SOUTHERN POWER DISTRIBUTION POWER COMPANY LIMITED OF ANDHRA PRADESH (APSPDCL) & ANR. versus M/S HINDUJA NATIONAL POWER CORPORATION LIMITED & ANR

[2022] 8 S.C.R.

ASOUTHERN POWER DISTRIBUTION POWER COMPANYLIMITED OF ANDHRA PRADESH (APSPDCL) & ANR.

M/S HINDUJA NATIONAL POWER CORPORATION LIMITED& ANRB

(Civil Appeal No. 1844 of 2020)

FEBRUARY 02, 2022

[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]

CElectricity Act, 2003 – ss. 61, 62, 64 and 86 – Power PurchaseAgreement(PPA) – Appellants-distribution companies (DISCOMS)were to purchase 100% power generated by respondent no.1-HNPCL – O.P. No.21 of 2015 filed by HNPCL for determination ofcapital cost and O.P. No.19 of 2016 filed by appellants–DISCOMSfor approval of PPA – However, on 4th January, 2018, appellants-DDISCOMS filed IAs before the State Electricity RegulatoryCommission for withdrawal of O.P. No.19 of 2016 and disposal ofO.P. No.21 of 2015 – State Commission allowed withdrawal of O.P.No.19 of 2016 filed by appellants–DISCOMS and consequentiallydismissed O.P. No.21 of 2015 filed by HNPCL – Appeal of respondentEno.1-HNPCL allowed by Appellate Tribunal for Electricity (APTEL)which directed the State Electricity Regulatory Commission to disposeof O.P. No.21 of 2015 and O.P. No.19 of 2016 on merits –Correctness of – Held: APTEL rightly held that, on account of theassurance given by the State of Andhra Pradesh/APDISCOMS,HNPCL had altered its position and as such, it was not permissibleFfor the appellants-DISCOMS to withdraw O.P. No.19 of 2016 –Conduct of appellants-DISCOMS would disentitle them to withdrawthe application – Argument, that on account of increase of the capitalcost of the project, the appellants–DISCOMS would be required topurchase power at much higher rate, also does not hold water sinceGthe State Electricity Regulatory Commission would only approvethe cost as it would feel appropriate, as guided by the provisions u/s.61 of the Act of 2003 and the Regulations; and merely because,the cost of the project is estimated by HNPCL at particular amount,the State Commission is not bound to accept the same – Further,perusal of s.64 of the Act of 2003 would reveal that even aH

SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD.

Generating Company is entitled to make an application fordetermination of tariff u/s.62 of the Act of 2003 – As such, the StateCommission was wholly unjustified in dismissing O.P. No.21 of 2015filed by HNPCL – For reasons unknown, appellants-DISCOMS tooka decision to resile from their earlier stand, due to which, not onlythe huge investment made by HNPCL would go in waste, but alsovaluable resources of the public including thousands of acres ofland would go in waste – Appellants-DISCOMS, which areinstrumentalities of the State, could not be permitted to change theirdecision at their whims and fancies and, particularly, when it wasadversarial to the public interest and public good – The recordclearly showed that the change in decision was arbitrary, irrationaland unreasonable – IAs filed by appellants–DISCOMS, were acts,affecting public interest and public good, without there being anyrational or reasonable basis for the same – Conduct of appellants–DISCOMS, deprecated – In any event, the impugned judgment ofAPTEL cannot be said to be prejudicial to the interests of any of theparties – What was done by APTEL was only to direct the StateElectricity Regulatory Commission to dispose of the said two O.Pson merits – Appeal dismissed with costs, quantified at Rs.5,00,000/- – State Electricity Regulatory Commission to decide the said twoO.Ps, expeditiously, within six months.

Constitution of India – Arts.12 and 14 – Public Authority –State – Instrumentalities of the State – Held: Every action of Stateis required to be guided by the touch-stone of non-arbitrariness,reasonableness and rationality – Every action of State is equallyrequired to be guided by public interest – Every holder of publicoffice is trustee, whose highest duty is to the people of the country– The Public Authority is therefore required to exercise the powersonly for the public good.

Dismissing the appeal, the Court

HELD: 1. The Appellate Tribunal for Electricity (APTEL)rightly held that, on account of the assurance given by the Stateof Andhra Pradesh/APDISCOMS, HNPCL had altered its positionand as such, it was not permissible for the appellants-DISCOMSto withdraw O.P. No.19 of 2016. The grounds, which are soughtto be urged in I.A. No.1 of 2018 in O.P. No.19 of 2016 and I.A.No.2 of 2018 in O.P. No.21 of 2015, were very much available

ABC

Awhen the appellants-DISCOMS had entered into MoA on 17thMay, 2013 and the Continuation Agreement dated 28th April,2016. [Para 79][226-C-E]

2. In any case, the conduct of the appellants–DISCOMS, inthe present case, would disentitle them to withdraw theBapplication. [Para 87][230--C-D]

3. Another argument, that on account of increase of thecapital cost of the project, the appellants-DISCOMS would berequired to purchase power at much higher rate, also does nothold water. The State Electricity Regulatory Commission whileCdetermining the tariff would be guided by various factors as arerequired to be taken into consideration in view of the provisionsof Section 61 of the Electricity Act, 2003. In any event, theappellants–DISCOMS have themselves reserved their right tocontest the correctness of the cost on every component at anDappropriate stage before the State Commission. Merely because,the cost of the project is estimated by HNPCL at particularamount, the State Commission is not bound to accept the same.The State Commission would only approve the cost as it wouldfeel appropriate, as guided by the provisions under Section 61 ofthe Act of 2003 and the Regulations. In that view of the matter,Ethe argument in this regard also, is without substance. [Para88][230-D-H]

4. In any event, the State Commission totally erred indismissing O.P. No.21 of 2015 filed by HNPCL. Perusal of Section64 of the Act of 2003 would reveal that even GeneratingFCompany is entitled to make an application for determination oftariff under Section 62 of the Act of 2003. As such, irrespectiveof the question, as to whether an application for withdrawal ofO.P. No.19 of 2016 filed by the appellants-DISCOMS could havebeen entertained, the State Commission was wholly unjustifiedGin dismissing O.P.No.21 of 2015 filed by HNPCL. In any case, inthe facts of the present case and, particularly, taking intoconsideration the conduct of the appellants-DISCOMS, theAPTEL rightly held that the appellants– DISCOMS could nothave been permitted to withdraw O.P. No.19 of 2016. [Para99][230-A-C]H

5. The appellants–DISCOMS are instrumentalities of theState and as such, State within the meaning of Article 12 of theConstitution of India. Every action of State is required to beguided by the touch-stone of non-arbitrariness, reasonablenessand rationality. Every action of State is equally required to beguided by public interest. Every holder of public office is atrustee, whose highest duty is to the people of the country. ThePublic Authority is therefore required to exercise the powersonly for the public good. [Para 100][234-C-E]

6. The determination of the capital cost of the project andthe rate of tariff at which the power has to be purchased wouldalways be subject to regulatory control of the State Commission.What has been done by the APTEL is only directing the StateCommission to determine the same. [Para 104][237-F-G]

7. The record would clearly reveal that from the year 2012onwards till 4[th] January, 2018, it was the consistent stand of theState of Andhra Pradesh as well as the APDISCOMS that it wouldbe purchasing 100% power generated from the project of HNPCL.Not only an application being O.P. No.21 of 2015 was filed byHNPCL for determination of capital cost, but also O.P. No.19 of2016 was filed by the appellants-DISCOMS for grant of approvalto the Continuation Agreement dated 28th April, 2016 with theAmended and Restated PPA of 1998. The matters were heardfinally on 15th May, 2017 and closed for orders. For someunknown reasons, exclusively within the knowledge of theappellants–DISCOMS, things turned topsy-turvy between 15[th]May, 2017 and 4th January, 2018, on which date, the appellants –DISCOMS did somersault and filed applications for withdrawalof O.P. No.19 of 2016 and disposal of O.P. No.21 of 2015. Everydecision of the State is required to be guided by public interestand the power is to be exercised for public good. For reasonsunknown, the appellants– DISCOMS took decision to resilefrom their earlier stand, due to which, not only the hugeinvestment made by HNPCL would go in waste, but also valuableresources of the public including thousands of acres of land wouldgo in waste. The reasons /grounds, which are sought to be given

Ain I.A. No. 1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018in O.P. No.21 of 2015, filed on 4th January, 2018, were very muchavailable between 2011 till 15th May, 2017. It is not as ifsomething new has emerged between 15th May, 2017 and 4thJanuary, 2018, which would have entitled the appellants–DISCOMS to resile from their earlier stand. The appellants–BDISCOMS could not be permitted to change the decision at theirwhims and fancies and, particularly, when it is adversarial to thepublic interest and public good. The record would clearly showthat the change in decision is arbitrary, irrational andunreasonable. [Para 105][237-G-H; 238-A-E]C

8. I.A. No.1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of2018 in O.P. No.21 of 2015 filed by the appellants-DISCOMS,are acts, which have been done wrongfully and wilfully withoutreasonable and probable cause. The act is one, affecting publicinterest and public good, without there being any rational orDreasonable basis for the same. [Para 107][239-D-E]

9. In any case, the impugned judgment of APTEL cannotbe said to be of such nature, which can be said to be prejudicialto the interests of any of the parties. What has been done by theAPTEL is only to direct the State Commission to dispose of O.P.ENo.21 of 2015 filed for determination of capital cost and O.P. No.19of 2016 filed for approval of Amended and Restated PPA(Continuation Agreement) on merits. On remand, the StateCommission would be bound to take into consideration all therelevant factors and the contentions to be raised by both theFparties before deciding the said O.Ps. [Para 109][239-F-G]

Hulas Rai Baij Nath v. Firm K.B. Bass and Co. [1967] 3SCR 886 – distinguished.

Arjun Singh v. Mohindra Kumar AIR 1964 SC 993 :[1964] 5 SCR 946; Tata Power Company Limited v.GReliance Energy Limited and others (2009) 16 SCC 659: [2009] 9 SCR 625; Kumari Shrilekha Vidyarthi andothers v. State of U.P. and others (1991) 1 SCC 212 :

SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD.

[1990] 1 Suppl. SCR 625; Food Corporation of Indiav. M/s Kamdhenu Cattle Feed Industries (1993) 1 SCC71 : [1992] 2 Suppl. SCR 322; Indian Oil CorporationLimited and others v. Shashi Prabha Shukla and another(2018) 12 SCC 85 : [2017] 13 SCR 268 and KalabharatiAdvertising v. Hemant Vimalnath Narichania and others(2010) 9 SCC 437 : [2010] 10 SCR 971 – referred to.

