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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5875 OF 2012

GUJARAT URJA VIKAS NIGAM LIMITED ...APPELLANT(S)

VERSUS

TARINI INFRASTRUCTURE LTD. & ORS. ...RESPONDENT(S)

WITH

CIVIL APPEAL NOS. 1973-1974 OF 2014

J U D G M E N T

RANJAN GOGOI, J.

1.Is the tariff fixed under a PPA (Power Purchase

Agreement) sacrosanct and inviolable and beyond review and

correction by the State Electricity Regulatory Commission

which is the statutory authority for fixation of tariff under the

Electricity Act, 2003 (hereinafter for short ‘the Act’). This is the

short question that arises for determination in the present

appeals. The Regulatory Commission did not consider it

appropriate to confer on itself the said power upon a

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construction of the provisions of the Act and the terms of the

PPA(s) in question. The Appellate Tribunal disagreed and held

that the power would be available to the State Regulatory

Commission. This is how the matter has come up before us in

the present appeals filed at the instance of the distribution

licensee which is common in both the cases, namely, Gujarat

Urja Vikas Nigam Limited.

2.A very brief resume of the relevant facts would be

appropriate and would assist a determination of the question

arising identified hereinabove.

The respondent No. 1 in Civil Appeal No. 5875 of 2012,

namely, Tarini Infrastructure Ltd., is a power producer which

has set up/installed two small hydro power projects in the

State of Gujarat. In January, 2008 the respondent No.

1-power producer entered into a PPA with the appellant-

distribution licensee for sale of electricity from the generating

stations to the extent of the contracted quantity for a period of

35 years at Rs. 3.29 per KWH subject to escalation of 3% per

annum till date of commercial operation. In March, 2010, just

before commissioning of the generating station, the respondent

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power producer sought an increase in the tariff to Rs. 4.70 per

unit on the ground that though under the Concession

Agreement power was to be evacuated at the nearest

sub-station at Rakholi under the jurisdiction of the Gujarat

Electricity Transmission Company (GETCO) which was at a

distance of 4 Kms from its switch yard, it was later realized

that Rakholi was in Dadar Nagar Haveli. Consequently, the

transmission line was required to be laid up to a point known

as Mota Pondha which involved a total distance of 23 Kms.

instead of the originally envisaged 4Kms. The additional

infrastructure, admittedly, cost about Rs. 10 crores which

was not envisaged in the Concession Agreement entered into

between the respondent-power producer and Narmada Water

Resources Department (respondent No. 2). In these

circumstances, the power producer applied to the State

Regulatory Commission for a redetermination of the tariff. The

said request was refused by an order dated 03.09.2010,

primarily, on the ground that once the tariff was determined

and thereafter incorporated in the PPA there was no scope for

redetermination of the same at the unilateral request of the

power producer.

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3.Insofar as Civil Appeal Nos. 1973-1974 of 2014 are

concerned, the respondent-power producer, namely, Junagadh

Power Projects Pvt. Ltd., has set up a biomass based power

generation plant and had entered into a PPA with Gujarat Urja

Vikas Nigam Limited (distribution licensee) on 26.11.2010.

The tariff incorporated in the PPA was earlier approved by the

State Regulatory Commission by tariff order dated 17.05.2010

on the basis of cost of biomass at Rs. 1600 per MT with

escalation of 5% per annum for a period of 20 years of

operation. The Biomass Energy Developers Association sought

revision of the biomass fuel cost to Rs. 3000/- per MT and for

consequential redetermination of the tariff. The said review

petition was dismissed by the State Commission in November,

2010. Thereafter, the power producer, on its own, moved the

State Regulatory Commission seeking modification of tariff on

account of air cooled condenser and also seeking increase in

the biomass fuel cost and consequential redetermination of the

tariff on that basis. The State Regulatory Commission by its

order dated 05.12.2010, while allowing an increase in tariff on

account of air cooled condenser, rejected the request of the

power producer to review the price of biomass fuel cost,

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primarily, on the ground that the review of the price of biomass

fuel having been earlier rejected in the case of Biomass Energy

Developers Association, the review of the said price at the

request of the power producer cannot now be allowed.

