"No Shred Of Evidence Or Pleadings Beyond Bare Allegation"- SC Criticises APTEL's Casual Approach, Sets Aside Order Against Gujarat Urja

A Supreme Court Bench of Justice Sanjay Kishan Kaul, Justice S Ravindra Bhat and Justice MM Sundresh has stressed that as the Appellate Tribunal for Electricity is a judicial body dealing with contracts and bargains which are entered into by parties with equal bargaining power, it is not expected to casually render findings of coercion, or fraud, without proper pleadings or proof, or without probing into evidence.

Senior Counsel CA Sundaram appeared for the appellant. Senior Counsel Shyam Divan and Senior Counsel Dhruv Mehta appeared for the respondents.

In the present case, the State Commission, by its order, 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 (WPDs) set up under a preferential tariff mechanism. A Power Purchase Agreement in terms of the Central Commission Renewable Energy Generation Regulations (REC Regulations) was entered into between the Gujarat Urja and the wind power developers.

Later, the Central Commission amended the REC Regulations 2010 and replaced "at a price not exceeding pooled cost of the power purchase" with "at the pooled cost of power purchase". It was clarified in the amendment that PPAs already executed prior to this amendment at a tariff lower than APCC (Average Power Purchase Cost) would not be affected.

The respondents were aggrieved. They filed a 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. The State Commission directed that the order of the Central Commission was general and was therefore applicable to all similarly situated wind power generators. Aggrieved by this State Commission order, Gujarat Urja preferred an appeal before APTEL. This appeal was rejected by APTEL, and so was the review petition.

The Supreme Court took the view that the approach of the Court must 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.

It was observed that the PPA was entered into by the parties within the control period stipulated. It was also observed that after the amendment, no difficulty was experienced in the pricing mechanism agreed upon by the parties, under the PPA. In furtherance of the same, the Court observed that "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 a bid to shed clarity on the law, the Court said that "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". 

In light of the mentioned, it was held that agreements and PPAs entered into voluntarily by the parties, before the amendment were not affected by its terms.

Further, regarding the APTEL's findings on the respondents being coerced into entering into PPAs, the Supreme Court observed that "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. 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". 

Subsequently, the findings of the State Commission and APTEL were set aside.

Cause Title: Gujarat Urja Vikas Nigam & Ors. v. Renew Wind Energy (Rajkot) Private Limited & Ors.

Click here to read/download the Judgment