Boal Quay Wharfingers Ltd. v. King’s Lynn ConservancyBoard (1971) 1 WLR 1558 [Court of Appeal, England]

– referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1844of 2020.

From the Judgment and Order dated 07.01.2020 of the AppellateTribunal for Electricity at New Delhi in Appeal No. 41 of 2018.

C. S. Vaidyanathan, Sr. Adv., Mahfooz Ahsan Nazki, PolankiGowtham, Ms. Rajeswari Mukherjee, Advs. for the Appellants.

Dr. Abhishek M. Singhvi, M. G. Ramachandran, Sr. Advs., AtulSharma, Abhishek Sharma, Ms. Harshita Agarwal, Shubham Arya, Ms.L. Nidhiram Sharma, Alok Tripathi, Advs. for the Respondents.

The Judgment of the Court was delivered by

B. R. GAVAI, J.

1. The present appeal filed by the appellants – DistributionCompanies (hereinafter referred to as “the appellants - DISCOMS”)challenges the judgment and order dated 7[th] January, 2020, passed bythe Appellate Tribunal for Electricity, New Delhi (hereinafter referredto as “the APTEL”) in Appeal No. 41 of 2018, thereby allowing the

Aappeal filed by the respondent No.1 – M/s Hinduja National PowerCorporation Limited (hereinafter referred to as “HNPCL”). By theimpugned judgment and order, the APTEL has directed the AndhraPradesh Electricity Regulatory Commission (hereinafter referred to as“the State Commission”) to dispose of O.P. No.21 of 2015 filed byHNPCL for determination of capital cost and O.P. No.19 of 2016 filedBby the appellants – DISCOMS for approval of amended and restatedPower Purchase Agreement (hereinafter referred to as “PPA”)(Continuation Agreement) on merits.2. The facts, in brief, giving rise to the present appeal are asunder:C3. The erstwhile Andhra Pradesh State Electricity Board(hereinafter referred to as “APSEB”) entered into Memorandum ofUnderstanding (hereinafter referred to as “MoU”) with HNPCL on 17[th]July, 1992. As per the said MoU, APSEB transferred all the licenses,approvals, clearance and permits, fuel linkage, water required forDestablishment of the power project at Visakhapatnam in the erstwhileState of Andhra Pradesh, to HNPCL to generate and supply the electricityto APSEB.

4. An initial PPA was entered into between APSEB and HNPCLon 9[th] December, 1994. On 25[th] July, 1996, the Central ElectricityERegulatory Commission (CERC) granted Techno Economic Clearancefor the power project for an estimated cost of Rs.4628.11 crores (Rs.4.45 crores per MW).

5. Owing to certain change in conditions, the parties agreed toamend the initial PPA. Accordingly, an Amended and Restated PPAFdated 15[th] April, 1998, was entered into between APSEB and HNPCL.Between the years 1998 and 2007, the Amended and Restated PPA, forsale of power by HNPCL to APSEB, was not implemented. Subsequently,in the year 2007, HNPCL approached the Government of AndhraPradesh to revive the power project mainly structuring it as merchantGplant, offering 25% of the power generated to the State and balance75% power to third parties. However, it appears that there werenegotiations between the parties, and the State Government had offeredto purchase 100% power generated from the plant of HNPCL and thatHNPCL had agreed to it. The same would be clearly evident from thematerial placed on record, to which we will be referring hereinafter.HSOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P.(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]

6. The material placed on record would reveal that in the year2011-2012, the Central Power Distribution Company of Andhra PradeshLimited (hereinafter referred to as “APCPDCL”) for and on behalf offour Distribution Companies of Andhra Pradesh (hereinafter referred toas “APDISCOMS”) had initiated the process for procurement of powerunder Case-1 long term bidding route, to meet the base load requirementsof APDISCOMS from the years 2014-2015 onwards. In the said biddingprocess, HNPCL participated and had successfully emerged as the secondlowest bidder (L-2 bidder). After the completion of the bidding process,APCPDCL had filed O.P. No.55 of 2013 before the State Commissionfor approval of the tariffs emerged in the said bidding process. However,the State Level Expert Committee for evaluation of Case-1 bidding(hereinafter to as “Bid Evaluation Committee”) in its meeting dated 28[th]September, 2012, had noted that, the State Government had informedthat the entire capacity of HNPCL was encumbered to the State ofA.P./APDISCOMS and was not available for consideration under thetender. Accordingly, the Bid Evaluation Committee had discarded HNPCLfrom the bidding process.

7. In the meanwhile, there was correspondence betweenHNPCL and the State Government in the year 2012, with regard to thesteps to be taken for the development of the project and requestingState support for scheduled commissioning of the project. In this regard,HNPCL addressed letter dated 6[th] August, 2012 to the then Hon’bleChief Minister of the erstwhile State of Andhra Pradesh, therebyconveying its intention to develop the project and seeking State’s support.Vide communication dated 26[th] December, 2012, the State Governmentaddressed letter to HNPCL accepting its proposal and agreeing topurchase 100% power from the project of HNPCL as per the Amendedand Restated PPA. Vide communication dated 14[th] January, 2013,HNPCL agreed to supply 100% power to the State-DistributionCompanies at the tariff to be determined by the State Commission.

8. The HNPCL vide communication dated 16[th] May, 2013,addressed to the appellants – DISCOMS, inter alia, provided thereinthe details with regard to the estimated capital cost of the power projectto the tune of Rs.6098 crores as against Rs.5545 crores that was givenin June, 2010. The appellants – DISCOMS vide communication dated17[th] May, 2013, expressed their reservations about the capital costfurnished by HNPCL and reserved their rights to contest the same beforethe State Commission.

A9. On the same day, i.e., 17[th] May, 2013, Memorandum ofAgreement (hereinafter referred to as “MoA”) was entered into betweenthe APDISCOMS and HNPCL, thereby deciding to continue theAmended and Restated PPA dated 15[th] April, 1998, on the terms andconditions set out therein. In pursuance of the aforesaid MoA, FuelSupply Agreement (“FSA” for short) dated 26[th] August, 2013, came toBbe entered between HNPCL and Mahanadi Coalfield Limited for coalsupply for the said project.

10. On 12[th] March, 2014, petition being O.P. No.21 of 2015,came to be filed by HNPCL before the State Commission fordetermination of capital cost for the project and for determination of theCtariff for such generation and sale of electricity by HNPCL toAPDISCOMS.

11. Thereafter, on 2[nd] June, 2014, the Andhra Pradesh StateReorganisation Act, 2014, (hereinafter referred to as “ReorganisationAct”) came into effect vide which the erstwhile State of Andhra PradeshDwas bifurcated into two States, i.e., the State of Andhra Pradesh and theState of Telangana.

12. On 28[th] July, 2015, HNPCL filed an Addendum Application inO.P. No.21 of 2015, thereby enhancing the capital cost of the project toRs.8,087 crore. This capital cost was disputed by the APDISCOMS.E[[th]]

13. On 11[[th]] January, 2016, the first unit of the Power project (520MW) was declared Commercial Operation Date (COD) by HNPCL.Vide interim order dated 1[st] March, 2016, the State Commission fixedthe provisional tariff at the rate of Rs.3.61 per unit for supply of electricityby HNPCL to the APDISCOMS.F14. On 30[[th]]

14. On 30[[th]] March, 2016, HNPCL filed I.A. No.5 of 2016 in O.P.No.21 of 2015, for payment of variable charges and fixed charges atRs.1.80 per unit and Rs.2.16 per unit aggregating to Rs.3.96 per unit at80% availability.

15. On 28[th] April, 2016, distinct Power Distribution CorporationsGwere created including the appellants – DISCOMS i.e. Southern PowerDistribution Power Company Limited of Andhra Pradesh (“APSPDCL”)and Eastern Power Distribution Company of Andhra Pradesh(“APEPDCL”). These corporations succeeded the APSEB, which hadentered into the Amended and Restated PPA dated 15[th] April, 1998 withHNPCL. As such, the Continuation Agreement to the Amended andH

Restated PPA was entered into between the appellants – DISCOMSand HNPCL on 28[th] April, 2016.

16. On 11[th] May, 2016, the appellants – DISCOMS filed petitionbeing O.P. No.19 of 2016 before the State Commission for approval ofthe Continuation Agreement dated 28[th] April, 2016, read with theAmended and Restated PPA dated 15[th] April, 1998.

17. The State Government vide order dated 1[st] June, 2016,accorded approval for purchase of 100% power from HNPCL.

18. On 3[rd] July, 2016, the second unit of the HNPCL (520 MW)came to be declared COD by HNPCL.

19. Vide order dated 6[th] August, 2016, the State Commission re-determined the provisional tariff at the rate of Rs.3.82 per unit, payableby the appellants – DISCOMS for the power supplied by HNPCL.

20. On 15[th] May, 2017, the State Commission after hearing theparties on merits, reserved the judgment in both the petitions, i.e., in O.P.No.19 of 2016 and O.P. No.21 of 2015.

21. It is further to be noted that in the appeal arising out ofinterlocutory proceedings, the APTEL vide order dated 1[st] June, 2017,directed the State Commission to dispose of O.P. No.19 of 2016 andO.P. No.21 of 2015 on or before 14[th] August, 2017. The said periodcame to be extended from time to time, the last of such extension wasgranted till 31[st] January, 2018, vide order dated 10[th] January, 2018.

22. Thereafter, on 4[th] January, 2018, the appellants – DISCOMSfiled two Interlocutory Applications, viz., (i) I.A. No.1 of 2018 in O.P.No.19 of 2016 for withdrawal of O.P. No.19 of 2016 together with initialPPA; and (ii) I.A. No.2 of 2018 in O.P. No.21 of 2015 for disposal ofO.P. No.21 of 2015.

23. Vide order dated 31[st] January, 2018, the State Commissionallowed withdrawal of O.P. No.19 of 2016 filed by the appellants –DISCOMS seeking approval of PPA and consequentially dismissed O.P.No.21 of 2015 filed by HNPCL seeking determination of tariff.

24. Aggrieved by the same, an appeal being Appeal No.41 of2018, came to be filed by HNPCL before the APTEL. The said appealcame to be admitted by the APTEL vide order dated 26[th] February,2018. The APTEL vide order dated 16[th] March, 2018, passed in I.A.No.211 of 2018 in the said appeal, as an ad hoc arrangement, directed

Athe parties to maintain status quo as prevalent prior to 31[st] January, 2018.This was without prejudice to the rights and contentions of the parties inthe main appeal, i.e., Appeal No.41 of 2018.

