Regulations 2010. Further at the time of signing the PPA, and
even thereafter till the filing of the Petition before the State Commission
in the month of December 2013 (i.e. more than one and half years after
the execution of the PPA),
the first respondent did not raise any objections
or protest on being allegedly coerced or placed under duress to agree to
the terms and conditions of the PPA. The terms of the PPA were fully in
compliance with the provisions of the REC Regulations 2010 as the
restriction in those regulations was for the price not to exceed the Pooled
Power Purchase Cost. The price agreed to between the appellant and
Respondent No. 1 was  2.64/- per unit or Pooled Power Purchase
Cost of the subsequent year, whichever was lower.
19 Dated 10.07.2013, which inter alia, stated that
 “Some of the stakeholders have suggested to clarify as to whether the PPAs executed at
price lower than APPC would become ineligible under REC Mechanism. It is felt that the
tariff for electricity component lower or higher than APPC may lead to avoidable loss or
profit to RE generator. The Commission would like to clarify that the intention is not to
debar the projects that have executed PPA at tariff lower than APPC. This amendment
will apply prospectively and as such will not affect the” already executed PPAs at lower
than APPC.”
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22. The appellants argue that till 11.07.2013 none of the WPDs/
respondents raised any issue on the tariff of  2.64/kWh for the entire
duration of the PPA. It was only on 10.12.2013, the first two respondents
filed Petition No.1363/ 2013 before the State Commission claiming that
the tariff should be the APPC cost year-on-year basis instead of a fixed
 2.64/kWh. This was contrary to the decision by CERC on the
application of Second Amendment only prospectively -which is, for PPAs
entered on or after 11.07.2013. The state commission by its order (dated
01.07.2015) allowed the respondent’s petition and further directed that
the order is generic in nature and applicable to all similarly placed WPDs-
which was affirmed by the first impugned order. The appellants argue
that the governing Regulations for PPAs adopting the REC Mechanism
are 2010 REC Regulations and the state commission cannot decide on
tariff contrary to the same. When the Central Commission clarified that
for PPAs entered into prior to 11.07.2013, the tariff mutually agreed is
valid for the entire duration of the PPA (25 years), the state commission
and APTEL fell into error in substituting a new tariff at the instance of
the WPDs/Respondents. It is pointed out that Rule 820 of the Electricity
Rules, 2005, notified by the Central Government, is binding, and
specifically provides that tariff determined by the Central Commission
(CERC) shall not be subject to
re-determination by the GERC/State
Commission.
23. Learned senior counsel argued that if at the time of signing
the PPAs WPDs-Respondents had sought for tariff at APPC on year-
on-year basis, the appellants would not have entered into PPAs under
the REC mechanism route and would have only adopted the alternate
route where the price was fixed and in addition, the appellants would
have been entitled to RPO benefits. This is also clear as the appellants
did not sign any PPAs after the Second Amendment for procuring power
under the REC mechanism. The appellants urge that the Impugned Order
is contrary to the decision of this court in Gujarat Urja Vikas Nigam
20 Rule 8 reads as follows:
 “8. Tariffs of generating companies under section 79. –The tariff determined by the
Central Commission for generating companies under clause (a) or (b) of subsection (1)
of section 79 of the Act shall not be subject to redetermination by the State Commission
in exercise of functions under clauses (a) or (b) of sub section (1) of section 86 of the Act
and subject to the above the State Commission may determine whether a Distribution
Licensee in the State should enter into Power Purchase Agreement or procurement
process with such generating companies based ,on the tariff determined by the Central
Commission.”
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Limited v Solar Semi-Conductors Power Company (Pvt) Ltd (Supra)
holding that if the state commission re-determines the tariff, it cannot
force the appellants to continue the PPAs or enter into a contract based
on such increased tariff. Furthermore, it is argued that the principle that
WPDs having validly executed the PPAs cannot seek a modification to
the tariff terms and conditions contained in the PPAs under a prevalent
dispensation for an increase in the tariff or for any other terms and
conditions: counsel referred to Transmission Corporation of Andhra
Pradesh Ltd v Sai Renewable Power Private Limited (hereafter
“Transmission Corporation of Andhra Pradesh Ltd”)21; Gujarat Urja
Vikas Nigam Limited v EMCO Limited (hereafter “Emco Ltd”)22;
and Gujarat Urja Vikas Nigam Limited v ACME Solar Technologies
(Gujarat) Pvt Ltd & Others23 in support of the above contention.
24. Mr. Sundaram argued – for the appellants that the plea of
coercion or duress or unequal bargaining etc, raised by the WPDs was
patently erroneous for the following reasons: (a) the petition before the
state commission was filed only by the first two Respondents; therefore,
it cannot be a ground for alleging coercion against all WPDs; (b) the
allegations by the said two Respondents were vague and unsubstantiated,
and an afterthought as no such plea was raised till December 2013, i.e.,
till after the amended CERC Regulations; and (c) as held by this Court
such plea of coercion had to be
specifically pleaded and proved. In this
regard, reliance was placed on Transmission Corporation of Andhra
Pradesh Ltd (Supra).
25. It is further argued that there is no Regulation of the state or
central commissions prohibiting a term being incorporated in PPA which
permits an option to either party to switch from REC mechanism to
Preferential Tariff Mechanism. The impugned order had not considered
judgments referred to by the appellants on clauses granting power to
one party to cancel the contract. In this regard, reliance is placed on
Central Bank of India v Hartford Fire Insurance Co. Ltd24; and Her
Highness Maharani Shantidevi P Gaikwad v Savjibai Haribai Patel
& Ors25.
21 (2010) 8 SCR 636
22 (2016) 1 SCR 857
23 (2017) 16 SCC 498
24 AIR 1965 SC 1288
25 2001 (5) SCC 101
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Respondents’ Submissions
26. Mr. Shyam Divan and Mr. Dhruv Mehta, learned senior
counsels appearing for the first two respondents urged that State
Commission had jurisdiction in the present case. Reliance was placed
on the definitional clause of the PPA (Article 1.1) to submit that
commission meant ‘State Commission’. It was urged that in terms of
the extant regulatory framework, (which provided for regulatory oversight
by the appropriate commission), PPAs executed by generating companies
and distribution licensees necessarily required approval by the appropriate
commission. Firstly, Section 86(1)(b) of the Act specifically vests the
State Commission with the power to regulate the electricity purchase
and procurement process of distribution licensees including the price at
which electricity shall be procured from the generating companies. This
provision empowers the state commission to modify, alter or vary the
terms of PPAs, to ensure their compliance in accordance with the
regulatory framework. Secondly, under the Multi Year Tariff Regulations,
2011 (hereafter “GERC (Multi Year Tariff) Regulations”) notified by
the State Commission, , PPAs are to be mandatorily approved in order
for them to be considered effective and enforceable. Learned counsel
relied on provisions of the Maharashtra Electricity Regulatory
Commission (Multi Year Tariff) Regulations, 2019, (Regulation 21); Delhi
Electricity Regulatory Commission
Comprehensive (Conduct of
Business) Regulations 2001 (Regulation 45) and Andhra Pradesh
Electricity Regulatory Commission (Distribution Licensee) Regulations,
2013 (Regulation 36) to support the contention that prior filing and approval
of PPAs is necessary and was not undertaken in this case, which
undermines its legal efficacy.
