2000 (2) TMI 842 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the Power Purchase Agreements (PPAs) are statutory contracts.
2. Whether the Madhya Pradesh Electricity Board (MPEB) can unilaterally alter the terms of concluded contracts.
3. Validity of the least tariff criteria for prioritizing projects for Escrow Protection.
4. Whether the MPEB's decision to prioritize certain projects was arbitrary or in public interest.

Summary of Judgment:

1. Statutory Nature of PPAs:
The court addressed the contention that PPAs are statutory contracts under Sections 43 and 43A of the Electricity Supply Act. It clarified that merely because a contract is entered into under statutory power, it does not become a statutory contract unless it contains terms mandated by the statute. The PPAs in question were statutory only to the extent they contained provisions regarding tariff determination and other statutory requirements of Section 43A(2). The obligation to open and maintain an Escrow Account was not a statutory requirement, thus the PPAs could not be regarded as statutory in this respect.

2. Alteration of Concluded Contracts:
The court acknowledged that the MOUs and PPAs were concluded contracts but differentiated between having a concluded contract and having an enforceable right to Escrow coverage. It noted that the obligation to open and maintain an Escrow Account was contingent upon mutual agreement on terms, which had not been finalized due to disagreements with Financial Institutions (FIs). Therefore, MPEB was not going back on any enforceable obligation.

3. Least Tariff Criteria:
The court found the least tariff criteria to be rational and consistent with the notification issued u/s 43A(2). It emphasized that prioritizing projects based on the least tariff would benefit MPEB and the public by ensuring cheaper electricity. The court dismissed the argument that the least tariff criteria were a 'hoax' or arbitrary, noting that it was adopted in good faith and in public interest.

4. Decision on Prioritization:
The court upheld the MPEB's decision to prioritize projects based on the least tariff criteria, finding it neither unreasonable nor arbitrary. It rejected the argument that the criteria were designed to favor certain IPPs, noting a lack of evidence. The court also addressed objections regarding the evaluation of project costs and assumptions used, concluding that the assumptions were not fanciful or arbitrary and were applied equally to all IPPs.

Final Decision:
The appeals by ITPL, Jindal, Bhilai, SPPL, Madhya Bharat, and GBL were dismissed. The appeal by STI was partly allowed, quashing the decision to prioritize Pench and directing MPEB to reconsider its decision based on its Escrowable capacity and other relevant factors within two months.