25. It is also to be noted that the order dated 16[th] March, 2018,passed by the APTEL in I.A. No.211 of 2018 in Appeal No.41 of 2018,Bcame to be challenged by the appellants – DISCOMS before the HighCourt of Andhra Pradesh by filing Writ Petition being Writ PetitionNo.10814 of 2018. Another writ petition being Writ Petition No.13689 of2018 came to be filed by the appellants – DISCOMS challenging theorder of the APTEL dated 26[th] February, 2018, admitting the appealfiled by HNPCL. The said writ petitions came to be dismissed by theCHigh Court of Andhra Pradesh vide order dated 2[nd] May, 2018.

26. In the meantime, on 16[th] April, 2018, HNPCL had filed anExecution Petition being Execution Petition No.3 of 2018 before theAPTEL seeking execution of the order dated 16[th] March, 2018, passedby the APTEL in I.A. No.211 of 2018 in Appeal No.41 of 2018. CertainDdirections were passed by the APTEL in the said Execution Petitionvide order dated 31[st] May, 2018.

27. The appellants – DISCOMS had also challenged the orderdated 16[th] March, 2018, passed by the APTEL, by way of Civil AppealNo.5772 of 2018 before this Court. This Court vide order dated 4[th] June,E2018, refused to interfere with the said order, since it was an interimorder. However, this Court directed the appeal to be decided expeditiouslywithout taking into consideration the observations, in the order impugnedbefore it, as conclusive.

28. Vide impugned judgment and order dated 7[th] January, 2020,Fthe APTEL allowed the appeal filed by HNPCL and directed the StateCommission to dispose of O.P. No.21 of 2015 and O.P. No.19 of 2016.Being aggrieved thereby, the appellants – DISCOMS have approachedthis Court by way of the present appeal.

29. On 14[th] July, 2020, this Court passed the following order in thepresent appeal:G

The appeal is admitted.

Until further orders, the impugned order passed by theAppellate Tribunal for Electricity New Delhi in Appeal No. 41/2019 shall remain stayed.

HList for hearing after four weeks.”

30. An application being I.A. No.67061 of 2020 for modificationof the said order dated 14[th] July, 2020, came to be filed by HNPCL. ThisCourt vide order dated 21[st] August, 2020, modified the order as under:

“Heard.

By order dated 14.07.2020, we directed the stay ofimpugned order passed by the Appellate Tribunal for Electricity,New Delhi, in Appeal No.41/2019.

We clarify that there shall be no stay of the order dated16.03.2018 passed by the Appellate Tribunal for Electricity, NewDelhi, providing for interim measure. Order accordingly.

The instant interlocutory application stands disposed ofaccordingly”

31. It appears from the record that during the intervening period,certain Interlocutory Applications have been filed from both the sides,wherein, the appellants – DISCOMS are seeking vacation of the interimorder dated 21[st] August, 2020, whereas HNPCL is seeking implementationof the order dated 21[st] August, 2020. The record would show that thematter has been adjourned from time to time and was finally heard bythis Court on 20[th] January, 2022.

32. We have heard Shri C.S. Vaidyanathan, learned Senior Counselappearing on behalf of the appellants – DISCOMS and Dr. AbhishekManu Singhvi and Shri M.G. Ramachandran, learned Senior Counselappearing on behalf of HNPCL.

33. Shri C.S. Vaidyanathan, learned Senior Counsel appearing onbehalf of the appellants – DISCOMS, submitted that the APTEL hasgrossly erred in holding that the appellants – DISCOMS were not entitledto apply for withdrawal of O.P. No.19 of 2016, filed for grant of approvalof the PPA. It is submitted that unless there was prohibition in law, theappellants were very much within their right to apply for withdrawal ofthe O.P. filed by them. In this regard, Shri Vaidyanathan relied on thefollowing authorities:

(i)Boal Quay Wharfingers Ltd. v. King’s Lynn ConservancyBoard[1]and

(ii)Hulas Rai Baij Nath v. Firm K.B. Bass and Co.[2]

1 (1971) 1 WLR 1558 [Court of Appeal, England)

2 (1967) 3 SCR 886

A34. Shri Vaidyanathan further submitted that the PPA was not avalid document until it was approved by the State Commission underSection 86(1)(b) of The Electricity Act, 2003 (hereinafter referred to as“the Act of 2003”). He further submitted that under Section 21 of TheAndhra Pradesh Electricity Reform Act, 1998 (hereinafter referred toas “the Reform Act”), any agreement relating to generating, transmitting,Bdistribution or supply of energy without the previous consent in writingof the Commission was void ab initio. He submitted that by the impugnedjudgment, the APTEL has, in effect, granted HNPCL decree of specificperformance of contract, which is void ab initio. He further submittedthat MoA dated 17[th] May, 2013 and the Continuation Agreement datedC28[th] April, 2016 were themselves contrary to the National Tariff Policyissued under Section 3 of the Act of 2003 and Regulation 5.2(b) of theAndhra Pradesh Electricity Regulatory Commission (Terms andconditions for determination of tariff for supply of electricity by agenerating company to distribution licensee and purchase of electricityby distribution licensees) Regulation, 2008 (Regulation No.1 of 2008)D(hereinafter referred to as ‘the Tariff Regulations’) issued by the StateCommission. As such, the direction by the APTEL, to continue to getthe electricity supply from HNPCL, being contrary to the statutoryprovision, would not be tenable in law.

35. Shri Vaidyanathan submitted that the present project does notEfall under any of the categories mentioned in Regulation 5.2 of the TariffRegulations, which aspect has not been taken into consideration by theAPTEL.36. Shri Vaidyanathan further submitted that the finding of theAPTEL, that HNPCL had made huge investments on the basis of the

Fassurance given by the appellants – DISCOMS that they will purchase100% power from it, is itself erroneous. He submitted that the initialproject of HNPCL was lying in cold storage from 1996 to 2007. Hesubmitted that in the year 2007, HNPCL had attempted to revive theproject as Merchant-power plant. He submitted that the project ofHNPCL had also attained financial closure in the year 2010. He furtherGsubmitted that before the acceptance of the proposal of HNPCL by theState Government, HNPCL had already completed upto 93% of theproject. It is therefore, submitted that the finding that huge investmentsmade by HNPCL were on the basis of the representation by the StateGovernment is totally erroneous. In any case, he submits, that theHappellants – DISCOMS are independent authorities and not bound by

the decision of the State. He submitted that under the scheme of the Actof 2003, the appellants – DISCOMS cannot purchase the power withoutthe prior approval of the State Commission. He submits that the Statehas no role to play in the said matter. It is submitted that, in any case, theappellants – DISCOMS could not be bound by the representation madeby the State Government.

37. Shri Vaidyanathan further submits that since the re-initiationof the project in the year 2007 by HNPCL is as Merchant-powerplant, it can very well sell the power to the third parties in the market.He submitted that however, the appellants – DISCOMS cannot becompelled to purchase the power from HNPCL, which will be at veryhigh price. He submitted that the capital cost of the project, which wasinitially estimated at Rs.4628.11 crores has now gone up to Rs.8087crores, which will have direct effect on the purchase price of theelectricity by the appellants – DISCOMS. He therefore submits that ifthe appellants – DISCOMS are directed to purchase the electricity atsuch high price, the loss would be ultimately to the consumers and assuch, the direction given by the APTEL is also against the public interest.

38. Per contra, Dr. Abhishek Manu Singhvi and Shri M.G.Ramachandran, learned Senior Counsel appearing on behalf of HNPCLsubmitted that the order passed by the APTEL is such, which does notat all harm the appellants – DISCOMS. Dr. Singhvi submitted that bythe impugned order, the APTEL has only directed the State Commissionto dispose of O.P. No.21 of 2015 filed by HNPCL for determination ofcapital cost and O.P. No.19 of 2016 filed by the appellants – DISCOMSfor approval of Amended and Restated PPA on merits.

39. Dr. Singhvi submits that the APTEL has given sound andelaborate reasons and as such, no interference is warranted in the presentappeal.

40. Shri M.G. Ramachandran, learned Senior Counsel, submittedthat when withdrawal of an application is sought, which has the effectof frustrating the contract and defeating the defendant’s right, theappellants cannot be said to have the right to withdraw the proceedings.He relied on the following authorities in support of this proposition.

(i)Madhu Jajoo v. State of Rajasthan[3]

(ii)Kiran Girhotra & Ors. v. Raj Kumar & Ors.[4]

3 AIR 1999 Raj 1

4 (2009) 164 DLT 483

A(iii)M. Radhakrisna Murthy v. Government of A.P. & Ors.[5]

(iv)Smt. Ajita Debi v. Musst. Hossenara Begum[6]

(v)Mathuralal v. Chiranji Lal[7]

(vi)The Registrar, Manonmaniam Sundaranar UniversityBv. Suhura Beevi[8]

41. Shri Ramachandran has further submitted that right ofwithdrawal is not an absolute right and that once the judgment is reservedthere cannot be any further application seeking withdrawal. In supportof this proposition, he relied on the following authorities:C[[9]]

(i)Arjun Singh v. Mohindra Kumar[[9]]

(ii)Bharati Behera v. Jhili Prava Behera[10]

(iii)Rabia Bi Qasim v. Countrywide Consumer FinancialServices Limited[11]

D(iv)Pujya Sindhi Panchayat v. Prof. C.L. Mishra[12]

(v)Yash Mehra v. Arundhati Mehra[13]

(vi)Dharani Sugars and Chemicals Limited v. TMNEngineering Industry[14]

E42. Dr. Singhvi, learned Senior Counsel, further submitted that, asa matter of fact, HNPCL desired to start the project as Merchant-power plant. It is however, on the insistence of the State of AndhraPradesh that HNPCL was compelled to supply 100% of powergenerated to the State. He further submitted that it is evident from therecord that HNPCL had participated in the competitive bidding processFconducted by the APCPDCL. It was the decision of the Bid Evaluation

5 (2001) 3 ALD 330 (DB)

6 AIR 1977 Cal 59

7 AIR 1962 Raj 109

G8 AIR 1995 Mad 42

9 AIR 1964 SC 993

10 W.P. No.26254 of 2013 decided by Orissa High Court on 18.04.2014

11 ILR 2004 KAR 2215

12 AIR 2002 Rajasthan 274 (DB)

13 (2006) 132 DLT 166

14 CRP PD No.3309 to 3312 of 2011 and MP No.1 of 2011 decided by the Madras HighHCourt on 30.08.2017

Committee, to not consider the bid submitted by HNPCL on the premisethat the entire generation capacity of HNPCL’s project was alreadyencumbered to the State of Andhra Pradesh under the Amended andRestated PPA of 1998. He further submitted that not only this but theentire communication placed on record would show that it was the StateGovernment, which had expressed its interest to purchase 100% powerfrom HNPCL’s project as per the Amended and Restated PPA dated15[th] April, 1998.