27. It was submitted that pooled purchased cost of power to be
taken into consideration under the REC mechanism has to be the APPC
of the previous financial year- which has to be modified / increased on a
regular basis. When pooled purchase cost increases, the floor price of
REC will decrease as the floor price and forbearance price of RECs are
subject to fluctuation, at the end of each control period. Thus, wind power
projects under the REC mechanism will be viable, only when the
realization from the power component increases to compensate for the
reduction in prices of RECs. It was submitted that if the APPC computed
is lower than what has been taken by the CERC for the determination of
the REC price band, there could be a viability gap problem for RE
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generators under the REC mechanism, especially in cases where the
price discovered in the power exchange is closer to the floor price.
28. It was further submitted that the Second Amendment to REC
regulations specifically replaced the words “at a price not exceeding” to
“at the pooled cost”, which meant that the cost of electricity purchased
could neither be lower nor higher than the power purchase cost. Counsel
further placed reliance on Statement of Reasons dated 10.07.2013 issued
by the Central Commission regarding the Second Amendment to contend
that REC contracts cannot be fixed price contracts as they would affect
the viability of REC projects as the price band (floor price / forbearance
price) are subject to periodic revision. Relevant extracts of the said
statement of reasons are reproduced below:
“4.3 Analysis and decision
Some of the stakeholders have suggested to clarify as to
whether the PPAs executed at price lower than APPC would
become ineligible under REC Mechanism. It is felt that the
tariff for electricity component lower or higher than APPC
may lead to avoidable loss or profit to RE generator. The
Commission would like to clarify that the intention is not to
debar the projects that have executed PPA at tariff lower than
APPC. This amendment will apply prospectively and as such
will not affect the already executed PPAs at lower than APPC.
Regarding suggestion received that PPA of electricity
component should be a fixed price long term
contract (without
escalation) since Commission has assumed fixed price while
determining REC price bands in its methodology, it is clarified
that the price band is subject to periodic revision; hence fixed
APPC or long-term contract without escalation might affect
viability of RE Projects. In any case proposed amendment
provides that APPC would be determined by the Appropriate
Commission”
29. Counsel appearing for the association submitted that in terms
of the regulatory framework, PPAs executed by generating companies
and distribution licensees have to be approved by the appropriate
commission; and that the PPA in question was never approved by State
Commission nor did the appellants approach the State Commission for
such approval. It was further submitted that floor price and forbearance
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price are to be determined guided by various principles, inter alia,
variations in APPC across the states, (which is revised on an annual
basis). Hence, the APPC cannot be a static concept else variation in
floor price or forbearance price would lead to under recovery to
generators.
30. It was further contended that APPC along with REC pricing,
together, are the tariff determined and approved for the supply of power.
That is to say that APPC and REC pricing are two halves of the same
whole which constitutes the overall tariff which a generating company
registered under the REC mechanism is entitled to receive. APPC along
with REC pricing is what was intended to be incorporated as part of the
tariff clause in the PPA. If either of the components is pegged or capped
artificially, and without the approval of the State Commission, it would
lead to a skewed application of the REC mechanism to the detriment of
generating company, leading to under-recovery and unviability of the
RE generator.
31. It was argued that Regulation 9(2) of REC Regulations 2010
provides for the determination of the floor price (minimum price) and
the forbearance price (maximum price) within which the RECs can be
traded in power exchanges. The floor price and the forbearance are to
be determined by CERC for the entire country guided by various
principles, inter alia, variations in APPC across the States, which is
revised on an annual basis.
Therefore, if APPC is made static then
variation in Floor Price/ Forbearance price would lead to under recovery
to generators.
32. The APPC to be taken into consideration under the REC
mechanism must be dynamic and must be revised on a regular basis.
When APPC is increased, the floor price of REC comes down and vice
versa and the same is subject to change every year. The APPC along
with REC pricing, together, are the tariff determined and approved for
the supply of power. In other words, the APPC and REC pricing are
two halves of the same whole, which constitute the overall tariff which
a generating company registered under the REC mechanism is entitled
to receive. APPC along with REC pricing is what was intended to be
incorporated as part of the tariff clause in the PPA. If either
component is pegged or capped artificially, and that too without approval
from GERC, the same would lead to a skewed application of the REC
mechanism to the detriment of the generating company, leading to under-
recovery and unviability of the RE Generator.
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33. It was submitted that the tariff in the PPA was in violation of
the principal regulation, which does not contemplate a fixed long-term
price/ tariff. It is, therefore, illegal and had to be aligned with the
regulation. The APTEL correctly aligned the tariff to the regulation. The
regulation has not been challenged and it has the force of statute and it
mandates that PPAs should be aligned to the regulations. Reliance is
placed on PTC India Ltd. v. CERC (hereafter “PTC India”)26.
34. Counsel for the third respondent argued that there could not
be a tariff between a generating company and a distribution licensee in
a PPA which was not in line with the CERC Regulations and tariff
orders issued by the State Commission. It was further contended that
the court cannot enforce a contract where unequal bargaining power
exists amongst the parties. It was further submitted that State Commission
has rightly observed that the fixed tariff of  2.64/unit for a period of 25
years by the parties violates not only the provisions of the Act but also
the National Electricity Policy and tariff policy as notified under Section
3 of the Act which promotes renewable energy sources through
preferential pricing.
35. Counsel for Wish Wind submitted that it cannot be bound by
the onerous terms of the PPA as it was never approved by the State
Commission and thus not in consonance with the statutory procedure
prescribed under the Act. Learned counsel also submitted that present
proceedings are not a case where a contract has been interdicted by the
State Commission but rather where a contract has been aligned with the
relevant regulatory regime in the exercise of the regulatory power vested
by the Act. In response to Gujarat Urja’s argument that State Commission
has no jurisdiction to reopen the PPA, it was submitted that Section
86(1)(b) of the Act places an obligation upon distribution licensees to get
PPAs (executed by them) approved by the State Commission and in the
present case, state commission never had the opportunity to verify/
regulate such PPAs in accordance with the law.
36. It was also submitted that Section 86(1)(b) of the Act empowers
the state commission to modify, alter or vary the terms of the agreement
of PPAs, to ensure their compliance in accordance with the regulatory
framework established under the Act. It was further submitted that taking
into consideration the definition of APPC, it is evident that floor price
26 (2010) 3 S.C.R. 609
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and forbearance price are dynamic in nature and APPC being associated
with the floor price and the forbearance price is also required to be
determined on a year-to-year basis so that the guaranteed return to the
generators is not affected.
Analysis and Findings
37. The crisis arising out of, and the enormous environmental cost
involved in the continued use of fossil fuels has led governments, world
over, to promote alternative and renewable sources of energy. The rapid
growth of renewable energy over the decade and a half has witnessed
that solar and wind power are now the cheapest sources of energy in
many countries in the world. Once green energy was an expensive
alternative, however, it is now helping to reduce energy bills.
38. The rapidly changing economics of such sources has led, the
Union government to realize that solar and other renewables can
potentially transform the energy landscape, increase access and help
India meet its climate change objectives. Grid transmission capacity has
been a barrier; however, distributed and off-grid solar solutions provide
a viable solution for increasing energy access. Being dependent primarily
on cheap coal-based power generation, traditional thinking on energy
has been that increase in renewable energy’s share of electricity
generation would further impair local distribution companies’ poor
financial situation. Over the years, India has established a comprehensive
policy
and regulatory frameworks to encourage renewable energy
development. India began its development of wind power in the 1990s
and has significantly increased its capacity over the last few years.