4.The learned Appellate Tribunal by the impugned orders

overruled the view taken by the State Regulatory Commission

on a consideration of the provisions of the Act and the terms

and conditions of the PPA(s). The above view of the learned

Appellate Tribunal is primarily based on the reasoning that

under the Act it is the State Regulatory Commission which has

been statutorily vested with the power to determine the tariff

and that the tariff as may be fixed and incorporated in the PPA

between the distribution licensee and the power producer is

liable to be reviewed in the light of changes in the

circumstances of a given case. In the case of Junagadh Power

Projects Pvt. Ltd. the learned Appellate Tribunal even went to

the extent of holding that if in the changed scenario occasioned

by a drastic alteration of the facts and circumstances

surrounding the determination of tariff, a review is

declined/refused the power producer will be left with no option

but to shut down its plants. Therefore, a review of the tariff in

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exercise of the statutory power vested in the State Regulatory

Commission would be fully justified. It is the correctness of the

aforesaid view that has been assailed in the present appeals

under Section 125 of the Act.

5.We have heard Shri C.A. Sundaram, learned senior

counsel appearing for the appellant and Shri Sanjay Sen,

learned senior counsel appearing for the respondent-power

producers in both sets of appeals.

6.The arguments on behalf of the appellant-distribution

licensee in both the cases are more or less common. In the case

of Tarini Infrastructure Ltd. it is urged that under Clause 5.2 of

the PPA the appellant is required to pay tariff as determined by

the State Commission which is liable to escalation @ 3% per

annum. The tariff order has not been challenged by the power

producer. Therefore, the tariff approved by the State Regulatory

Commission and incorporated in the PPA would remain in force

for the period of time agreed upon and the same cannot be

altered unilaterally. Reliance in this regard is placed on two

recent decisions of this Court in the case of Gujarat Urja

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Vikas Nigam Limited Vs. EMCO Ltd. & Anr.

1

and Bangalore

Electricity Supply Co. Vs. Konark Power Projects Ltd.

2

. It is

contended that in the said cases it has been held that a PPA

duly entered into and otherwise consistent with the tariff order

of the State Regulatory Commission cannot be reopened. A

somewhat “discordant note” struck by this Court in

Transmission Corporation of Andhra Pradesh Vs. Sai

Renewable Power Pvt. Ltd.

3

has been sought to be explained

by the appellant by contending that in the PPA involved in that

case there was a specific clause that the tariff would be as

revised by orders of the State Regulatory Commission from

time to time.

Specifically in the case of Junagadh Power Projects Pvt.

Ltd. (respondent No. 1 in Civil Appeal Nos. 1973-1974 of 2914)

it is urged that the demand raised by Biomass Energy

Developers Association for redetermination of the tariff by

enhancing the fuel cost to Rs. 3000 per MT had been dismissed

earlier and the issue has attained finality in law. The PPA

stood novated to the extent of modification of tariff allowed on

account of the issue of air cooled condenser is concerned and

1

2016 (2) SCALE 75

2

2015(5) SCALE 711

3

(2011) 11 SCC 34

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no further, it is urged. For clarity it may be noted that in an

earlier proceeding a higher tariff had been allowed to biomass

based power plants with air cooled condensers.

7.On the other hand, on behalf of the power producers it is

argued that determination and fixation of tariff are instances

of the exercise of the statutory powers of the State Regulatory

Commission under Section 62 read with Section 86(1)(a) of the

Act. The mere incorporation of the tariff in a PPA between the

generating company and the distribution licensee would not

make the tariff a consensual decision by and between the

contracting parties which, can only be altered by the

Commission with the mutual consent of the parties.

8.The decisions relied upon in Gujarat Urja Vikas Nigam

Limited Vs. EMCO Ltd. & Anr. (supra) and Bangalore

Electricity Supply Co. Vs. Konark Power Projects Ltd.

(supra) have sought to be distinguished by reference to the

facts in the context of which the same have been rendered.

The observations of this Court in Transmission Corporation

of Andhra Pradesh Vs. Sai Renewable Power Pvt. Ltd.

(supra) (para 64) with regard to the role and authority of the

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Regulatory Commission in the matter of fixation of tariff have

been relied upon. Furthermore, the language appearing in

Section 86(1)(b) of the Act has been specifically relied upon to

contend that the said provision of the Act confers on the State

Regulatory Commission the power “ to regulate the price at

which electricity shall be procured from the generating

companies or licensees …….. through agreements for purchase

of power for distribution and supply within the State.” Reliance

has also been placed on the decisions on this Court in Sri

Venkata Setaramanjaneya Rice & Oil Mills and Ors. Vs.