43. He further submitted that on the reorganisation of the erstwhileState of Andhra Pradesh and its bifurcation into two States, i.e., theState of Andhra Pradesh and the State of Telangana; though the Stateof Telangana had demanded 54% of the power from HNPCL’s project,the Government of Andhra Pradesh insisted HNPCL to supply 100% ofthe power to the State of Andhra Pradesh. He therefore submits thatthe APTEL has rightly, on appreciation of the material placed on record,held that it was on the representation of the State Government that theHNPCL had made huge investments for the project. He submitted thatthe contention of the appellants – DISCOMS, that if the power generatedby the HNPCL is purchased by them, it will be at very heavy cost, istotally erroneous. He submitted that, as matter of fact, when as perthe interim orders passed by the APTEL and this Court, the appellants –DISCOMS could have purchased the power from HNPCL at the rateof Rs.3.82 per unit, the appellants – DISCOMS are purchasing the powerat much higher rate from the generators, which were ranked muchbelow HNPCL in the merit order. He further submits that the conduct ofthe appellants – DISCOMS is totally mala fide. Whenunder the interimorders of this Court as well as of the APTEL, they were bound to purchasethe power at much lesser price than compared to the rate at which theyare purchasing, they continued to purchase power at much higher price.He therefore submits that such an act, apart from being violative of theorder of this Court, is contrary to the public interest.

44. Dr. Singhvi further submits that on account of mala fide attitudeof the appellants – DISCOMS, it is not only HNPCL, but also the publicat large, who are the sufferers. He submits that huge investment ofthousands of crores of rupees is lying idle. He further submits that apartfrom generating employment for more than 1000 people, the generationproject, which is fully operational, would also provide electricity in theState of Andhra Pradesh. He submitted that the contention of the

Aappellants – DISCOMS that they had decided to withdraw the applicationon account of huge capital cost and the power being available in excessis also factually incorrect. He submits that recently the appellants haveentered into an MoU with SEMBCORP Energy India in December,2021 for generation of 625 MW of electricity. He submits that insofar asthe price at which the electricity would be purchased by the appellants –BDISCOMS from the generation unit of HNPCL would be determinedby the State Commission, which will have to take into considerationvarious aspects while approving the capital cost of the project as well aswhile doing the exercise of determination of tariff. The learned SeniorCounsel therefore submits that no interference is warranted in the presentCappeal.45. The facts in the present case are not much in dispute. It is notin dispute that on 17[th] July, 1992, an MoU came to be entered betweenAPSEB and HNPCL, vide which APSEB had transferred all the licences,approvals, clearance and permits, fuel linkage, water required for theDproject to HNPCL. It is also not in dispute that on 9[th] December, 1994,an initial PPA came to be entered between HNPCL and APSEB. On25[th] July, 1996, the CERC granted Techno Economic Clearance forthe power project for an estimated cost of Rs.4628.11 crores (Rs.4.45crores per MW). It is also not in dispute that APSEB and HNPCLmutually agreed to amend 1994 PPA and accordingly, an Amended andERestated PPA came to be executed on 15[th] April, 1998. It is also not indispute that from 1996 till 2007, the project remained in cold storage. Inthe year 2007, the promoters of HNPCL approached the then Hon’bleChief Minister of the erstwhile State of Andhra Pradesh. It appears thatcertain discussions took place between the then Hon’ble Chief MinisterFof erstwhile State of Andhra Pradesh and the promoters of HNPCL.On 5[th] January, 2007, Mr. G.P. Hinduja addressed communication tothe then Hon’ble Chief Minister of the erstwhile State of Andhra Pradesh.It will be relevant to refer to the following excerpt from the saidcommunication, which reads thus:

“As per our discussion I am summarizing herein below ourproposal for your ready reference:

1.Vizag Power project will be mainly structured as Merchantplant and implemented in period manner with an initialcapacity of 1040 MW and increasing upto 400 MW in aHphased manner.

2.GoAP will sign MoU with the Project Sponsors to provide:A

-Title deeds for 1122.38 acres of land against balancepayment of Rs.16.48 cr.

-Transfer of remaining land of 1921.34 acres againstpayment of an amount of Rs. 67.63 cr.

-Infrastructure support including for construction,power and water.

-Recommend to GoI mega status for the project.

-Revive the Coal supply and TransportationCAgreements.

-Facilitate environment clearance from MOEF.

-Sanction of all other applicable State Approvals.

3.GoAP will have the first right of refusal, in the MoU, toDpurchase 25% of the power at regulated tariff.”

46. It could thus be seen that when HNPCL proposed to revivethe project in the year 2007, it was mainly structured as Merchantplant, wherein the Government of Andhra Pradesh was to have the firstright of refusal, to purchase 25% of the power at regulated tariff.

47. It is also not in dispute that APCPDCL on behalf of all thefour APDISCOMS (viz., Central Power Distribution Company of AndhraPradesh Limited, Southern Power Distribution Company of AndhraPradesh Limited, Northern Power Distribution Company of AndhraPradesh Limited and Eastern Power Distribution Company of AndhraPradesh Limited) had conducted bidding process for procurement ofpower of 2000 MW +/- 20% under Case-1 to meet the base loadrequirements of APDISCOMS from the year 2014-2015 onwards. It isalso not in dispute that in the said bidding process, HNPCL had alsosubmitted its bid and successfully emerged as L-2 bidder. After completionof the bidding process, APCPDCL had applied for approval of the tariffat which the power was to be purchased from the successful bidders inthe said process. It will be relevant to refer to paragraph 4(u) of theorder dated 13[th] August, 2013, passed by the State Commission in O.P.No. 55 of 2013, filed by APCPDCL on behalf of all the fourAPDISCOMS, which reads thus:

“u)In the minutes of meeting held on 28[th] September 2012, theBid Evaluation Committee noted that “The PrincipalSecretary, Energy informed the Evaluation Committee thatthe entire capacity of Hinduja National Power CorporationLimited (HNPCL) is encumbered to the state of A.P. /DISCOMs of A.P. and hence not available for considerationBunder this tender. Hence, HNPCL must be taken out of thebid process and APERC must be informed accordingly.Hence the Committee took the note of it and decided toseparate HNPCL from the bid process”

48. It could thus be seen that though HNPCL had successfullyCemerged as the L-2 bidder in the open bidding process, it was at theinstance of the State of Andhra Pradesh that the Bid Evaluation Committeehad discarded the bid of HNPCL, on the ground that the entire capacityof HNPCL was encumbered to the State of Andhra Pradesh/APDISCOMS.D

49. It will also be relevant to refer to the following excerpt fromthe letter dated 26[th] December, 2012, addressed by the Principal Secretaryto Government, Energy Department, to HNPCL:

“This Is to Invite your attention to the above cited letter intimatingthe implementation of the coal fired power project (1040 MW) byEyou at Visakhapatnam and supply of power therefrom. In thisregard, HNPCL has sought certain support so as to achievescheduled commissioning of the Project commencing in July 2013.On this matter I am to clarify that Government of AndhraPradesh reiterates its Interest in purchasing 100% powerF(through APDISCOMs) from the said project, as alreadycontemplated in the restated PPA entered into between APSEBand HNPCL in 1998 based on the MOU in 1992 on the broadconditions mentioned in the PPA signed in 1998, except tothe extent they may stand modified due to Impact of changein laws/rules and regulatory standards guiding such powerGprojects post 1998.

2. In this background, the Government of Andhra Pradesh herebyagrees to facilitate the implementation of the power project toachieve the timeline for schedule commissioning. The Governmenthas also decided to direct the APDlSCOMs as the successor

entities of APSEB to enter into continuation Agreement tothe PPA of 1998 With HNPCL to this effect.”

[emphasis supplied]

50. perusal of the said letter dated 26[th] December, 2012, wouldreveal that the Government of Andhra Pradesh has reiterated its interestin purchasing 100% of power (through APDISCOMS) from the saidproject, as already contemplated in the restated PPA entered into betweenAPSEB and HNPCL in 1998 based on the MoU of 1992. No doubt thatit mentions that the same shall be except to the extent they may standmodified due to impact of change in laws/rules and regulatory standardsguiding such power projects post 1998. The said letter would also revealthat the Government had decided to direct the APDISCOMS as thesuccessor entities of APSEB to enter into continuation agreement tothe PPA of 1998 with HNPCL to the said effect. It will also be relevantto note that in the said letter it is observed that the State Government willtake necessary steps within three months for execution of PPA andprovision of Transmission System for Start-up Power and PowerEvacuation. In the said letter, the State had also agreed for providingassistance in obtaining statutory clearances/approvals from State/localauthorities within the timeline for scheduled commissioning of Project.

51. In response to the aforesaid letter, HNPCL addressed acommunication dated 14[th] January, 2013, to the State Government, therebyexpressing its concurrence to the proposal given by the Government ofAndhra Pradesh of procuring entire power from the Project. Vide thesaid letter dated 14[th] January, 2013, HNPCL requested the StateGovernment to provide all the necessary support required for taking therequisite approvals from the State Commission for tariff determinationbased on the actual project cost.

52. further communication dated 16[th] May, 2013, was addressedby HNPCL to the appellants - DISCOMS. By the said letter, HNPCLhad estimated the project cost to the tune of Rs.6098 crores. The saidproject cost was worked out on the basis of the order passed by theCERC dated 4[th] June, 2012, providing Benchmark Capital Cost (Hardcost) model for Thermal Power Stations with Coal as Fuel for tariffdetermined by the Commission under Section 62 of the Act of 2003.

53. The appellants – DISCOMS vide communication dated 17[th]May, 2013, recorded that the documents of capital cost of the Project

Awere received without prejudice to the rights of APDISCOMS to contestthe cost of the project on every component before the State Commissionat appropriate stage and that the receiving of the capital cost documentdid not constitute that the APDISCOMS had agreed/accepted the samewithout demur.