Compared to established countries with wind energy capacities like the
USA or Denmark, India is a latecomer. Yet, its support for wind power,
through its policies has resulted in India becoming the producer with the
fourth largest installed wind power capacity, in the world; wind power
accounts for 10% of India’s total installed power capacity. As of February
2023, the installed capacity of wind power in India was 42,015 megawatts
(MW).27
39. Section 86 of the Act enumerates the functions of state
commissions; Section 86 (1)(e) reads as follows:
27 Physical Progress (Achievements) Ministry of New and Renewable Energy, Govt. of
India. https://mnre.gov.in/the-ministry/physical-progress, visited on 06.04.2023 at 20:30
hours.
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“Section 86(1): The State Commission shall discharge the
following functions, namely:
******************
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(e) promote cogeneration and generation of electricity from
renewable sources of energy by providing suitable measures
for connectivity with the grid and sale of electricity to any
person, and also specify, for purchase of electricity from such
sources, a percentage of the total consumption of electricity
in the area of a distribution licensee;”
40. State Commissions have placed significant emphasis on the
last part of this important clause while developing regulations for
Distribution Licensees under their jurisdiction. The National Tariff Policy,
issued by the Central Government in terms of Section 3 of the Act states
as follows:
“Clause 6.4: Non-conventional sources of energy generation
including co-generation:
(1) Pursuant to provisions of section 86(1)(e) of the Act, the
Appropriate Commission shall fix a minimum percentage for
purchase of energy from such sources taking into account
availability of such resources in the region and its impact on
retail tariffs. Such percentage for purchase of energy should
be made applicable for the tariffs to be determined by the
SERCs latest by April 1, 2006.”
By virtue of Regulation 4 (1) of the REC Regulations 2010, there
are two categories of RECs: solar and non-solar. Regulation 4 (2)
mandates that “non-solar certificate shall be sold to the obligated
entities to enable them to meet their
obligation for purchase from
renewable energy sources other than solar.” Regulation 5 (1) of the
REC regulations (extracted earlier) spells out the eligibility conditions
for renewable energy generating companies to apply and seek registration
for certificates; these are that the company should have: (a) obtained
accreditation from the State Agency; (b) it does not have any power
purchase agreement for the capacity related to such generation to sell
electricity at a preferential tariff determined by the Appropriate
Commission; and (c) it sells the electricity generated either-(i) to the
distribution licensee of the area in which the eligible entity is located, at
a price not exceeding the pooled cost of power purchase of such
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distribution licensee, or (ii) to any other licensee or to an open access
consumer at a mutually agreed price, or through power exchange at
market determined price. What is meant by “pooled cost or purchase” is
elaborated in the Explanation (to Regulation 5) to mean “the weighted
average pooled price at which the distribution licensee has
purchased the electricity including cost of self-generation, if any,
in the previous ·year from all the energy suppliers long-term and
short-term, but excluding those based on renewable energy sources.
as the case may be.”
41. The objectives of the REC Regulations 2010 were described
in the judgment of this court, reported as Hindustan Zinc
Ltd. v. Rajasthan Electricity Regulatory Commission,28
“44. [..] Regulations have been enacted in order to effectuate
the object of promotion of generation of electricity
from renewable sources of energy as against the polluting
sources of energy which principle is enshrined in the Act, the
National Electricity Policy of 2005 and the Tariff Policy of
2006. The provisions requiring purchase of minimum
percentage of energy from renewable sources of energy have
been framed with an object of fulfilling the constitutional
mandate with a view to protect environment and prevent
pollution in the area by utilising renewable energy sources as
much as possible in larger public interest.[..]”
42. The approach of this court, therefore, has to consider the
objective of the policy of promoting non-renewable sources of energy,
the purpose of introducing RECs, and the progressive obligations placed
upon licensees, to ensure that they purchase energy from such “green”
or “clean” sources, in a viable manner. In the present case, the obligation
to procure renewable energy, is located in the Gujarat Electricity
Regulatory Commission (Procurement of Energy from Renewable
Sources) Regulations, 2010 (hereafter the “Renewable Sources
Regulations”). Regulation 4 (1) of the said Renewable sources Regulations
reads as follows:
“4. Quantum of Renewable Purchase Obligation (RPO)
4.1 Each distribution licensee shall purchase electricity (in
kWh) from renewable energy sources, at a defined minimum
28 (2015) 7 S.C.R. 1104
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percentage of the total consumption of its consumers including
T&D losses during a year. Similarly, Captive and Open Access
user(s) / consumer(s) shall purchase electricity (in kWh) from
renewable energy sources, at a defined minimum percentage
of his/her total consumption during a year.
The defined minimum percentages are given below in the Table
1.
If the above-mentioned minimum quantum of power purchase
from solar and other renewable energy sources is not available
in a particular year, then in such cases, additional wind or
other energy, over and above that shown in column 3 and 5,
shall be utilized for fulfillment of the RPO in accordance with
column 2.
Provided further that such obligation to purchase renewable
energy shall be inclusive of the purchases, if any, from
renewable energy sources already being made by the obligated
entity concerned:
Provided also that the power purchases under the power
purchase agreements for the purchase of renewable energy
sources already entered into by the distribution licensees shall
continue to be made till their present validity, even if the total
purchases under such agreements exceed the percentage as
specified hereinabove.”
43. In terms of Regulation 9 (1) of the Renewable Sources
Regulations, if an obligated entity29 (such as the present appellant) does
not fulfil the renewable purchase obligation as provided in the regulations
29 An “obligated entity” is defined in Regulation 2 (k) as “the entity mandated
under
clause (e) of subsection (1) of section 86 of the (Electricity) Act to fulfil the renewable
purchase obligation and identified under clause 3 of these Regulations.
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during any year and also does not purchase the certificates, the State
Commission may direct the obligated entity to deposit into a separate
fund, to be created and maintained by such obligated entity, such amount
as the State Commission may determine. Thus, obligated entities,
(distribution licences included) had to take steps to progressively increase
the purchase of power from renewable energy sources. To incentivize
this, flexibility was granted; the power generators could either have the
tariff fixed, according to the State Commission’s Tariff determination
order, or adopt another mechanism, i.e., the one contemplated in the
REC Regulations.
44. The relevant conditions and stipulations set out in the PPA in
this case, are extracted below:
“RATES AND CHARGES
5.1 Monthly energy charges: the GUVNL shall pay for the
delivered energy as certified by the SEA of Gujarat SLDC,
for the term of this agreement from the commercial operation
date of signing of power purchase agreement whichever is
later, to the power producer every month. The tariff payable
by GUVNL for energy purchased shall be as per clause 5.2
herein.
5.2. GUVNL shall pay a fixed rate of Rs. 2.64 per KWh
(average power purchase cost for previous FY i.e. 2010-11)
during the term of this agreement for delivered energy certified
by Gujarat SLDC in the monthly State energy Account (SEA):
a) In case in any subsequent FY the APPC goes below the
APPC goes below
the APPC of FY 2010-11, the applicable
tariff for ensuring. FY shall be such lower APPC of the
previous year.
b) Power producer and power procurer both have option to
switch over from REC mechanism to preferential tariff after
10 years from commissioning of the 23.10 MW WTGS. In case
either party exercises the option, the tariff shall be Rs. 3.56
per KWh (as determined by GERC through order no. 1 of
2010 dated 30.1.2010) for balance term of the agreement.