State of A.P.

4

, K. Ramanathan Vs. State of T.N. & Anr.

5

and D.K. Trivedi & Sons Vs. State of Gujarat & Ors.

6

with

regard to wide meaning of word “regulate”. It is further pointed

out that power production for purposes of supply on the terms

envisaged in the PPA is commercially not viable resulting in

closure of the Junagadh Power Projects Ltd. for the past 3

years and the possible loss of the huge investment made.

9.The Electricity Act of 2003 has been enacted to

consolidate and upgrade the existing laws relating to

4

AIR 1964 SC 1781

5

(1985) 2 SCC 116

6

(1986) Supp. SCC 20

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generation, transmission, distribution, trade and use of

electricity; for taking measures conducive to development of

electricity as an industry; to promote competition therein and

to protect the interest of consumers; rationalize tariff and

promote efficient and environment friendly policies besides

creating different regulatory and appellate bodies to deal with

highly complex technical issues with regard to production,

distribution and sale of electricity including fixation of tariff. A

reading of the provisions of the 2003 Act would go to show that

apart from fixation of tariff in a “situation of open access” or in

a situation of competitive bidding covered by Section 63 of the

Act, determination and fixation of tariff is a statutory function

to be performed by the State Regulatory Commissions

constituted under the Electricity Regulatory Commissions Act,

1988 and exercising powers in consonance with the principles

enunciated by the Electricity Act, 2003. Insofar as fixation of

tariff is concerned, Part VII of the Act read with the functions of

the State Commission contained in Section 86 thereof are

relevant and would require to be specifically noticed. Sections

61, 62 64 and Section 86 of the Act therefore are being

extracted herein below.

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“61. Tariff regulations:- The Appropriate Commission shall,

subject to the provisions of this Act, specify the terms and

conditions for the determination of tariff, and in doing so,

shall be guided by the following, namely:-

(a) the principles and methodologies specified by the Central

Commission for determination of the tariff applicable to

generating companies and transmission licensees;

(b) the generation, transmission, distribution and supply of

electricity are conducted on commercial principles;

(c) the factors which would encourage competition, efficiency,

economical use of the resources, good performance and

optimum investments;

(d) safeguarding of consumers' interest and at the same time,

recovery of the cost of electricity in a reasonable manner;

(e) the principles rewarding efficiency in performance;

(f) multi year tariff principles;

1[(g) that the tariff progressively reflects the cost of supply of

electricity and also reduces cross-subsidies in the manner

specified by the Appropriate Commission;]

(h) the promotion of co-generation and generation of

electricity from renewable sources of energy;

(i) the National Electricity Policy and tariff policy:

Provided that the terms and conditions for determination of

tariff under the Electricity (Supply) Act, 1948 (54 of 1948),

the Electricity Regulatory Commission Act, 1998 (14 of 1998)

and the enactments specified in the Schedule as they stood

immediately before the appointed date, shall continue to

apply for a period of one year or until the terms and

conditions for tariff are specified under this section,

whichever is earlier.”

“62. Determination of tariff: - (1) The Appropriate

Commission shall determine the tariff in accordance with the

provisions of this Act for –

(a) supply of electricity by a generating company to a

distribution licensee:

Provided that the Appropriate Commission may, in case of

shortage of supply of electricity, fix the minimum and

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maximum ceiling of tariff for sale or purchase of electricity in

pursuance of an agreement, entered into between a

generating company and a licensee or between licensees, for a

period not exceeding one year to ensure reasonable prices of

electricity;

(b) transmission of electricity;

(c) wheeling of electricity;

(d) retail sale of electricity:

Provided that in case of distribution of electricity in the same

area by two or more distribution licensees, the Appropriate

Commission may, for promoting competition among

distribution licensees, fix only maximum ceiling of tariff for

retail sale of electricity.

(2) The Appropriate Commission may require a licensee or a

generating company to furnish separate details, as may be

specified in respect of generation, transmission and

distribution for determination of tariff.

(3) The Appropriate Commission shall not, while determining

the tariff under this Act, show undue preference to any

consumer of electricity but may differentiate according to the

consumer's load factor, power factor, voltage, total

consumption of electricity during any specified period or the

time at which the supply is required or the geographical

position of any area, the nature of supply and the purpose for

which the supply is required.