B54. On the same day, i.e., 17[th] May, 2013, an MoA for continuationof the Amended and Restated PPA dated 15[th] April, 1998, came to beexecuted between APDISCOMS and HNPCL. It will be relevant torefer to clauses and of the said MoA dated 17[th] May, 2013, whichread thus:

C“E.HNPCL shall agree that the entire capacity of the projectand all the units of the power station shall at all times be forthe exclusive benefit of the DISCOMs and the DISCOMsshall have the exclusive right as well as obligation to purchasethe entire capacity from the project. HNPCL shall not grantto any third party or allow any third party to obtain anyDentitlement to the Available Capacity and/or scheduledenergy. In case DISCOMs do not avail power up to theAvailable Capacity provided by HNPCL, DISCOMs shallpay to HNPCL the capacity charges for such unavailedAvailable Capacity.

ENotwithstanding the above, in case DISCOMS do not availpower up to the Available Capacity provided by HNPCL,HNPCL shall have the option to sell such Available Capacitynot availed by DISCOMS to any third party or require thepayment of capacity charges from DISCOMS towards suchFunavailed Available Capacity not sold to third parties.DISCOMs shall not be required to pay capacity chargesfor such capacity sold to third parties.

F.Transmission line/system for start-up power and powerevacuation from the Project will be provided by DISCOMsGthrough APTRANSCO in time so as to ensure availabilityof power evacuation facility at the time of COD of Unit 1.DISCOMs assure that power evacuation shall be donethrough APTRANSCO without any delay.”

55. It could thus be seen that in the MoA dated 17[th] May, 2013, itwas agreed that the entire capacity of the project and all the units of theH

power station shall at all times be for the exclusive benefit of theDISCOMS and the DISCOMS were to have the exclusive right as wellas the obligation to purchase the entire capacity from the project. Videthe said MoA, HNPCL was restrained from granting to any third partyor allowing any third party to obtain any entitlement to the availablecapacity and/or scheduled energy. It was further agreed that in caseDISCOMS do not avail power up to the Available Capacity provided byHNPCL, the DISCOMS were to pay HNPCL, the capacity charges forsuch un-availed Available Capacity. No doubt, that in case the DISCOMSfailed to avail power up-to the Available Capacity provided by HNPCL,an option was available to HNPCL to sell such Available Capacity, notavailed by DISCOMS, to any third party. It was also agreed that theDISCOMS were not required to pay capacity charges for such capacitysold to third parties. As per the said MoA, the Transmission line/systemfor start-up power and power evacuation from the project was to beprovided by DISCOMS through Transmission Corporation of AndhraPradesh (APTRANSCO) in time so as to ensure availability of powerevacuation facility at the time of COD of Unit-1. It is also not in disputethat in pursuance of the execution of the said MoA, HNPCL entered intoan FSA with Mahanadi Coalfield Limited for supply of coal for the project.

56. Pursuant to the execution of the said MoA, an applicationbeing O.P. No.21 of 2015 came to be filed by HNPCL before the StateCommission on 12[th] March, 2014, for determination of Capital Cost ofthe coal fired power station of 1040 MW (2 x 520 MW) capacity in thedistrict of Visakhapatnam.

57. Pursuant to these events, the Reorganisation Act came intoeffect on 2[nd] June, 2014, thereby bifurcating the erstwhile State of AndhraPradesh into the State of Andhra Pradesh and the State of Telangana. Itis the contention of HNPCL that after the bifurcation of the erstwhileState of Andhra Pradesh, though the State of Telangana demanded 54%of the power from the project, the Government of Andhra Pradesh insistedHNPCL to supply 100% of the power to the State of Andhra Pradesh.

58. It is not in dispute that HNPCL filed an Addendum Applicationin O.P. No.21 of 2015 on 28[th] July, 2015, thereby showing the capitalcost of the project to have increased to Rs.8087 crores.

59. When O.P. No.21 of 2015, was listed before the StateCommission on 26[th] September, 2015, the State Commission passed thefollowing order:

A“Sri P. Shiva Rao, learned Standing Counsel for the respondentsfiled counter on behalf for the respondents and sought for furthertime to respond to the further material filed by the petitioner byway of addendum before the Commission. Sri P. Shiva Rao, learnedStanding Counsel for the respondents also represented that theyare filing an application to dispense with the earlier Consultant asBthe respondents appointed their own Consultant. Hence, for furtherresponse of the respondents and rejoinder of the petitioner to thecounter filed by tile respondents and for further hearing on thequestion of Consultant including on the application for dispensingwith the earlier Consultant. Posted to 03-10-2015 at 11 AM. BothCthe learned counsel also represented that there is no issue ofjurisdiction involved in the matter.”

60. It is also not in dispute that the first unit of the power projectof HNPCL (520 MW) was declared COD on 11[th ]January, 2016.

D61. Further, it is not in dispute that the State Commission by anorder dated 1[st] March, 2016, directed the appellants – DISCOMS to payan interim tariff at the rate of Rs.3.61 per unit to HNPCL. By the saidorder, the State Commission also clarified that such interim tariff waswithout prejudice to the rights and contentions of both parties in the mainpetition, i.e., O.P. No.21 of 2015.E

62. After the bifurcation of the erstwhile State of Andhra Pradeshinto the State of Andhra Pradesh and the State of Telangana, on 28[th]April, 2016, Continuation Agreement came to be signed between theappellants – DISCOMS and HNPCL. perusal of the recital in the saidContinuation Agreement dated 28[th] April, 2016 would reveal that theFGovernment of Andhra Pradesh represented by the erstwhile APSEBhad expressed the desire to establish coal-based Thermal Power Projectat Visakhapatnam and had selected the consortium of Ashok LeylandLimited, company incorporated in India and Mission Energy Company,a California, USA corporation, to set up joint venture for establishing aGthermal power station. The said Continuation Agreement dated 28[th] April,2016, also refers to the MoU of 1992 (dated 17[th] July, 1992), PPA of1994 (dated 9[th] December, 1994), the Amended and Restated PPA of1998 (dated 15[th] April, 1998), the correspondence between the State ofAndhra Pradesh and HNPCL, and MoA between the erstwhile State ofAndhra Pradesh and HNPCL dated 17[th] May, 2013. It will be relevantH

to refer to the following part of the Continuation Agreement dated 28[th]April, 2016:

“3) The Parties acknowledge and agree that the Procurers havereplaced the APSEB in all respects with regard to the 1998PPA and shall execute such other or further documentsand/or take such steps, as are necessary and/or incidental,in order to give full and complete effect to such transfer ofcontracts, deeds, agreements and other instruments ofwhatever nature to the Procurers.

4)The Procurers hereby agree that they are jointly andseparately liable for all obligations under the Agreement.

5)Subject to Clause 3 hereof and pending the execution ofsuch other or further documents as envisaged under Clause3 hereof, the Parties hereto are entering into this ContinuationAgreement to the 1998 PPA and confirm, agree to thefollowing:

(a) The 1998 PPA shall stand amended as mentionedhereunder and as indicated in the Annexure attached hereto,which Annexure shall constitute an integral part of thisContinuation Agreement.

(b) The 1998 PPA and the MoA shall stand modified oramended to the extent provided herein. All other terms andconditions of the 1998 PPA including the obligations of theParties as stated thereunder shall continue to be binding onthe Parties. This Continuation Agreement and the 1998 PPAshall together constitute one and the same agreement andthe provisions of this Continuation Agreement shall forman Integral part of the 1998 PPA. However, notwithstandingthe foregoing, should any provisions of this ContinuationAgreement be at variance or in conflict with any of theprovisions of the 1998 PPA or the MoA, the provisions ofthis Continuation Agreement shall prevail.”

63. It could thus clearly be seen that the appellants – DISCOMShave clearly represented that they had replaced the APSEB in all respectswith regard to the 1998 PPA and had agreed to execute all furtherdocuments and take such steps as are necessary in order to give full andcomplete effect to such transfer of contracts, deeds, agreements, etc.

AThe appellants – DISCOMS have also clearly agreed that the 1998PPA (i.e. the Amended and Restated PPA dated 15[th] April, 1998) shallstand amended as mentioned in the said Continuation Agreement dated28[th] April, 2016. It has been specifically averred that the ContinuationAgreement and the 1998 PPA shall together constitute one and the sameagreement.B

64. Immediately after the said Continuation Agreement was enteredinto between the appellants – DISCOMS and HNPCL, the appellants –DISCOMS filed an application being O.P. No.19 of 2016 under Section86(1)(b) of the Act of 2003 for grant of approval of PPA. The saidapplication contained the entire history narrated herein above leading upCto the execution of the Continuation Agreement dated 28[th] April, 2016.The prayer clause in the said application reads thus:

“PRAYER

32. Therefore, it is prayed that the Hon’ble Commission may beDpleased to grant approval/consent for the initialed ContinuationAgreement to the PPA dated 15.04.1998 together with Amended& Restated PPA dated 15.04.1998 of HNPCL.”

65. The State Government vide order dated 1[st] June, 2016,accorded approval for purchase of 100% power from HNPCL. On 3[rd]EJuly, 2016, the second unit of HNPCL (520 MW) was declared COD.Vide order dated 6[th] August, 2016, the State Commission, after hearingthe counsel for the parties, directed the appellants – DISCOMS to payan interim tariff at the rate of Rs.3.82 per unit to HNPCL from 1[st] August,2016 for the power received by them. This was to operate until furtherorders passed by the State Commission.F

66. It is also not in dispute that after elaborate hearing in both thepetitions i.e. O.P. No.21 of 2015 and O.P. No.19 of 2016, the StateCommission reserved the matters for orders on 15[th] May, 2017. It is alsonot in dispute that in an appeal between the parties arising out ofinterlocutory proceedings, the APTEL had directed the State CommissionGto decide O.P. No.19 of 2016 and O.P. No.21 of 2015 expeditiously andon or before 14[th] August, 2017. The said period came to be extendedfrom time to time, the last of such extension was granted till 31[st] January,2018, vide order dated 10[th] January, 2018.

67. At this juncture, the appellants – DISCOMS filed twoHInterlocutory Applications on 4[th] January, 2018, viz., (i) I.A. No.1 of

2018 in O.P. No.19 of 2016 for withdrawal of O.P. No.19 of 2016 togetherwith initial PPA; and (ii) I.A. No.2 of 2018 in O.P. No.21 of 2015 fordisposal of O.P. No.21 of 2015.

68. Vide order dated 31[st] January, 2018, passed by the StateCommission, which was impugned before the APTEL, the StateCommission allowed withdrawal of O.P. No.19 of 2016 filed by theappellants - DISCOMS and consequently dismissed O.P. No.21 of 2015filed by HNPCL.