Further, power producer shall submit documentary evidence
to GUVNL for de-registration of wind project from REC
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mechanism in case either party ·exercise. Option to switch
over from REC to preferential tariff.
5.3 For each KVRAH drawn from the grid, the Company shall
pay at the rate of as determined by the Commission to GETCO
from time to time for each KARH drawn.
5.4 Till the intra-State ABT is implemented, the certificate issued
by GEDA for generation share of wind turbine shall be
acceptable for monthly energy bill. The other provisions of
intrastate ABT and Open access regulations appearing in this
agreement shall also be applicable only after the intra-State
ABT is implemented.
************************    ****************
ARTICLE 9
TERM, TERMINATION AND DEFAULT
9.1 Term of the agreement: This agreement shall become
effective upon the executive and delivery thereof by the parties
hereto and unless terminated pursuant to other provisions of
the agreement, shall continue to be in force for such time
until the completion of a period of 25 (twenty five) years from
the commercial operation date.”
………………………..
Did the PPA in the present case, require prior approval of the
state commission
45. RWE and the other respondents urge that the PPA was
unenforceable because it was not approved by the State Commission.
This court is of the considered view that the argument is unmerited and
insubstantial.
46. The State Commission’s regulations (Renewable Sources
Regulations) relating to procurement of energy from Renewable Sources,
provides, inter alia, pertinently, as follows:
“3. Applicability of Renewable Purchase Obligation: These
Regulations shall apply to: (1) Distribution licensee (2) Any
other person consuming electricity
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(i) generated from conventional Captive Generating Plant
having capacity of 5 MW and above for his own use and / or
(ii) procured from conventional generation through open
access and third party sale.”
47. From a reading of the above provision, it is evident that there
was never any provision, which mandated prior approval by the state
commission, of PPAs entered into, by parties, in exercise of their free
choice, in relation to renewable energy sources. As a matter of fact, in
the case of renewable power, the state commission had approved a
model PPA. Further, the tariff terms and conditions to the extent decided
are by the Central Commission and not by the State Commission. These
are incorporated in the model PPA. Neither the commission, nor the
contesting respondents, during the hearings in the present appeals, were
able to point out any provision in the PPA in the present case, which
conflicted with any provision of the model PPA, or any express regulation.
Furthermore, it was not established how in the absence of any reference
to the Multi Year Tariff Regulations, they were applicable to PPAs
relating to renewable energy sources.
48. This court is also of the considered view, that in the absence
of specific norms prescribing prior approval of PPAs like in the case of
provisions of Regulation 21 of the Maharashtra Electricity Regulatory
Commission (Multi Year Tariff) Regulations, 2019; Regulation 45 of the
Delhi
Electricity Regulatory Commission Comprehensive (Conduct of
Business) Regulations 2001 and Regulation 36 of the Andhra Pradesh
Electricity Regulatory Commission (Distribution Licensee) Regulations,
2013, the respondent’s arguments on this aspect cannot be accepted. In
these circumstances, the findings of APTEL, not based on any stipulated
obligations under provisions of the state regulations, requiring approval
of the state commission, for its operation, cannot be sustained.
Whether change in the REC Regulations obliged revision of
the PPA in this case
49. In Emco Ltd (supra), the parties had entered into a PPA on
09.12.2010 for the sale and purchase of solar power. The PPA was
modified on 07.05.2011 in view of certain difficulties in the location of
the unit. When the PPA was entered into, the tariff order was applicable.
The PPA was thus entered into during the control period of the first
tariff order. The second tariff order came into force on 27.01.2012. It
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granted certain concessions to purchase and availing of the benefit of
accelerated depreciation under the income tax and did not grant such
benefits to purchasers and tariff payable to power purchasers which did
not avail of the benefit of accelerated depreciation. The respondent Emco
had not availed accelerated depreciation. Despite that, it approached
the Gujarat State Commission, seeking a determination of the tariff afresh,
contending that the position had changed. This court noticed that the
power purchaser had contended that notwithstanding that it entered into
a PPA during the control period, it was not obliged to sell power to the
distributor for a price specified in the PPA and was legally entitled to
seek fixation of separate tariff. The Court rejected the contention after
noticing the arguments. The relevant extracts of the judgment (In Emco
Ltd.) are as below:
 “11. The case of the first respondent is that notwithstanding
the fact that it entered into a PPA during the “control period”
specified in the First Tariff Order, it is not obliged to sell power
to the appellant for the price specified in Article5.2 of the
PPA and is legally entitled to seek (from the second
respondent) fixation of a separate tariff. It is the further case
of the first respondent that under the PPA, the appellant is
under an obligation to procure the power from the first
respondent for a period of 25 years if the first respondent
commences the generation of power within
the “control
period” and is also obliged to pay for the power procured by
it at the rates specified in Article 5.2 of the PPA. But the
obligation of the first respondent to sell power generated by
it to the appellant at the rates specified in Article 5.2 of the
PPA comes into existence only on the happening of the two
contingencies i.e. the first respondent (i) commencing the
generation of power within the “control period” stipulated
under the First Tariff Order; and (ii) choosing to avail the
“benefit of accelerated depreciation” under the Income Tax
Act. According to the first respondent, the stipulation under
the First Tariff Order that the tariff fixed there under is not
applicable to those Projects which “do not get such benefit,
the Commission would on a petition in that respect determine
a separate tariff taking into account all the relevant facts
from not” would only imply that tariff fixed under the First
Tariff Order is not applicable to those Projects/power
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producers which do not avail the “benefit of accelerated
depreciation” under the Income Tax Act.
xxxxxx
xxxxxx
xxxxxx
13. We have already noticed that the first respondent did not
commence generation of power within the “control period”
stipulated under the First Tariff Order and also did not avail
the “benefit of the accelerated depreciation” under the Income
Tax Act. It is admitted on all hands that the “benefit of
accelerated depreciation” mentioned in the First Tariff Order
and the PPA is the stipulation contained in Section 32(1)(i) of
the Income Tax Act read with Rule 5(1-A) of the Income Tax
Rules. They provide for the method and manner in which
depreciation of the assets of an assessee is to be calculated.
xxxxxx
xxxxxx
xxxxxx
26. Apart from that, the conclusion of the Tribunal in the instant
case is wrong. First of all the PPA does not give any option to
the respondent to opt out of the terms of the PPA. It only
visualises a possibility of the producer not commissioning its
Project within the “control period” stipulated under the First
Tariff Order and provides that in such an eventuality what
should be the tariff applicable to the sale of power by the
first respondent. Secondly, the PPA does not “entitle” the first
respondent to the “tariff as determined by the” second
respondent by the Second Tariff Order. On the other hand,
the PPA clearly stipulates that in such an eventuality:
“Above tariff shall apply
for solar projects commissioned on
or before 31-12-2011. In case, commissioning of solar power
project is delayed beyond 31-12-2011, GUVNL shall pay the
tariff as determined by the Hon’ble GERC for solar projects
effective on the date of commissioning of solar power project
or abovementioned tariff, whichever is lower.”