(4) No tariff or part of any tariff may ordinarily be amended,

more frequently than once in any financial year, except in

respect of any changes expressly permitted under the terms

of any fuel surcharge formula as may be specified.

(5) The Commission may require a licensee or a generating

company to comply with such procedures as may be specified

for calculating the expected revenues from the tariff and

charges which he or it is permitted to recover.

(6) If any licensee or a generating company recovers a price or

charge exceeding the tariff determined under this section, the

excess amount shall be recoverable by the person who has

paid such price or charge along with interest equivalent to the

bank rate without prejudice to any other liability incurred by

the licensee.”

“64. Procedure for tariff order: - (1) An application for

determination of tariff under section 62 shall be made by a

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generating company or licensee in such manner and

accompanied by such fee, as may be determined by

regulations.

(2) Every applicant shall publish the application, in such

abridged form and manner, as may be specified by the

Appropriate Commission.

(3) The Appropriate Commission shall, within one hundred

and twenty days from receipt of an application under

sub-section (1) and after considering all suggestions and

objections received from the public,-

(a) issue a tariff order accepting the application with such

modifications or such conditions as may be specified in that

order;

(b) reject the application for reasons to be recorded in writing

if such application is not in accordance with the provisions of

this Act and the rules and regulations made thereunder or

the provisions of any other law for the time being in force:

Provided that an applicant shall be given a reasonable

opportunity of being heard before rejecting his application.

(4) The Appropriate Commission shall, within seven days of

making the order, send a copy of the order to the Appropriate

Government, the Authority, and the concerned licensees and

to the person concerned.

(5) Notwithstanding anything contained in Part X, the tariff

for any interstate supply, transmission or wheeling of

electricity, as the case may be, involving the territories of two

States may, upon application made to it by the parties

intending to undertake such supply, transmission or

wheeling, be determined under this section by the State

Commission having jurisdiction in respect of the licensee who

intends to distribute electricity and make payment therefor.

(6) A tariff order shall, unless amended or revoked, continue

to be in force for such period as may be specified in the tariff

order.”

“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

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case may be, within the State:

Provided that where open access has been permitted to a

category of consumers under section 42, the State

Commission shall determine only the wheeling charges and

surcharge thereon, if any, for the said category of consumers;

(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;

(c) facilitate intra-State transmission and wheeling of

electricity;

(d) issue licences to persons seeking to act as transmission

licensees, distribution licensees and electricity traders with

respect to their operations within the State;

(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;

(f) adjudicate upon the disputes between the licensees, and

generating companies and to refer any dispute for arbitration;

(g) levy fee for the purposes of this Act;

(h) specify State Grid Code consistent with the Grid Code

specified under clause (h) of sub-section (1) of section 79;

(i) specify or enforce standards with respect to quality,

continuity and reliability of service by licensees;

(j) fix the trading margin in the intra-State trading of

electricity, if considered, necessary; and

(k) discharge such other functions as may be assigned to it

under this Act.

(2) The State Commission shall advise the State Government

on all or any of the following matters, namely:-

(i) promotion of competition, efficiency and economy in

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activities of the electricity industry;

(ii) promotion of investment in electricity industry;

(iii) reorganization and restructuring of electricity industry in

the State;

(iv) matters concerning generation, transmission ,

distribution and trading of electricity or any other matter

referred to the State Commission by that Government.

(3) The State Commission shall ensure transparency while

exercising its powers and discharging its functions.

(4) In discharge of its functions, the State Commission shall

be guided by the National Electricity Policy, National

Electricity Plan and tariff policy published under section 3.”

10.While Section 61 of the Act lays down the principles for

determination of tariff, Section 62 of the Act deals with the

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 paragraphs 36 and 64 of

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Transmission Corporation of Andhra Pradesh Vs. Sai

Renewable Power Pvt. Ltd. (supra). 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 the 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.