69. As discussed herein above, being aggrieved, HNPCL filedAppeal No.41 of 2018 before the APTEL, which came to be admittedby the APTEL on 26[th] February, 2018. It is also not in dispute that theAPTEL passed an interim order dated 16[th] March, 2018 in I.A. No.211of 2018 in Appeal No.41 of 2018, on an ad hoc arrangement basis, therebydirecting the parties to maintain status quo as prevalent prior to 31[st]January, 2018. It is also not in dispute that both the orders passed by theAPTEL, i.e., order dated 16[th] March, 2018 directing maintenance ofstatus quo as prevalent prior to 31[st] January, 2018 and order dated 26[th]February, 2018, admitting Appeal No.41 of 2018, were assailed beforethe High Court of Andhra Pradesh by way of Writ Petitions being WritPetition No. 10814 of 2018 and Writ Petition No.13689 of 2018respectively. However, the same were dismissed by the High Court ofAndhra Pradesh by order dated 2[nd] May, 2018.

70. It is also not in dispute that in the meantime, Execution PetitionNo. 3 of 2018 was filed by HNPCL before the APTEL seeking executionof order dated 16[th] March, 2018, passed by the APTEL in I.A. No.211of 2018 in Appeal No.41 of 2018.

71. The appellants – DISCOMS had also approached this Courtby way of Civil Appeal No.5772 of 2018, challenging the interim orderpassed by the APTEL dated 16[th] March, 2018. However, this Courtrefused to interfere with the said order and directed the APTEL to decidethe appeal pending before it expeditiously without taking into considerationthe observation in the impugned order as conclusive.

72. Vide the impugned judgment and order dated 7[th] January, 2020,the Appeal No.41 of 2018, filed by HNPCL has been allowed by theAPTEL, the correctness of which is under challenge in the presentproceedings.

ABC

A73. It could thus clearly be seen that though HNPCL had initiallyproposed to revive its project in the year 2007 as Merchant-powerplant and had proposed to give the Government of Andhra Pradesh firstright of refusal, in the MoU, to purchase 25% of the power at regulatedtariff, it was at the instance of the State of Andhra Pradesh that it hadagreed to supply 100% power to the State through APDISCOMS. ItBcould clearly be seen from the record that though HNPCL hadparticipated in the bidding process conducted by the APCPDCL in theyear 2011-2012 and though HNPCL had successfully emerged as L-2bidder in the said bidding process, it was on account of the decision ofthe Bid Evaluation Committee, that HNPCL was discarded from theCbidding process since the entire generation capacity of HNPCL wasencumbered to the State of Andhra Pradesh/APDISCOMS. The minutesof the meeting dated 28[th] September, 2012 of the Bid EvaluationCommittee, as has been noticed in the order of the State Commissiondated 13[th] August, 2013, clarify this position.D74. It is the State of Andhra Pradesh, which had expressed itsinterest in purchasing 100% power from HNPCL, as could be seenfrom the various documents placed on record. The communicationaddressed by the Principal Secretary to the Government of AndhraPradesh, Energy Department, to HNPCL dated 26[th] December, 2012,clearly reiterates the intention of the Government of Andhra Pradesh inEpurchasing 100% power (through DISCOMS) from the project ofHNPCL. The said communication would also show that the State hasassured to take all necessary steps for commissioning the project at theearliest including execution of PPA and for making provision ofTransmission system for start-up power and power evacuation. The saidFcommunication would clearly show that the parties had agreed to abideby the conditions mentioned in the Amended and Restated PPA dated15[th] April, 1998, except to the extent they may stand modified due toimpact of change in laws/rules and regulated standards guiding suchpower projects post 1998.G75. No doubt, that the documents placed on record would showthat though HNPCL had given its estimation of project cost on the basisof the guidelines issued by the CERC, the same was received by theappellants – DISCOMS without prejudice to their rights to contest thesame on every component before the State Commission. The documentsplaced on record would clearly show that the State of Andhra PradeshH

has, on more than one occasion, expressed that it was interested in buying100% power from the project of HNPCL. The MoA signed betweenthe appellants – DISCOMS and HNPCL dated 17[th] May, 2013, wouldclearly show that it was agreed between the parties that the entirecapacity of HNPCL project and all the units of the power stations shall,at all times, be for the exclusive benefit of the DISCOMS and theDISCOMS were to have the exclusive right as well as obligation topurchase the entire capacity from the project. Not only this, but after theReorganisation Act came into effect and the erstwhile State of AndhraPradesh was bifurcated into the State of Andhra Pradesh and the Stateof Telangana, the State of Andhra Pradesh, on more than one occasion,reiterated its stand of procuring 100% power from the project of HNPCL.Perusal of the orders of the State Commission dated 26[th] September,2015 and 6[th] August, 2016, would clearly reveal that the appellants –DISCOMS also stood by the position that the 100% power generated inthe power plant of HNPCL was to be purchased by them. Not only this,but after the bifurcation of the erstwhile State of Andhra Pradesh, theappellants – DISCOMS entered into Continuation Agreement dated28[th] April, 2016, reiterating their stand.

76. After the Continuation Agreement was entered into on 28[th]April, 2016, the appellants – DISCOMS filed O.P. No.19 of 2016 forapproval of the Continuation Agreement with the Amended and RestatedPPA of 1998 on 11[th] May, 2016. The State Government again on 1[st]June, 2016, accorded its approval for purchase of 100% power generatedby HNPCL. It could thus be seen that right from the year 2012 till January,2018, it was the consistent stand of the State of Andhra Pradesh as wellas the appellants – DISCOMS and its predecessors that the appellants -DISCOMS were to purchase 100% power generated by HNPCL.

77. It is also not in dispute that in pursuance of the MoA, executedon 17[th] May, 2013, HNPCL had also entered into FSA dated 26[th] August,2013 with Mahanadi Coalfield Limited for supply of coal for the project.

78. It is thus clear that the consistent stand of the appellants -DISCOMS from the year 2012, for the first time, changed on 4[th] January,2018, when they filed Interlocutory Applications before the StateCommission for withdrawal of O.P. No.19 of 2016 and disposal of O.P.No.21 of 2015.

79. As already observed hereinabove, in the open bidding process,conducted in the year 2011-2012, HNPCL emerged as the successful

AL-2 bidder. It is however on account of the stand taken by the BidEvaluation Committee, that it was discarded from the bidding process.As such, the stand of the appellants – DISCOMS, that the revival of theproject of HNPCL was as Merchant-power plant and therefore, theappellants – DISCOMS cannot be compelled to purchase power fromit, is self-contradictory. On one hand, HNPCL was discarded from theBopen bidding process, though it was the successful L-2 bidder, on theground that 100% power generated by HNPCL is encumbered to theState of Andhra Pradesh/APDISCOMS whereas, on the other hand, itis now sought to be urged that the appellants – DISCOMS cannot becompelled to purchase the power from HNPCL, since it was merchant-Cpower plant. We have no hesitation to hold that the APTEL has rightlyheld that, on account of the assurance given by the State of AndhraPradesh/APDISCOMS, HNPCL had altered its position and as such, itwas not permissible for the appellants – DISCOMS to withdraw O.P.No.19 of 2016. The grounds, which are sought to be urged in I.A. No.1of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018 in O.P. No.21 ofD2015, were very much available when the appellants – DISCOMS hadentered into MoA on 17[th] May, 2013 and the Continuation Agreementdated 28[th] April, 2016. It is difficult to appreciate how it is permissiblefor the appellants – DISCOMS to withdraw the application for grant ofapproval of PPA on the ground that it could procure the power onlyEthrough the competitive bidding process, when in the facts of the presentcase, it was the State of Andhra Pradesh, which had discarded HNPCLfrom the open bidding process of 2011-2012, though it had successfullyemerged as L-2 bidder in the said bidding process.

80. Various authorities have been cited at the Bar in support of

Fthe proposition that withdrawal of an application could not be permissiblewhen such withdrawal amounts to frustration of contract and therebydefeats the rights of the defendant and that the right of withdrawal is notabsolute. In this respect, we will refer to the observations made by thisCourt in the case of Arjun Singh v. Mohindra Kumar & Ors.[15]. Though

the issue involved in the said case is distinct than the issue involved inGthe present case, we find that it will be apposite to seek guidance fromthe observations made by this Court, while construing the provisions ofOrder IX and Order XX of the Code of Civil Procedure, 1908 (CPC).The relevant extract reads thus:

“ ….In the present context when once the hearing starts, theCode contemplates only two stages in the trial of the suit: (1)where the hearing is adjourned or (2) where the hearing iscompleted. Where, the hearing is completed the parties haveno further rights or privileges in the matter and it is only forthe convenience of the Court that Order XX. Rule 1 permitsjudgment to be delivered after interval after the hearing iscompleted. It would, therefore, follow that after the stagecontemplated by Order IX. Rule 7 is passed the next stage isonly the passing of decree which on the terms of Order IX.Rule 6 the Court is competent to pass. And then follows theremedy of the party to have that decree set aside by applicationunder Order IX. Rule 13. There is thus no hiatus between thetwo stages of reservation of judgment and pronouncing thejudgment so as to make it necessary for the Court to afford tothe party the remedy of getting orders passed on the lines ofOrder IX. Rule 7. We are, therefore, of the opinion that the CivilJudge was not competent to entertain the application dated May31, 1958 purporting to be under Order IX. Rule 7 and thatconsequently the reasons given in the order passed would not beres judicata to bar the hearing of the petition undo Order IX. Rule13 filed by the appellant.”

[emphasis supplied]

81. It can be seen that this Court has held that CPC contemplatestwo stages of the trial in the suit: (1) where the hearing is adjourned; and(2) where the hearing is completed. It has been held that where thehearing is completed, the parties have no further rights or privileges inthe matter and it is only for the convenience of the Court that Order XXrule 1 permits judgment to be delivered after an interval after the hearingis completed. It has been held that there is no hiatus between the twostages of reservation of judgment and pronouncing the judgment so as tomake it necessary for the Court to afford to the party the remedy ofgetting orders passed on the lines of Order IX rule 7.

82. The other judgments of various High Courts relied upon byShri Ramachandran, follow the line laid down by this Court in ArjunSingh (supra).