(emphasis supplied)”
50. In Transmission Corporation of Andhra Pradesh Ltd
(Supra), the state commission had, by an order dated 20.06.2001 directed
generators of non-conventional energy to supply power exclusively to
the A.P. Transmission Corporation. Energy developers were not permitted
to sell power to third parties. The Commission also approved the rate
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prevailing earlier for supply @  2.25/- per unit with a 5% escalation per
annum from 1994-1995 being the base year. The parties entered into
PPA after the passing of the Regulatory Commission’s order. The PPA
embodied or reflected the tariff @  2.25/- per unit with escalation @
5% per annum having 1994 as the base year to be revised annually upto
2003-04. After that, the purchase price was to be decided by the state
commission. The stipulation also provided that further review of the
purchase price on the completion of 10 years from the commissioning of
the project would be made.
51. The A.P. Transmission Corporation’s functions devolved upon
discoms by operation of law. In this background, the state commission
exercised suo motu powers to revise non-conventional energy purchase
tariffs. The APTEL rejected the appeal of the A.P. Transmission
Corporation. This court held that once agreements were signed and were
enforceable in law, such enforceable obligations could not be frustrated.
The court also negatived the arguments on behalf of the power generator
that they had been subjected to coercion or duress. The observations of
this court in this regard are pertinent in this regard and are extracted
below:
“39. [..] In the present case the order dated 20-6-2001 was
fully accepted by the parties without any reservation. After
the lapse of more than reasonable time of their own accord
they voluntarily signed the PPA which contained a specific
stipulation
prohibiting sale of generated power by them to
third parties. The agreement also had a renewal clause
empowering TRANSCO/ APTRANSCO/Board to revise the
tariff. Thus, the documents executed by these parties and their
conduct of acting upon such agreements over a long period,
in our view, bind them to the rights and obligations stated in
the contract. The parties can hardly deny the facts as they
existed at the relevant time, just because it may not be
convenient now to adhere to those terms. Conditions of a
contract cannot be altered/avoided on presumptions or
assumptions or the parties having a second thought that a
term of contract may not be beneficial to them at a subsequent
stage. They would have to abide by the existing facts,
correctness of which, they can hardly deny. Such conduct,
would be hit by allegans contraria non est audiendus.”
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42. Now, we will proceed to examine the merits or otherwise
of the findings recorded by the Tribunal that the PPAs executed
by the parties were result of some duress and thus, it will not
vest the authorities with the power to review the tariff and
other granted incentives. PPAs were executed prior and
subsequent to the issuance of the order dated 20-6 2001.
Different persons executed the contracts at different times in
full awareness of the terms and conditions of such PPAS. To
frustrate a contract on the ground of duress or coercion, there
have to be definite pleadings which have to be substantiated
normally by leading cogent and proper evidence. However,
in the case where summary procedure is adopted like the
present one, at least some documentary evidence or affidavit
ought to have been filed raising this plea of duress specifically.
43. [..] From the record before us, nothing was brought to
our notice to state the plea of duress and to prove the alleged
facts which constituted duress, so as to vitiate and/or even
partially reduce the effect of the PPAs. On the one hand, the
Tribunal appears to have doubted the binding nature of the
contracts stating that they contained unilateral conditions
introduced by virtue of order and approval of the Regulatory
Commission, while on the other hand, in para 53 of the order,
it proceeded on the presumption that PPAS are final and
binding and still
drew the conclusion that the Regulatory
Commission could not revise the tariff. Even in the order, no
facts have been pointed out which, in the opinion of the
Tribunal, constituted duress within the meaning of the Contract
Act so as to render the contract voidable.”
52. In Gujarat Urja v. Solar Power Company India Pvt.
Ltd.30(hereafter “Solar Power Company India Pvt. Ltd”), the issue
involved was whether the State Commission could extend the control
period. One of the arguments made was that having regard to the terms
of the PPA, the exercise of such power to extend the control period was
not available under the statute. The Court (per Kurian Joseph, J) referred
to Gujarat Urja Vikas Nigam Ltd. v. Tarini Infrastructure Ltd.31
wherein it was held that:
30 (2017) 14 S.C.R. 115
31 (2016) 5 S.C.R. 990
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“10. While Section 61 of the Act lays down the principles for
determination of tariff, Section 62 of the Act deals with
different kinds of tariffs/charges to be fixed. Section 64
enumerates the manner in which determination of tariff is
required to be made by the Commission. On the other hand,
Section 86 which deals with the functions of the Commission
reiterates determination of tariff to be one of the primary
functions of the Commission which determination includes,
as noticed above, a regulatory power with regard to purchase
and procurement of electricity from generating companies by
entering into PPA(s). The power of tariff determination/fixation
undoubtedly is statutory and that has been the view of this
Court expressed in paras 36 and 64 of A.P. TRANSCO v. Sai
Renewable Power (P) Ltd. This, of course, is subject to
determination of price of power in open access (Section 42)
or in the case of open bidding (Section 63). In the present
case, admittedly, the tariff incorporated in PPA between the
generating company and the distribution licensee is the tariff
fixed by the State Regulatory Commission in exercise of its
statutory powers. In such a situation it is not possible to hold
that the tariff agreed by and between the parties, though finds
mention in a contractual context, is the result of an act of
volition of the parties which can, in no case, be altered except
by mutual consent. Rather, it is a determination made in the
exercise of statutory
powers which got incorporated in a
mutual agreement between the two parties involved.
**********
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This Court in Solar Power Company India Pvt. Ltd (Supra)
further observed that:
35. This Court should be specially careful in dealing with
matters of exercise of inherent powers when the interest of
consumers is at stake. The interest of consumers, as an
objective, can be clearly ascertained from the Act. The
Preamble of the Act mentions “protecting interest of
consumers” andSection61 (d) requires that the interests of
the consumers are to be safeguarded when the appropriate
Commission specifies the terms and conditions for
determination of tariff. Under Section 64 read with Section
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62, determination of tariff is to be made only after considering
all suggestions and objections received from the public. Hence,
the generic tariff once determined under the statute with notice
to the public can be amended only by following the same
procedure. Therefore, the approach of this Court ought to be
cautious and guarded when the decision has its bearing on
the consumers.
36. Regulation 85 provides for extension of time. It may be
seen that the same is available only in two specified situations
- (i) for extension of time prescribed by the Regulations, and
(ii) extension of time prescribed by the Commission in its order
for doing any act. The control period is not something
prescribed by the Commission under the Conduct of Business
Regulations. The control period is also not an order by the
Commission for doing any act. Commissioning of a project is
the act to be performed in terms of the obligation under the
PPA and that is between the producer and the purchaser viz.
Respondent 1 and appellant. Hence, the Commission cannot
extend the time stipulated under the PPA for doing any act
contemplated under the agreement in exercise of its powers
under Regulation 85. Therefore, there cannot be an extension
of the control period under the inherent powers of the
Commission.
37. The Commission being a creature of statute cannot assume
to itself any powers which are not otherwise conferred on it.
In other words, under
the guise of exercising its inherent power,
as we have already noticed above, the Commission cannot
take recourse to exercise of a power, procedure for which is
otherwise specifically provided under the Act.”