11.The principles on which tariff is to be determined by the

Commission as set out in Section 61 have already been

noticed. Generation, transmission, distribution and supply of

electricity is required to be conducted on commercial

principles; while the consumers’ interest is to be safeguarded,

recovery of cost of electricity in a reasonable manner has also

to be ensured. Under Section 64(6) a tariff order continues to

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remain in force for such period as may be specified. In the

State of Gujarat, currently, the Gujarat Electricity Regulatory

Commission (multi-year tariff) Regulations, 2016 govern the

fixation of tariff by the State Commission. As per Regulation

31 the Commission is required to determine the tariff of a

generating company, transmission licensee, SLDC and

distribution licensee for each financial year during the control

period (control period is 5 years) (financial year 2016 to

financial year 2021) having regard to the following factors:

“(a)The approved forecast of Aggregate Revenue

Requirement and expected revenue from tariff and

charges of the Generating company, Transmission

Licensee, SLDC and Distribution Licensee for such

financial year, including modification approved at

the time of mid-term review, if any, and

(b)Approved gains and losses, including the incentive

available to be passed through in tariffs, following

the Truing Up of previous year.

12. Not only the tariff fixed is subject to periodic review,

furthermore the above Regulations provide for taking into

consideration the force majeure events. Any force majeure is

considered as an uncontrollable factor. In fact Regulation 23

provides that the approved aggregate gain or loss on account of

uncontrollable factor shall be passed through as an adjustment

in the tariff over such period as may be specified in the Order

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of the Commission.

13. Regulations 23 and 31 of the Gujarat Electricity

Regulatory Commission (multi-year tariff) Regulations, 2016

are reproduced hereunder.

23. Mechanism for pass through of gains or losses

on account of uncontrollable factors

23.1 The approved aggregate gain or loss to the Generating

Company or Transmission Licensee or SLDC or

Distribution Licensee on account of uncontrollable

factors shall be passed through as an adjustment in

the tariff of the Generating Company or Transmission

Licensee or SLDC or Distribution Licensee over such

period as may be specified in the Order of the

Commission passed under these Regulations.

23.2 The Generating Company or Transmission Licensee or

SLDC or Distribution Licensee shall submit such

details of the variation between expenses incurred

and revenue earned and the figures approved by the

Commission, in the prescribed format to the

Commission, along with the detailed computations

and supporting documents as may be required for

verification by the Commission.

23.3 Nothing contained in this Regulation 23shall apply in

respect of any gain or loss arising out of variations in

the price of fuel and power purchase, which shall be

dealt with as specified by the Commission from time

to time.

31. Annual determination of tariff

The Commission shall determine the tariff of a Generating

Company, Transmission Licensee, SLDC and Distribution

Licensee covered under a Multi-Year Tariff framework for

each financial year during the Control Period, at the

commencement of such financial year, having regard to the

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following:

(a) The approved forecast of Aggregate

Revenue Requirement and expected revenue

from tariff and charges of the Generating

Company, Transmission Licensee, SLDC and

Distribution Licensee for such financial year,

including modifications approved at the time of

mid-term review, if any; and

(b) Approved gains and losses, including the

incentive available to be passed through in

tariffs, following the Truing Up of previous year.”

14.When the tariff order itself is subject to periodic review it

is difficult to see how incorporation of a particular tariff

prevailing on the date of commissioning of the power project

can be understood to bind the power producer for the entire

duration of the plant life (20 years) as has been envisaged by

Clause 4.6 of the PPA in the case of Junagadh. That apart,

modification of the tariff on account of air cooled condensers

and denying the same on account of claimed inadequate

pricing of biogas fuel is itself contradictory.

15.As already noticed, 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 through agreements for power produced

for distribution and supply. As held by this Court in

Page 20 20

Sri Venkata Setaramanjaneya Rice & Oil Mills and Ors. Vs.

State of A.P. (supra), K. Ramanathan Vs. State of T.N. &

Anr. (supra) and D.K. Trivedi & Sons Vs. State of Gujarat &

Ors. (supra) the power of regulation is indeed of wide import.

The following extracts from the reports in the above cases

would illuminate the issue.

Sri Venkata Setaramanjaneya Rice & Oil

Mills and Ors. Vs. State of A.P. (supra)

“20. Then it was faintly argued by Mr. Setalvad

that the power to regulate conferred on the

respondent by Section 3(1) cannot include the

power to increase the tariff rate; it would include

the power to reduce the rates. This argument is

entirely misconceived. The word “regulate” is wide

enough to confer power on the respondent to

regulate either by increasing the rate, or

decreasing the rate, the test being what is it that

is necessary or expedient to be done to maintain,

increase, or secure supply of the essential articles

in question and to arrange for its equitable

distribution and its availability at fair prices.

