CERC Can't Go Beyond Express Terms Of Contract; APTEL Can't Discover New "Change In Law" Which Parties Never Contemplated : Supreme Court

The Supreme Court has ruled that in a case where the matter is governed by the express terms of the contract, the Central Electricity Regulatory Commission cannot, even donning the garb of a regulatory body, go beyond the express terms of the contract. The bench of Justices K.M. Joseph and B.V. Nagarathna noted that a regulation made under Section 178 of the Electricity Act, 2003 has the effect of interfering and overriding the existing contractual relationship between the regulated entities. However, the bench remarked that while it may be open for a regulation to extricate a party from its contractual obligations, the Commission cannot in the course of its adjudicatory power, use the nomenclature regulation to usurp this power to disregard the terms of the contract.The court further held that the Appellate Tribunal for Electricity cannot discover a new ‘change in law’ which the parties have not contemplated as change in law under the contract, and the Tribunal cannot rewrite the contract and create a new bargain between the parties.The top court was dealing with an appeal filed against the decision of the Tribunal who had set aside the order of the Commission, where the latter had ruled that the issues raised by the power generator, Sasan Power Ltd, a subsidiary of Reliance Power Limited, under the Power Purchase Agreement (PPA), did not constitute a ‘change in law’ for availing compensation under the PPA. While setting aside the order of the Tribunal where it had remanded the matter to the Commission for re-examination, the court upheld the finding that Sasan Power had failed to demonstrate that there was a change in law as contemplated under the Agreement between the parties.Dismissing the contentions advanced by Sasan Power, the court remarked that where the parties have entered into a contract with express provisions, the Tribunal would not have the power to disregard the express provisions of the contract on the ground that, with the passage of time and change in circumstances, it is found that the contract cannot be worked except at a loss for the contractor.Sasan Power, is a Special Purpose Vehicle, which was formed to set up an Ultra Mega Power Project, to be operated by Reliance Power Limited, which was declared as the successful bidder and who, consequently, acquired 100 per cent shareholding of Sasan Power.Reliance entered into a Power Purchase Agreement (PPA) with the appellants, including the Haryana Power Purchase Centre, in 2007.The power generated by Reliance was to be supplied through procurers/ distribution licensees, including the Haryana Power Purchase Centre, under the Electricity Act. The procurers were to supply the power so procured finally to the consumers.After the PPA was entered into, a petition was filed before the Central Electricity Regulatory Commission by Sasan Power under Section 79 of the Act, read with the statutory framework governing procurement of power and the relevant articles contained in the PPA, for compensation due to change in law ‘during the construction period’. Sasan Power pleaded that due to certain changes in law that had occurred during the ‘Construction Period of the Project’, the Capital Cost of the Project had increase substantially.The petition was dismissed by the Commission, who adopted the rates in accordance with the PPA, holding that Sasan Power had failed to establish any change in law.Against this, Sasan Power filed an appeal before the Appellate Tribunal for Electricity, who remanded the matter back to the Commission for re-examining the issues.In an appeal filed before the Supreme Court against the decision of the Tribunal, the top court reckoned that it was the case of Sasan Power that there was insufficient availability of water at the project site. Sasan Power had relied on the second report of the WAPCOS, who is a public sector body of the Central Government and who was tasked with the responsibility of ascertaining the availability of water for the project. Sasan Power pleaded that because of this, it was compelled to take water from a distant point of the reservoir which led to a colossal increase in the expenditure towards laying of the pipelines. Thus, the same constituted a change in law.Noting that it was dealing with an appeal under Section 125, which is based on the existence of a substantial question of law, the bench-while dealing with the merits of the case-reckoned that Sasan Power had pleaded before the Commission that the increase in the cost was directly attributable to the error in the 1st WAPCOS report provided to the bidders at the pre-bid stage, and thus Sasan Power was required to be compensated for the same. Further, as per Sasan Power, the initial consent which the appellant was required to secure under the PPA, consisted of performing the task of making the land available for the power plant and for the pipeline. Since there was a change in the same in view of what transpired pursuant to the second report of the...

CERC Can't Go Beyond Express Terms Of Contract; APTEL Can't Discover New "Change In Law" Which Parties Never Contemplated : Supreme Court

Parina Katyal

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