83. Insofar as the reliance placed by Shri Vaidyanathan, learnedSenior Counsel, on the judgment of Court of Appeal in the case of Boal

AQuay Wharfingers Ltd. (supra) is concerned, the said case arose outof an application made by the appellant therein to the Licensing Authorityfor grant of license. It was not an application in quasi-judicialproceeding where the withdrawal of an application would adversely affectthe rights of the other party. In the said case, it has been observed that ifa person applies for license, there is no prohibition as to why he is notBentitled to withdraw his application, unless, of course, there is someprovision in law, which would prevent him from doing so. The proceedingsin the aforesaid case did not arise from lis between the two parties, butarose out of an application made by party to licensing authority underthe Docks and Harbours Act, 1966.C84. Insofar as the reliance placed on the judgment of this Court inthe case of Hulas Rai Baij Nath (supra) is concerned, the respondenttherein had instituted suit for rendition of accounts against the appellant-firm, alleging that the appellant-firm was the commission agent of therespondent and that the accounts between respondent as the principalDand appellant as the agent were not settled. The claim of the respondentwas resisted by the appellant therein, stating that the claim of therespondent was fully settled and that the suit was not fit to proceed inaccordance with law. In the said suit, after considerable amount ofevidence had been recorded, an application was presented on behalf of

the respondent-plaintiff for withdrawal of the suit. The same was objectedEto. The trial court overruled the objection of the appellant-defendant,holding that the plaintiff had right to withdraw the suit and that rightcould be exercised at any time before judgment. The defendant couldonly claim an order for costs in his favour. The suit was thereforedismissed awarding costs of the suit to the appellant-defendant. TheFappellant-defendant filed revision in the High Court. The High Courtdismissed the revision. Being aggrieved, the appellant-defendant hadapproached the Apex Court. In this factual background, this Courtobserved thus:

“2. The short question that, in these circumstances, falls forGdecision is whether the respondent was entitled to withdraw fromthe suit and have it dismissed by the application dated 5th May,1953 at the stage when issues had been framed and some evidencehad been recorded, but no preliminary decree for rendition ofaccounts had yet been passed. The language of order 23 Rule 1sub-rule (1) CPC, gives an unqualified right to plaintiff toH

withdraw from suit and, if no permission to file fresh suit issought under sub-rule (2) of that Rule, the plaintiff becomes liablefor such costs as the Court may award and becomes precludedfrom instituting any fresh suit in respect of that subject-matterunder sub-rule (3) of that Rule. There is no provision in the Codeof Civil Procedure which requires the Court to refuse permissionto withdraw the suit in such circumstances and to compel theplaintiff to proceed with it. It is, of course, possible that differentconsiderations may arise where set-off may have been claimedunder order 8 CPC, or counter claim may have been filed, ifpermissible by the procedural law applicable to the proceedingsgoverning the suit. In the present case, the pleadings in paras 8and 11 of the written statement mentioned above, clearly did notamount to claim for set-off. Further, there could be no counter-claim, because no provision is shown under which counter-claimcould have been filed in the trial court in such suit. There is alsothe circumstance that the application for withdrawal was movedat stage when no preliminary decree had been passed forrendition of account and, in fact, the appellant was still contendingthat there could be no rendition of accounts in the suit, becauseaccounts had already been settled. Even in para 11, the only claimput forward was that, in case the Court found it necessary todirect rendition of accounts and any amount is found due to theappellant, decree may be passed in favour of the appellant forthat amount. In this paragraph also, the right claimed by theappellant was contingent right which did not exist at the timewhen the written statement was filed.”

85. It could thus be seen that the facts in the aforesaid case aretotally different from the facts in the present case. This Court in theaforesaid case held that there is no provision in the CPC, which requiresthe Court to refuse permission to withdraw the suit and compel the plaintiffto proceed with it. However, this Court itself has clarified that differentconsiderations could arise where set-off may have been claimed underorder VIII of CPC, or counter claim may have been filed, if permissibleby the procedural law applicable to the proceedings governing the suit.It was found that from the pleadings in the written statement, it could beclearly seen that there is no claim for set-off. It was further found thatthere could be no counter-claim, since no provision was shown underwhich counter-claim could have been filed in the trial court in such

ABC

Asuit. It was further found that the right claimed by the appellant was acontingent one and did not exist at the time at which the written statementwas filed.

86. The facts in the present case are totally different, wherein,after execution of various agreements, an application being O.P. No.19Bof 2016 came to be filed for grant of approval of PPA. Not only this, butthe said O.P. No.19 of 2016 was clubbed along with O.P. No.21 of 2015,which was filed for determination of capital cost of the project as wellas for determination of tariff. It can further be seen that in the aforesaidcase, an application for withdrawal of the suit was filed at the stage ofCleading of evidence. It is not as if the application was filed after the suitwas closed for judgment.

87. In any case, we are of the considered view that the conductof the appellants – DISCOMS, in the present case, would disentitle themto withdraw the application.D

88. Another argument, that on account of increase of the capitalcost of the project, the appellants – DISCOMS would be required topurchase power at much higher rate, also does not hold water. TheState Commission while determining the tariff would be guided by variousfactors as are required to be taken into consideration in view of theEprovisions of Section 61 of the Act of 2003. In any event, the appellants

– DISCOMS have themselves reserved their right to contest thecorrectness of the cost on every component at an appropriate stagebefore the State Commission. As already stated hereinabove, the StateCommission, while approving the cost of the project and determining thetariff at which the electricity would be purchased by the APDISCOMSFfrom HNPCL, would be required to look into various factors as arestated in Section 61 of the Act of 2003, so also under the Regulationsnotified for that purpose. While doing so, the State Commission wouldbe required to take into consideration the various aspects as well assubmissions to be made by the appellants – DISCOMS and HNPCL.GMerely because, the cost of the project is estimated by HNPCL at aparticular amount, the State Commission is not bound to accept the same.The State Commission would only approve the cost as it would feelappropriate, as guided by the provisions under Section 61 of the Act of2003 and the Regulations. In that view of the matter, the argument inthis regard also, is without substance.H

89. The appellants – DISCOMS have heavily relied on the judgmentof this Court in the case of Tata Power Company Limited v. RelianceEnergy Limited and others[16], and particularly, on paragraph 106 thereof,which reads thus:

“106. The scheme of the Act, namely, the generation of electricityis outside the licensing purview and subject to fulfilment of theconditions laid down under Section 42 of the Act generatingcompany may also supply directly to consumer wherefor no licencewould be required, must be given due consideration. The saidprovision has to be read with Regulation 24. In regard to the grantof approval of PPA the procedures laid down in Regulation 24 arerequired to be followed.”

90. No doubt, that this Court has held that generating companymay also supply directly to consumer wherefor no licence would berequired, however, this Court itself observed that the said provision hasto be read with Regulation 24 and with regard to the grant of approval ofPPA, the procedures laid down in Regulation 24 are required to befollowed.

91. It will also be relevant to refer to paragraph 119 of the saidjudgment.

“119. The 2003 Act even permits the generating company to supplyelectricity to consumer directly. For the said purpose what isnecessary is to comply with the provisions of the Act, the Rulesand the Regulations. Section 14 of the Act categorically providesfor grant of licence to any person who is transmitting electricityor distributing supply or undertaking trading therein, indisputably,however, the generator of an electrical energy, although is notsubject to the grant of licence but while supplying electrical energyto distributing agency, in turn would be subject to approval anddirections of the Commission.”

92. It can thus clearly be seen that this Court has held that thoughthe Act of 2003 permits the generating company to supply electricity toa consumer directly, and that the generator of an electrical energy is notsubject to the grant of license, but while supplying electrical energy to adistributing agency, in turn, it would be subject to approval and directionsof the Commission.

16 (2009) 16 SCC 659

A93. We are, therefore, of the view that the said judgment is of noassistance to the case sought to be advanced by the appellants –DISCOMS. On the contrary, we find that the view that is being taken byus is fortified by the following observations of this Court in the case ofTata Power Company Limited (supra):B“87. …. The agreement of distribution (PPA) being subject toapproval, indisputably the Commission would have the publicinterest in mind. It has power to approve an MoU which subservesthe public interest. It, while granting such approval may also takeinto consideration the question as to whether the terms to be agreedare fair and just.

*** *** ***

111. Section 86(1)(b) provides for regulation of electricity purchaseand procurement process of distribution licensees. In respect ofgeneration its function is to determine the tariff for generation asDalso in relation to supply, transmission and wheeling of electricity.Clause (b) of sub-section (1) of Section 86 provides to regulateelectricity purchase and procurement process of distributionlicensees including the price at which the electricity shall beprocured from the generating companies or licensees or from othersources through agreements. As part of the regulation it canEalso adjudicate upon disputes between the licensees and generatingcompanies in regard to the implementation, application orinterpretation of the provisions of the said agreement.”

94. It is thus trite that, while considering grant of approval to thePPA, the State Commission will have to keep in mind the public interest.FIt will have to consider, as to whether the PPA, which is subject toapproval, sub-serves the public interest. It will also be required to takeinto consideration, as to whether the terms agreed are fair and just whilegranting approval. While exercising power under Section 86(1)(b) of theAct of 2003, the Commission will have to regulate the price at which theGelectricity would be procured from the generating companies.Undoubtedly, while doing so, the Commission will be guided by the factorsmentioned in Section 61 of the Act of 2003 and the Regulationsconcerning the same. Under Section 86(1)(f) of the Act of 2003, theCommission is also empowered to adjudicate upon the disputes betweenthe licensees and generating companies, and to refer any such disputeHfor arbitration.

95. Another argument made on the basis of Section 21 of theReform Act is also not tenable. Much reliance is placed on sub-section(5) of Section 21 of the said Act, which reads thus:

“(5)Any agreement relating to any transaction of the naturedescribed in sub sections (1), (2), (3) or (4) unless made with orsubject to such consent as aforesaid, shall be void.”

96. It could thus be seen that any of the agreements mentioned insub-sections (1), (2), (3) or (4) of Section 21 would be void unless theyare made with the consent of the Commission or subject to such consent.Undisputedly, understanding this legal position, O.P. No.19 of 2016 cameto be filed by the appellants – DISCOMS, so as to obtain approval of theState Commission for the PPA entered into by them with HNPCL.

97. Insofar as the reliance placed on the provision of Regulation5.2 of the Tariff Regulations is concerned, the same deals with approachto determination of tariff. It could be seen that, whereas Regulation 5.1of the Tariff Regulations provides that where tariff has been determinedthrough transparent process of bidding in accordance with the guidelinesissued by the Central Government, the Commission shall adopt suchtariff in accordance with the provisions of the Act; Regulation 5.2 of theTariff Regulations provides that the provisions specified in Part-II of thesaid Regulation shall apply in determining tariff based on capital cost forsupply to Distribution Licensee. Part-II of the Tariff Regulations dealswith ‘Filing Details’ and ‘Tariff Determination’. Regulation 9 requiresthat each application where tariff is to be determined based on capitalcost shall include various details duly accompanied by supporting dataand documentary and other evidence regarding Fixed Costs, VariableCosts and Norms of operation, etc. Regulation 10 of the Tariff Regulationsrequires the tariff to be determined in accordance with the norms specifiedunder the said Regulations, guided by the principles and methodologiesspecified in CERC (Terms and Conditions of Tariff) Regulations, 2004,as amended from time to time. The Regulations contain detailed guidelines,as to what shall be the component of tariff and as to how the capital costand tariff is to be determined.