…………………………………………………..”

K. Ramanathan Vs. State of T.N. &

Anr. (supra)

“18. The word “regulation” cannot have any rigid

or inflexible meaning as to exclude “prohibition”.

The word “regulate” is difficult to define as having

any precise meaning. It is a word of broad import,

having a broad meaning, and is very

comprehensive in scope. There is a diversity of

opinion as to its meaning and its application to a

particular state of facts, some courts giving to the

term a somewhat restricted, and others giving to

it a liberal, construction. The different shades of

meaning are brought out in Corpus Juris

Secundum, Vol. 76 at p. 611:

Page 21 21

“‘Regulate’ is variously defined as meaning to

adjust; to adjust, order, or govern by rule,

method, or established mode; to adjust or control

by rule, method, or established mode, or

governing principles or laws; to govern; to govern

by rule; to govern by, or subject to, certain rules

or restrictions; to govern or direct according to

rule; to control, govern, or direct by rule or

regulations.

‘Regulate’ is also defined as meaning to direct;

to direct by rule or restriction; to direct or

manage according to certain standards, laws, or

rules; to rule; to conduct; to fix or establish; to

restrain; to restrict.”

See also: Webster’s Third New International

Dictionary, Vol. II, p. 1913 and Shorter Oxford

Dictionary, Vol. II, 3rd Edn., p. 1784.

19. It has often been said that the power to

regulate does not necessarily include the power

to prohibit, and ordinarily the word “regulate” is

not synonymous with the word “prohibit”. This is

true in a general sense and in the sense that

mere regulation is not the same as absolute

prohibition. At the same time, the power to

regulate carries with it full power over the thing

subject to regulation and in absence of restrictive

words, the power must be regarded as plenary

over the entire subject. It implies the power to

rule, direct and control, and involves the

adoption of a rule or guiding principle to be

followed, or the making of a rule with respect to

the subject to be regulated. The power to regulate

implies the power to check and may imply the

power to prohibit under certain circumstances,

as where the best or only efficacious regulation

consists of suppression. It would therefore

appear that the word “regulation” cannot have

any inflexible meaning as to exclude

“prohibition”. It has different shades of meaning

and must take its colour from the context in

which it is used having regard to the purpose and

object of the legislation, and the Court must

necessarily keep in view the mischief which the

legislature seeks to remedy.”

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D.K. Trivedi & Sons Vs. State of

Gujarat & Ors. (supra)

“30. Bearing this in mind, we now turn to

examine the nature of the rule-making power

conferred upon the State Governments by Section

15(1). Although under Section 14, Section 13 is

one of the sections which does not apply to minor

minerals, the language of Section 13(1) is in pari

materia with the language of Section 15(1). Each

of these provisions confers the power to make

rules for “regulating”. The Shorter Oxford English

Dictionary, 3rd Edn., defines the word “regulate”

as meaning “to control, govern, or direct by rule

or regulations; to subject to guidance or

restrictions; to adapt to circumstances or

surroundings”. Thus, the power to regulate by

rules given by Sections 13(1) and 15(1) is a power

to control, govern and direct by rules the grant of

prospecting licences and mining leases in respect

of minerals other than minor minerals and for

purposes connected therewith in the case of

Section 13(1) and the grant of quarry leases,

mining leases and other mineral concessions in

respect of minor minerals and for purposes

connected therewith in the case of Section 15(1)

and to subject such grant to restrictions and to

adapt them to the circumstances of the case and

the surroundings with reference to which such

power is exercised. It is pertinent to bear in mind

that the power to regulate conferred by Sections

13(1) and 15(1) is not only with respect to the

grant of licences and leases mentioned in those

sub-sections but is also with respect to “purposes

connected therewith”, that is, purposes

connected with such grant.”

16.All the above would suggest that in view of Section 86(1)

(b) the Court must lean in favour of flexibility and not read

inviolability in terms of the PPA insofar as the tariff stipulated

therein as approved by the Commission is concerned. It would

Page 23 23

be a sound principle of interpretation to confer such a power if

public interest dictated by the surrounding events and

circumstances require a review of the tariff. The facts of the

present case, as elaborately noted at the threshold of the

present opinion, would suggest that the Court must lean in

favour of such a view also having due regard to the provisions

of Sections 14 and 21 of the General Clauses Act, 1898. In

this context, the views of this Court on the purport and effect of

Sections 14 and 21 of the General Clauses Act may be

re-noticed by extracting paragraphs 47, 48 and 49 of the

decision of this Court in D.K. Trivedi & Sons Vs. State of

Gujarat & Ors. (supra).