53. The concurring view expressed by Banumathi J, crucially held
that:
“Sanctity of power purchase agreement
22. It is contended that Section 86(1)(b) of the Act empowers
the State Commission to regulate the price of sale and purchase
of electricity between the generating companies and
distribution licensees and the terms and conditions of the PPA
cannot be set to be inviolable. Merely because in PPA, tariff
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rate as per Tariff Order, 2010 is incorporated that does not
empower the Commission to vary the terms of the contract to
the disadvantage of the consumers whose interest the
Commission is bound to safeguard. Sanctity of PPA entered
into between the parties by mutual consent cannot be allowed
to be breached by a decision of the State Commission to extend
the earlier control period beyond its expiry date, to the
advantage of the generating company, Respondent 1 and
disadvantage of the appellant. Terms of PPA are binding on
both the parties equally.
66. In Gujarat Urja Vikas Nigam Ltd. v. EMCO Ltd., facts
were similar and the question of law raised was whether by
passing the terms and conditions of PPA, the respondent can
assail the sanctity of PPA. This Court held that power producer
cannot go against the terms of the PPA and that as per the
terms of the PPA, in case, the first respondent is not able to
commence the generation of electricity within the “control
period” the first respondent will be entitled only for lower of
the tariffs.”
54. Similarly, in Bangalore Electricity Supply Co. Ltd. vs.
Konark Power Projects Ltd. & Ors32 this court held as follows: 
“13. The contention that Under Regulations 5.2, 5.3, 5.4 of
the 2004 Regulations as well as Sections 61 and 62 of the
Electricity Act, power is vested with the Commission to vary
the tariff is concerned, such power specifically provided for
in the said Regulations will only operate prior to fixing of
the
tariff once the concerned Power Purchase Agreements are
ultimately concluded and the terms are agreed between the
parties under the Power Purchase Agreements, thereafter, in
our considered opinion, Regulation 5.1 of the 2004
Regulations alone would apply in the case of the parties before
us. Consequently, there was no scope for the Commission to
vary the tariff agreed between the parties under the approved
Power Purchase Agreement.”
55. Section 61 of the Act enacts the basis for tariff determination.
On the other hand, Section 62 is concerned with the fixation of various
32  (2016) 13 SCC 515
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other charges and tariffs. Section 64 lists the manner and procedure for
tariff determination by the Commission. Section 86 lists the functions of
the Commission and reiterates the determination of tariffs to be a
prominent task of the commission. Tariff determination no doubt,
comprehends the exercise of regulatory function, including purchase,
sourcing, procurement of electricity from generators, by distribution and
other licensees, and their sales. This part involves generating companies
entering into PPA(s) with procuring entities or licensees. Tariff fixation
is a statutory function. Yet, by virtue of Section 42, it is subject to open
access determination of the price of power, and subject to Section 63
wherever it involves open bidding. In the facts of this case, the PPA
incorporated a tariff between the respondents and Gujarat Urja
constituted the tariff fixed by the State Regulatory Commission in the
exercise of its statutory powers. The issue and sale of RECs, constituted
an important part of that bargain, between the two parties, based on the
assessment of their commercial interest.
56. The important feature of the REC Mechanism is that in it,
WPDs (i.e. respondents) had to sell power to distribution licensees at a
mutually agreed price, not exceeding the Average Power Purchase Cost
(‘APPC’) of the DISCOMs, (such as Gujarat Urja). The WPDs were
entitled to the additional benefit of Renewable Energy
Certificates issued
to it which could be traded in Power Exchange for a price. The
consideration payable to WPDs consisted of firstly, a mutually agreed
power Component and secondly a green component through RECs
traded in the Exchange. The alternative to the WPDs was to sell to
licensees at a preferential tariff, determined by the state commission.
In the latter event, WPDs were not entitled to the additional benefit of
the green component, which was the tradable RECs the sale of which
would have led to increased revenues. The respondent WPDs chose
the REC mechanism, while entering into PPAs in these cases, with Gujarat
Urja. The PPAs entered by WPDs provided for the fixed tariff of 
2.64/kWh for the entire term (25 years), as mutually agreed (Article 5.2
of PPA). WPDs were entitled to and were trading RECs in the power
exchange, deriving extra monetary benefits: which, at the relevant period
was  1.50/kWh (floor price at the time of signing of PPA). The
Preferential Tariff determined by the state commission, for WPDs not
opting for the REC Mechanism was   3.56/kWh. The WPDs were not
entitled to any additional REC benefits, had they adopted the preferential
tariff route.
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57. The respondents successfully complained before the State
Commission, and APTEL, that the PPA, which they had entered into
with Gujarat Urja, whereby the tariff was fixed at  2.64/kWh (with the
price of RECs sold by them) was, in the long run, less beneficial than 
3.56/kWh. During the hearing, it was sought to be urged that the cost of
RECs in the exchange, had been decreasing, whereas the preferential
tariffs had risen. On this aspect, Regulation 9 of the REC Regulations
2010 prescribes the price determination mechanism for RECs in the
power exchange. Proviso to Regulation 9 (1) of the REC Regulations
2010 empowers the central commission, in consultation with the Central
Agency and the Forum of Regulators, to provide the floor price and
forbearance price separately for solar and non-solar certificates. This
provision is important because it enables regulatory intervention in the
public interest: if the price went below a certain limit, the floor price was
to be prescribed, to take care of the interests of generators- like the
respondents; if the price went too high, a forbearance price could be
fixed, to take care of the interests of the consumers and distributors. By
Regulation 9 (2) of the REC Regulations 2010, the Central Commission,
was to be guided, in determining the floor and forbearance price, by
diverse factors, such as (a) variation in cost of generation of different
renewable energy technologies falling under solar and non-solar category,
across states in the country; (b) variation in the Pooled Cost of Purchase
across States in the country; (c) Expected electricity generation for non-
renewable energy sources [including (i) expected renewable energy
capacity under preferential tariff (ii) expected renewable energy under
mechanism of certificates] (d) Renewable purchase obligation targets
set by various State Commissions. By virtue of Explanation to Regulation
5 (1) of the REC Regulations, “the weighted average pooled price at
which the distribution licensee has purchased the electricity
including cost of self-generation, if any, in the previous year from
all the energy suppliers long-term and short-term, but excluding
those based on renewable energy sources, as the case may be.” An
important factor which cannot be lost sight of is that all the respondent’s
WPDs were registered, under the REC Regulations, based on the state
commission’s tariff order, of 2010. It is undisputed, that to register under
the REC Regulations 2010, an entity (such as WPDs) had to be (a)
accredited, with a State Agency [(defined by Regulation 2 (n) of the
REC Regulations as an agency “designated by the State Commission
to act as the agency for accreditation and recommending the
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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renewable energy projects for registration”) and an entity “not having
any power purchase agreement for the capacity related to such
generation to sell electricity at a preferential tariff determined by
the Appropriate Commission].
58. Furthermore, the state commission, in its tariff order, dated
30.01.2010 (which was operative for three years, with the control period
beginning from 10.08.2009) while determining the preferential tariff, had
observed that it would apply for 25 years:
“The Commission, therefore, determines the tariff for
generation of electricity from wind energy projects at Rs.3.56
(constant) for its entire project life of 25 years i.e. from the
first year to the twenty fifth year. This tariff shall be applicable
for purchase of wind energy by Distribution Licensees/ other
entities for complying with the renewable power purchase
obligations specified in the regulation by commission from
time to time. This tariff is applicable to wind energy projects
which commission brand new wind energy plants and
equipments on 11th August, 2009 onwards.”
