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2022 (2) TMI 1481 - SC - Indian LawsValidity of withdrawal of the petition by the appellants, DISCOMS for approval of the Power Purchase Agreement (PPA) - determination of capital cost and tariff for the power project by HNPCL - HELD THAT - It is trite that, while considering grant of approval to the PPA, the State Commission will have to keep in mind the public interest. It will have to consider, as to whether the PPA, which is subject to approval, sub serves the public interest. It will also be required to take into consideration, as to whether the terms agreed are fair and just while granting approval. While exercising power under Section 86(1)(b) of the Act of 2003, the Commission will have to regulate the price at which the electricity would be procured from the generating companies. Undoubtedly, while doing so, the Commission will be guided by the factors mentioned in Section 61 of the Act of 2003 and the Regulations concerning the same. Under Section 86(1)(f) of the Act of 2003, the Commission is also empowered to adjudicate upon the disputes between the licensees and generating companies, and to refer any such dispute for arbitration. Insofar as the reliance placed on the provision of Regulation 5.2 of the Tariff Regulations is concerned, the same deals with approach to determination of tariff. It could be seen that, whereas Regulation 5.1 of the Tariff Regulations provides that where tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government, the Commission shall adopt such tariff in accordance with the provisions of the Act; Regulation 5.2 of the Tariff Regulations provides that the provisions specified in Part II of the said Regulation shall apply in determining tariff based on capital cost for supply to a Distribution Licensee. Part II of the Tariff Regulations deals with Filing Details and Tariff Determination . Undisputedly, the appellants DISCOMS are instrumentalities of the State and as such, a State within the meaning of Article 12 of the Constitution of India. Every action of a State is required to be guided by the touch stone of non- arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest. Every holder of a public office is a trustee, whose highest duty is to the people of the country. The Public Authority is therefore required to exercise the powers only for the public good. There are no hesitation to hold that the appellants DISCOMS could not be permitted to change the decision at their whims and fancies and, particularly, when it is adversarial to the public interest and public good. The record would clearly show that the change in decision is arbitrary, irrational and unreasonable. There are no reason to interfere with the impugned judgment. However, before parting with the judgment, it is necessary to place on record the conduct of the appellants DISCOMS - appeal dismissed.
Issues Involved:
1. Validity of withdrawal of the petition by the appellants - DISCOMS for approval of the Power Purchase Agreement (PPA). 2. Determination of capital cost and tariff for the power project by HNPCL. 3. The role and obligations of the Andhra Pradesh State and its instrumentalities in the execution and continuation of the PPA. 4. The impact of regulatory approvals and public interest in the procurement of electricity by the appellants - DISCOMS. 5. Allegations of arbitrariness and malice in the actions of the appellants - DISCOMS. Issue-wise Analysis: 1. Validity of Withdrawal of Petition for PPA Approval: The appellants - DISCOMS sought to withdraw their petition (O.P. No. 19 of 2016) for the approval of the Continuation Agreement to the PPA, citing the non-binding nature of the PPA without regulatory approval. The court held that the withdrawal was not permissible as it would frustrate the contract and defeat the rights of HNPCL, which had altered its position based on assurances from the State and DISCOMS. The court cited precedents indicating that withdrawal is not an absolute right, especially when it adversely affects the other party's rights. 2. Determination of Capital Cost and Tariff: The court emphasized that the State Commission is responsible for determining the capital cost and tariff under Section 62 of the Electricity Act, 2003. It noted that the appellants - DISCOMS had reserved their right to contest the capital cost before the State Commission, which would ensure that the tariff determination process considers various factors to protect public interest. 3. Role and Obligations of the Andhra Pradesh State: The court highlighted the consistent position of the State of Andhra Pradesh and its instrumentalities, including the appellants - DISCOMS, to purchase 100% power from HNPCL. This position was reiterated through various agreements and communications, including the MoA and Continuation Agreement. The court found that the appellants - DISCOMS could not resile from their commitments arbitrarily, especially when HNPCL had made significant investments based on these assurances. 4. Regulatory Approvals and Public Interest: The court underscored that regulatory approval of the PPA is crucial and must be guided by public interest considerations. It noted that the State Commission must evaluate whether the PPA subserves public interest and is fair and just. The court dismissed the appellants' argument that they could only procure power through competitive bidding, pointing out the inconsistency in their stance, as they had previously excluded HNPCL from the bidding process. 5. Allegations of Arbitrariness and Malice: The court found the actions of the appellants - DISCOMS arbitrary, irrational, and contrary to public interest. It criticized their decision to withdraw the petition as lacking reasonable or probable cause, amounting to "legal malice." The court noted that the appellants' conduct in purchasing power at a higher rate from other sources, despite a lower interim tariff from HNPCL, was against public interest. Conclusion: The court upheld the APTEL's decision directing the State Commission to dispose of the petitions on merits, emphasizing the necessity of regulatory oversight and adherence to public interest. It dismissed the appeal with costs, directing the appellants - DISCOMS to continue purchasing power from HNPCL at the interim rate until the State Commission's final decision.
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