“47. The next contention was that though under

Section 15(1) the State Governments may have the

power to make rules providing for payment of royalty

and dead rent, sub-section (3) showed that such

power did not extend to amending the rules so as to

enhance the rate of dead rent. The submission in

this behalf was that the power to enhance the rate of

royalty by amending the rules was expressly

provided for in sub-section (3) by the use of the

words “at the rate prescribed for the time being in

the rules framed by the State Government in respect

of minor minerals” but there was no such provision

in Section 15 with respect to dead rent. We are

unable to accept this submission. Rules under

Section 15(1), though made by the State

Governments, are rules made under a Central Act

and the provisions of the General Clauses Act, 1897,

Page 24 24

apply to such rules. Under Section 21 of the General

Clauses Act, where by any Central Act, a power to

make rules is conferred, then that power includes a

power, exercisable in the like manner and subject to

the like sanction and conditions if any, to add to,

amend, vary or rescind any rules so made. The

power to amend the rules is therefore,

comprehended within the power to make rules and

as Section 15(1) confers upon the State Governments

the power to make rules providing for payment of

dead rent and royalty, it also confers upon the State

Governments the power to amend those rules so as

to alter the rates of royalty and dead rent so

prescribed, either by enhancing or reducing such

rates. …………… …………. …………. ………….

48. It was then contended that the very language of

sub-section (1) of Section 15 shows that it does not

confer any power upon the State Governments to

enhance the rate of royalty or dead rent because the

rules which are to be made under that sub-section

are for regulating the grant of quarry leases, mining

leases and other mineral concessions in respect of

minor minerals and, therefore, the rules under that

sub-section can be made only with respect to the

time when such leases or concessions are granted

and not with respect to any point of time subsequent

thereto and there being no provision similar to

sub-section (3) of Section 15 with respect to dead

rent, any rule providing for increase in the rate of

dead rent during the subsistence of a lease would be

ultra vires Section 15. This submission is devoid of

substance. As pointed out earlier, sub-section (3) of

Section 15 does not confer any power to amend the

rules made under Section 15(1), for the power to

amend the rules is comprehended within the power

to make the rules conferred by sub-section (1) of

Section 15. The construction sought to be placed

upon the word “grant” in Section 15(1) also cannot

be accepted. While granting a lease it is open to the

Page 25 25

grantor to prescribe conditions which are to be

observed during the period of the grant and also to

provide for the forfeiture of the lease on breach of

any of those conditions. If the grant of a lease were

not to prescribe such conditions, the lessee could

with impunity commit breaches of the conditions of

the lease. Ordinary leases of immovable property at

times provide for periodic increases of rent and there

is no reason why such increases should not be made

in a mining or quarry lease or other mineral

concession granted under a regulatory statute

intended for the benefit of the public and even less

reason why such a statute should not confer power

to make rules providing for increases in the rate of

dead rent during the subsistence of the lease.