59. In the present case, the PPA was entered into by the parties
on 29.03.2102, within the control period stipulated in the tariff order of
2010. The change in the REC Regulations 2010, whereby the Explanation
to Regulation 5 was amended resulted in a change. The pre-existing
clause that the power would be “at a price not exceeding pooled cost
of the power
purchase”was altered to “at the pooled cost of power
purchase”. This change, was through the Second Amendment (to the
REC Regulations), carried out on 10.07.2013. It is a matter of record,
that for the period between 29.03.2102 and 10.07.2013 - and indeed,
after the Second Amendment, no difficulty was experienced in the pricing
mechanism agreed by the parties, under the PPA. It was on 10.12.2013
that the respondent WPD approached the state commission for re-
determination of tariff. Clearly, this was an opportunistic attempt to derive
advantage from the change, brought about by the Second Amendment,
and seek to have it applied to an existing contract, which cannot be
countenanced. In view of these reasons, it is held that the reasoning of
APTEL, and the State Commission cannot be upheld.
Applicability of the Second Amendment to pre-existing
contracts- the general law
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60. Power Purchase Agreements are essentially not statutory
contracts; however, certain terms contained in those contracts, are
regulated by law, i.e. applicable regulations, under the Act. The PPA
between a generating company or, as in this case, a wind generator, and
a distribution licensee, such as Gujarat Urja, is the outcome of a carefully
considered decision, whereby the parties, after due deliberations and
negotiations, agree on terms, which are based on existing law and
regulations. Aside from contending that the PPA had to be approved,
(which this court has rejected in a previous part of this judgment) but
was not, the respondents also urge, independently, that the Second
Amendment had necessitated re-visiting of the terms of the PPA, relating
to the payment of average pooled power purchase cost, given that the
amendment mandated that the power would be at the pooled power
purchase cost, as opposed to the previous provision, which stated that
the cost would not exceed the pooled power purchase cost.
61. Regulation 1 (2) of the Second Amendment clearly provides
that the amendments were to come into force from the date of their
publication in the Official Gazette, which is 10th July, 2013. Furthermore,
the Statement of Reasons, accompanying the Second Amendment,
clarified that existing PPAs were not affected:
“Some of the stakeholders have suggested to clarify as to
whether the PPAs executed at price lower than APPC would
become ineligible under
REC Mechanism. It is felt that the
tariff for electricity component lower or higher than APPC
may lead to avoidable loss or profit to RE generator. The
Commission would like to clarify that the intention is not to
debar the projects that have executed PPA at tariff lower than
APPC. This amendment will apply prospectively and as such
will not affect the already executed PPAs at lower than APPC.”
62. The Constitution Bench of this Court, in PTC India (supra)
had indicated that state commissions possess the power to vary existing
contracts, especially PPAs:
“40. [..] To regulate is an exercise which is different from
making of the regulations. However, making of a regulation
under Section 178 is not a precondition to the Central
Commission taking any steps/measures under Section 79(1).
As stated, if there is a regulation, then the measure under
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Section 79(1) has to be in conformity with such regulation
under Section 178. This principle flows from various judgments
of this Court, which we have discussed hereinafter. For
example, under Section 79(1)(g), the Central Commission is
required to levy fees for the purpose of the 2003 Act. An order
imposing regulatory fees could be passed even in the absence
of a regulation under Section 178. If the levy is unreasonable,
it could be the subject-matter of challenge before the appellate
authority under Section 111 as the levy is imposed by an order/
decision-making process. Making of a regulation under
Section 178 is not a precondition to passing of an order
levying a regulatory fee under Section 79(1)(g). However, if
there is a regulation under Section 178 in that regard then
the order levying fees under Section 79(1)(g) has to be in
consonance with such regulation.
*********
40. [..] One must keep in mind the dichotomy between the
power to make a regulation under Section 178 on the one
hand and the various enumerated areas in Section 79(1) in
which the Central Commission is mandated to take such
measures as it deems fit to fulfil the objects of the 2003 Act.
Applying this test to the present controversy, it becomes clear
that one such area enumerated in Section 79(1) refers to
fixation of trading margin. Making of a regulation in that
regard is not a precondition to the Central Commission
exercising its powers to fix
a trading margin under Section
79(1)(j), however, if the Central Commission in an appropriate
case, as is the case herein, makes a regulation fixing a cap
on the trading margin under Section 178 then whatever
measures the Central Commission takes under Section 79(1)(j)
have to be in conformity with Section 178. One must
understand the reason why a regulation has been made in
the matter of capping the trading margin under Section 178
of the Act. Instead of fixing a trading margin (including
capping) on a case-to-case basis, the Central Commission
thought it fit to make a regulation which has a general
application to the entire trading activity which has been
recognised, for the first time, under the 2003 Act. Further, it
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is important to bear in mind that making of a regulation under
Section 178 became necessary because a regulation made
under Section 178 has the effect of interfering and overriding
the existing contractual relationship between the regulated
entities. A regulation under Section 178 is in the nature of a
subordinate legislation. Such subordinate legislation can even
override the existing contracts including power purchase
agreements which have got to be aligned with the regulations
under Section 178 and which could not have been done
across the board by an order of the Central Commission under
Section 79(1)(j).
*********
43. [..] While deciding the nature of an order (decision) vis-
à-vis a regulation under the Act, one needs to apply the test
of general application. On the making of the impugned 2006
Regulations, even the existing power purchase agreements
(PPA) had to be modified and aligned with the said
Regulations. In other words, the impugned Regulations make
an inroad into even the existing contracts. This itself indicates
the width of the power conferred on CERC under Section
178 of the 2003 Act. All contracts coming into existence after
making of the impugned 2006 Regulations have also to factor
in the capping of the trading margin. This itself indicates that
the impugned Regulations are in the nature of subordinate
legislation. 
Such 
regulatory 
intervention 
into
the existing contracts across the board could have been done
only by making
regulations under Section 178 and not
bypassing an order under Section 79(1)(j) of the 2003 Act.
Therefore, in our view, if we keep the above discussion in
mind, it becomes clear that the word “order” in Section 111
of the 2003 Act cannot include the impugned 2006 Regulations
made under Section 178 of the 2003 Act.”
63. Whilst there cannot be any doubt that regulations framed under
the Act can be made applicable to existing contracts, what is discernible
from PTC India (supra) is that in that case, the applicability of the Trading
Margin Regulations which for the first time, compelled persons engaged
in trading of electricity, in terms of Section 2 (17) of the Act, to register,
obtain licenses, and operate within the margin limits indicated in the
GUJARAT URJA VIKAS NIGAM LIMITED v. RENEW WIND
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regulations. These provisions introduced a new regime, regulating an
area, or activity which had hitherto been unregulated. The entire edifice
of prescribing general standards for application to all those operating
within its sweep, is to ensure that they are universal and constitute a
code. The observations in PTC India (supra), therefore, are to be seen
in this context. Being regulations of general application, dealing with a
range of commercial activity, there could have been no question of existing
contracts, operating in isolation, through separate silos, outside of their
framework. In the present case, however, the PPAs were entered into
in the exercise of equal bargaining power, after due negotiation by the
parties, and within the framework of existing regulations: both central
and state. Therefore, unless any later amendment expressly overrides
existing contracts, the terms of such agreements bind the parties.
64. That amendments to laws, or regulations, unless expressly
retrospective, are always prospective, is a settled proposition. In
Purbanchal Cables & Conductors (P) Ltd. v. Assam State Electricity
Board & Ors.33, the position was articulated in this manner:
“39. [..] This Court, time and again, has observed that any
substantive law shall operate prospectively unless retrospective
operation is clearly made out in the language of the statute.
Only a procedural or declaratory law operates retrospectively
as
there is no vested right in procedure.
40. In the absence of any express legislative intendment of
the retrospective application of the Act, and by virtue of the
fact that the Act creates a new liability of a high rate of interest
against the buyer, the Act cannot be construed to have
retrospective effect. Since the Act envisages that the supplier
has an accrued right to claim a higher rate of interest in terms
of the Act, the same can only be said to accrue for sale
agreements after the date of commencement of the Act i.e. 23-
9-1992 and not any time prior.”
65. In Commissioner of Income Tax v Vatika Township (P)
Ltd.34, this court observed, in this context, that:
“31. Of the various rules guiding how a legislation has to be
interpreted, one established rule is that unless a contrary
33 (2012) 6 S.C.R. 905
34 (2014) 12 S.C.R. 1037
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intention appears, a legislation is presumed not to be intended
to have a retrospective operation. The idea behind the rule is
that a current law should govern current activities. Law passed
today cannot apply to the events of the past. If we do something
today, we do it keeping in view the law of today and in force
and not tomorrow’s backward adjustment of it. Our belief in
the nature of the law is founded on the bedrock that every
human being is entitled to arrange his affairs by relying on
the existing law and should not find that his plans have been
retrospectively upset. This principle of law is known as lex
prospicit non respicit : law looks forward not backward. As
was observed in Phillips v. Eyre [Phillips v. Eyre, (1870) LR
6 QB 1], a retrospective legislation is contrary to the general
principle that legislation by which the conduct of mankind is
to be regulated when introduced for the first time to deal with
future acts ought not to change the character of past
transactions carried on upon the faith of the then existing
law.
32. The obvious basis of the principle against retrospectivity
is the principle of “fairness”, which must be the basis of every
legal rule as was observed in [L’Office Cherifien des
Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd., (1994)
1 All ER 20 (HL)] Thus, legislations which modified accrued
rights or which impose obligations or impose new duties or
attach a new disability have to be treated as prospective unless
the legislative intent is clearly to give the enactment a
retrospective effect; unless the legislation is for purpose of
supplying an obvious omission in a former legislation or to
explain a former legislation. We need not note the cornucopia
of case law available on the subject because aforesaid legal
position clearly emerges from the various decisions and this
legal position was conceded by the counsel for the parties.
In any case, we shall refer to few judgments containing this
dicta, a little later.”
This proposition was again explained and applied in Union of
India v. Indusind Bank Ltd 35.
66. In view of the above discussion, it is held that agreements,
such as the PPAs in the present case, entered into, voluntarily by the
35 (2016) 11 S.C.R. 700
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parties, before the Second Amendment, were not affected, by its terms.
The findings to the contrary in the impugned order, are set aside.
Were the respondents coerced into entering into PPAs
67. The State Commission had concluded that the PPAs were
also unenforceable, to the extent of being in non-conformity with the
pre-amended Rule 5, of the REC Regulations, as the contracts were
entered into by parties with unequal bargaining power. This aspect was
noted by APTEL, which held as follows:
“9.19 [..] The State Commission after careful consideration
of the submissions made by both the parties and after due
analysis of the available material on record has recorded its
findings in the impugned order that the conditions envisaged
in the PPA relating to the tariff and other associated conditions
appeared to be one sided in favour of the Appellant and
accordingly concluded the case of coercion or duress and
unequal bargaining power between the parties being
responsible for executing an Agreement full of unjustness and
perversity. In view of these facts, we hold that the State
Commission has analysed this issue rightly in accordance with
law and passed the order assigning cogent reasoning. Thus,
we do not find any material case or ground for our
interference in the matter.
10. SUMMARY OF OUR FINDINGS:
Having regard to the careful consideration and critical
analysis of the facts and submissions of the learned counsel
for the
Appellants as well as the Respondents, we hold that
the findings of the State Commission are just and right in
accordance with law.”
68. In Transmission Corporation of Andhra Pradesh Ltd
(supra), this court observed, in the context of a contention of coercion,
as follows:
“42. [..] To frustrate a contract on the ground of duress or
coercion, there have to be definite pleadings which have to
be substantiated normally by leading cogent and proper
evidence. However, in the case where summary procedure is
adopted like the present one, at least some documentary
evidence or affidavit ought to have been filed raising this
plea of duress specifically.[..]”
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69. In Shanti Budhiya Vesta Patel & Ors. v. Nirmala Jayprakash
Tiwari& Ors.36 , this court held that to establish fraud or coercion, there
should be”(a) an express allegation of coercion or fraud, and (b)
all the material facts in support of such allegations must be laid out
in full and with a high degree of precision. In other words, if coercion
or fraud is alleged, it must be set out with full particulars.” The
court had cited and applied the principle enunciated in Bishundeo
Narain v. Seogeni Rai37where it was held that:
“ […] Now if there is one rule which is better established
than any other, it is that in cases of fraud, undue influence
and coercion, the parties pleading it must set forth full
particulars and the case can only be decided on the particulars
as laid. There can be no departure from them in evidence.
General allegations are insufficient even to amount to an
averment of fraud of which any court ought to take notice,
however strong the language in which they are couched may
be, and the same applies to undue influence and coercion.
[See Order 6 Rule 4 of the Civil Procedure Code.]”
70. In New Indian Assurance Co. Ltd v Genus Power
Infrastructure Ltd38 this court dealt with the standard of pleadings and
evidence, needed in cases, where coercion or duress is alleged:
“8. It is therefore clear that a bald plea of fraud, coercion,
duress or undue influence is not enough and the party who
sets up a plea, must prime facie establish the same by
placing
material before the Chief Justice/his designate.”
71. In the present case, this salutary rule was thrown to the wind,
by the State Commission. In this court’s opinion, APTEL, in the most
cavalier fashion, virtually rubber stamped the State Commission’s findings
on coercion, in regard to the entering into the PPA by the parties. There
was no shred of evidence, nor any particularity of pleadings, beyond a
bare allegation of coercion, alleged against Gujarat Urja. It is
incomprehensible how such an allegation could have been entertained
and incorporated as a finding, given that the respondents are established
companies, who enter into negotiations and have the support of experts,
including legal advisers, when contracts are finalized. The findings
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regarding coercion are, therefore, wholly untenable. This court is also of
the opinion that the casual approach of APTEL, in not reasoning how
such findings could be rendered, cannot be countenanced. As a judicial
tribunal, dealing with contracts and bargains, which are entered into by
parties with equal bargaining power, APTEL is not expected to casually
render findings of coercion, or fraud, without proper pleadings or proof,
or without probing into evidence. The findings of coercion are therefore,
set aside.
Conclusions
72. In view of the foregoing discussion, it is held that the concurrent
findings and orders of the State Commission and APTEL cannot be
sustained. They are accordingly set aside. The appeals are allowed,
with costs payable to the appellants.
Divya Pandey
Appeals allowed.
(Assisted by : Shevali Monga, LCRA)