……………… ……………… …………… ……………

49. In support of the above contention it was also

submitted that in the absence of a provision like the

one contained in Section 15(3) the power to enhance

the rate of dead rent cannot be so exercised as to

affect subsisting leases and that unless this

construction were placed upon sub-section (1), the

power conferred by that sub-section would be bad in

law as being an arbitrary power. It was submitted

that a mining lease is the result of a contract entered

into between two parties and dead rent is part of the

consideration for the grant of the lease, and just as

in the case of a contract of sale of goods, it cannot be

left to the sweet will of the seller to charge what price

he liked, in the same way in the case of leases and

concessions granted under Section 15(1), it cannot

be left to the State Governments to amend the rules

so as to charge whatever dead rent they like and

whenever they like during the subsistence of the

lease. We find no substance in either of these

submissions. A quarry lease, mining lease or

other mineral concession in respect of a minor

mineral does not stand on the same footing as

an ordinary contract. These leases and

Page 26 26

concessions are granted by the State

Governments pursuant to rules made under the

statutory power conferred upon them by a

regulatory Act. Minerals are part of the material

resources which constitute a nation’s natural

wealth and if the nation is to advance

industrially and if its economy is to be benefited

by the proper development and exploitation of

these resources, they cannot be permitted to be

frittered away and exhausted within a few

years by indiscriminate exploitation without

any regard to public and national interest. The

same view was expressed by the Court in State of

Tamil Nadu v. Hind Stone. ………… ……………

………… The presumption is that an authority

clothed with a statutory power will exercise such

power reasonably, and if in the public interest and

for the efficacious regulation of mines and quarries

of minor minerals and the proper development of

such minerals, a State Government as the delegate

of the Union Government thinks fit to amend the

rules so as to enhance the rate of dead rent, it

cannot be said that it is prevented from doing so by

the principles of the ordinary law of contracts. It may

be that in certain cases by enhancing the rate of

dead rent the holders of leases in respect of certain

types of minor minerals may be adversely affected

but private interest cannot be permitted to override

public interest. Conservation of minerals and their

proper exploitation result in securing the maximum

benefit to the community and it is open to the State

Governments to enhance the rate of dead rent so as

to ensure the proper conservation and development

of minor minerals even though it may affect a

lessee’s liability under a subsisting lease.”

17. A similar view expressed in Shree Sidhbali Steels Ltd.

and Others Vs. State of Uttar Pradesh and Others

7

may

7

(2011) 3 SCC 193

Page 27 27

also be noticed.

“41. By virtue of Sections 14 and 21 of the General

Clauses Act, when a power is conferred on an

authority to do a particular act, such power can be

exercised from time to time and carries with it the

power to withdraw, modify, amend or cancel the

notifications earlier issued, to be exercised in the like

manner and subject to like conditions, if any,

attached with the exercise of the power. It would be

too narrow a view to accept that chargeability once

fixed cannot be altered. Since the charging provision

in the Electricity (Supply) Act, 1948 is subject to the

State Government’s power to issue notification under

Section 49 of the Act granting rebate, the State

Government, in view of Section 21 of the General

Clauses Act, can always withdraw, rescind, add to or

modify an exemption notification. No industry can

claim as of right that the Government should

exercise its power under Section 49 and offer rebate

and it is for the Government to decide whether the

conditions are such that rebate should be granted or

not.”

18.Before parting, a word about the recent pronouncements

of this Court in Gujarat Urja Vikas Nigam Limited Vs. EMCO

Ltd. & Anr. (supra) and Bangalore Electricity Supply Co.

Vs. Konark Power Projects Ltd. (supra), relied upon by the

appellant. All that would be necessary to note in this regard is

the context in which the bar of a review of the terms of a PPA

was found by this Court in the above cases. In Gujarat Urja

Vikas Nigam Limited Vs. EMCO Ltd. & Anr. (supra) the

power purchaser sought the benefit of a second tariff order

Page 28 28

made effective to projects commissioned after 29.01.2012 (the

power purchaser had commissioned its project on 02.03.2012)

though under the PPA it was to be governed by the first tariff

order of January, 2010. Under the first tariff order for such

projects which were not commissioned on or before the date

fixed under the said order, namely, 31.11.2011 the tariff

payable was to be determined by the Gujarat Electricity

Regulatory Commission. The power producer in the above case

did not seek determination of a separate tariff but what was

sought was a declaration that the second tariff order dated

27.01.2012 applicable to PPA(s) after 29.01.2012 would be

applicable. It is in this context that this Court had taken the

view that the power producer would not be relieved of its

contractual obligations under the PPA. In the case of

Bangalore Electricity Supply Co. Vs. Konark Power

Projects Ltd. (supra), this Court held that it was beyond the

power of State Commission to vary the tariff fixed under the

approved PPA in view of the specific provisions in Regulations

5.1 and 9 of the KERC(Power Procurement from Renewable

Sources by Distribution Licensee) Regulations, 2004 and 2011

respectively as the same specifically excluded a PPA concluded

Page 29 29

prior to the date of notification of the Regulations in question.

19.In view of the above, the appeals are dismissed and the

orders dated 31.05.2012 and 02.12.2013 of the Appellate

Tribunal are affirmed. In the facts and circumstances of the

case, the parties are left to bear their own costs.

….……......................,J.

[RANJAN GOGOI]

….……......................,J.

[PRAFULLA C. PANT]

NEW DELHI;

JULY 05, 2016.