98. We find that such an argument at the behest of party, whichhas discarded HNPCL from the bidding process, though it had emergedas the successful L-2 bidder, does not hold water and we have nohesitation to say that the appellants – DISCOMS’ approach is ofapprobate and reprobate.

A99. In any event, we find that the State Commission has totallyerred in dismissing O.P. No.21 of 2015 filed by HNPCL. Perusal ofSection 64 of the Act of 2003 would reveal that even GeneratingCompany is entitled to make an application for determination of tariffunder Section 62 of the Act of 2003. As such, irrespective of the question,as to whether an application for withdrawal of O.P. No.19 of 2016 filedBby the appellants - DISCOMS could have been entertained, the StateCommission was wholly unjustified in dismissing O.P. No.21 of 2015filed by HNPCL. In any case, we have held that in the facts of thepresent case and, particularly, taking into consideration the conduct ofthe appellants – DISCOMS, the APTEL has rightly held that theCappellants – DISCOMS could not have been permitted to withdraw O.P.No.19 of 2016.

100. Undisputedly, the appellants – DISCOMS are instrumentalitiesof the State and as such, State within the meaning of Article 12 of theConstitution of India. Every action of State is required to be guided byDthe touch-stone of non-arbitrariness, reasonableness and rationality. Everyaction of State is equally required to be guided by public interest. Everyholder of public office is trustee, whose highest duty is to the peopleof the country. The Public Authority is therefore required to exercise thepowers only for the public good.

E101. We may gainfully refer to the following observations of thisCourt in the case of Kumari Shrilekha Vidyarthi and others v. Stateof U.P. and others[17]:

“27. Unlike private party whose acts uninformed by reason andinfluenced by personal predilections in contractual matters mayFresult in adverse consequences to it alone without affecting thepublic interest, any such act of the State or public body even inthis field would adversely affect the public interest. Every holderof public office by virtue of which he acts on behalf of the Stateor public body is ultimately accountable to the people in whom thesovereignty vests. As such, all powers so vested in him are meantGto be exercised for public good and promoting the public interest.This is equally true of all actions even in the field of contract.Thus, every holder of public office is trustee whose highestduty is to the people of the country and, therefore, every act of

the holder of public office, irrespective of the label classifyingthat act, is in discharge of public duty meant ultimately for publicgood. With the diversification of State activity in Welfare Staterequiring the State to discharge its wide ranging functions eventhrough its several instrumentalities, which requires entering intocontracts also, it would be unreal and not pragmatic, apart frombeing unjustified to exclude contractual matters from the sphereof State actions required to be non-arbitrary and justified on thetouchstone of Article 14.

28. Even assuming that it is necessary to import the concept ofpresence of some public element in State action to attract Article14 and permit judicial review, we have no hesitation in saying thatthe ultimate impact of all actions of the State or public bodybeing undoubtedly on public interest, the requisite public elementfor this purpose is present also in contractual matters. We,therefore, find it difficult and unrealistic to exclude the State actionsin contractual matters, after the contract has been made, fromthe purview of judicial review to test its validity on the anvil ofArticle 14.”

102. It will also be apposite to refer to the following observationsof this Court in the case of Food Corporation of India v. M/s KamdhenuCattle Feed Industries[18]:

“7. In contractual sphere as in all other State actions, the Stateand all its instrumentalities have to conform to Article 14 of theConstitution of which non-arbitrariness is significant facet. Thereis no unfettered discretion in public law: public authoritypossesses powers only to use them for public good. This imposesthe duty to act fairly and to adopt procedure which is ‘fairplay inaction’. Due observance of this obligation as part of goodadministration raises reasonable or legitimate expectation in everycitizen to be treated fairly in his interaction with the State and itsinstrumentalities, with this element forming necessary componentof the decision-making process in all State actions. To satisfy thisrequirement of non-arbitrariness in State action, it is, therefore,necessary to consider and give due weight to the reasonable orlegitimate expectations of the persons likely to be affected by the

Adecision or else that unfairness in the exercise of the power mayamount to an abuse or excess of power apart from affecting thebona fides of the decision in given case. The decision so madewould be exposed to challenge on the ground of arbitrariness.Rule of law does not completely eliminate discretion in the exerciseof power, as it is unrealistic, but provides for control of its exerciseBby judicial review.

8. The mere reasonable or legitimate expectation of citizen, insuch situation, may not by itself be distinct enforceable right,but failure to consider and give due weight to it may render thedecision arbitrary, and this is how the requirement of dueCconsideration of legitimate expectation forms part of the principleof non-arbitrariness, necessary concomitant of the rule of law.Every legitimate expectation is relevant factor requiring dueconsideration in fair decision-making process. Whether theexpectation of the claimant is reasonable or legitimate in the contextDis question of fact in each case. Whenever the question arises,it is to be determined not according to the claimant’s perceptionbut in larger public interest wherein other more importantconsiderations may outweigh what would otherwise have beenthe legitimate expectation of the claimant. bona fide decision ofthe public authority reached in this manner would satisfy theErequirement of non-arbitrariness and withstand judicial scrutiny.The doctrine of legitimate expectation gets assimilated in the ruleof law and operates in our legal system in this manner and to thisextent.”

103. Recently, this Court in the case of Indian Oil CorporationFLimited and others v. Shashi Prabha Shukla and another[19], afterreferring to earlier judgments of this Court on the present issue hasobserved thus:

“33. Jurisprudentially thus, as could be gleaned from the abovelegal enunciations, public authority in its dealings has to be fair,Gobjective, non-arbitrary, transparent and non-discriminatory. Thediscretion vested in such an authority, which is concomitant ofits power is coupled with duty and can never be unregulated orunbridled. Any decision or action contrary to these functional

precepts would be at the pain of invalidation thereof. The Stateand its instrumentalities, be it public authority, either as anindividual or collective has to essentially abide by this inalienableand non-negotiable prescriptions and cannot act in breach of thetrust reposed by the polity and on extraneous considerations. Inexercise of uncontrolled discretion and power, it cannot resort toany act to fritter, squander and emasculate any public property,be it by way of State largesse or contracts, etc. Such outrageswould clearly be unconstitutional and extinctive of the rule of lawwhich forms the bedrock of the constitutional order.”104. In the present case, though initially, HNPCL had revived itsproject in the year 2007 as Merchant-power plant and offered 25% ofelectricity to the State, it was the State, which offered to purchase 100%power from HNPCL. HNPCL agreed for the said offer of the StateGovernment. It is clear from the record and, particularly, the letter dated26[th] December, 2012, that the State had given various facilities/concessions to HNPCL for execution of its power project. Thedocuments on record would reveal that the State has also allottedthousands of acres of land for the project to HNPCL. It is not in disputethat in pursuance of the MoA of 2013 (dated 17[th] May, 2013) and theContinuation Agreement of 2016 (dated 28[th] April, 2016), the entireproject has been erected and is operational. Not only this, but from theyear 2016 till 14[th] July, 2020, the power has been purchased by theappellants – DISCOMS from HNPCL. It could thus be seen that afterinvestment of huge resources including the land belonging to the State,the project is complete and has become operational. The question, atthis juncture, would be, whether to discard such project is in the publicinterest or against it. At the cost of repetition, it may be reiterated, thatthe determination of the capital cost of the project and the rate of tariffat which the power has to be purchased would always be subject toregulatory control of the State Commission. What has been done by theAPTEL is only directing the State Commission to determine the same.

105. The record would clearly reveal that from the year 2012onwards till 4[th] January, 2018, it was the consistent stand of the State ofAndhra Pradesh as well as the APDISCOMS that it would be purchasing100% power generated from the project of HNPCL. Not only anapplication being O.P. No.21 of 2015 was filed by HNPCL fordetermination of capital cost, but also O.P. No.19 of 2016 was filed by

Athe appellants – DISCOMS for grant of approval to the ContinuationAgreement dated 28[th] April, 2016 with the Amended and Restated PPAof 1998. The matters were heard finally on 15[th] May, 2017 and closedfor orders. For some unknown reasons, exclusively within the knowledgeof the appellants – DISCOMS, things turned topsy-turvy between 15[th]May, 2017 and 4[th] January, 2018, on which date, the appellants –BDISCOMS did somersault and filed applications for withdrawal ofO.P. No.19 of 2016 and disposal of O.P. No.21 of 2015. As alreadydiscussed hereinabove, every decision of the State is required to be guidedby public interest and the power is to be exercised for public good. Forreasons unknown, the appellants – DISCOMS took decision to resileCfrom their earlier stand, due to which, not only the huge investment madeby HNPCL would go in waste, but also valuable resources of the publicincluding thousands of acres of land would go in waste. As alreadydiscussed hereinabove, the reasons/grounds, which are sought to be givenin I.A. No. 1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018 inO.P. No.21 of 2015, filed on 4[th] January, 2018, were very much availableDbetween 2011 till 15[th] May, 2017. It is not as if something new hasemerged between 15[th] May, 2017 and 4[th] January, 2018, which wouldhave entitled the appellants – DISCOMS to resile from their earlierstand. We have no hesitation to hold that the appellants – DISCOMScould not be permitted to change the decision at their whims and fanciesEand, particularly, when it is adversarial to the public interest and publicgood. The record would clearly show that the change in decision isarbitrary, irrational and unreasonable.

106. We may also gainfully refer to the following observations ofthis Court in the case of Kalabharati Advertising v. Hemant VimalnathFNarichania and others[20]:

“25. The State is under obligation to act fairly without ill will ormalice— in fact or in law. “Legal malice” or “malice in law”means something done without lawful excuse. It is an act donewrongfully and wilfully without reasonable or probable cause, andGnot necessarily an act done from ill feeling and spite. It is adeliberate act in disregard to the rights of others. Where malice isattributed to the State, it can never be case of personal ill will orspite on the part of the State. It is an act which is taken with anoblique or indirect object. It means exercise of statutory power

for “purposes foreign to those for which it is in law intended”. Itmeans conscious violation of the law to the prejudice of another, adepraved inclination on the part of the authority to disregard therights of others, which intent is manifested by its injurious acts.(Vide ADM, Jabalpur v. Shivakant Shukla [(1976) 2 SCC 521: AIR 1976 SC 1207] , S.R. Venkataraman v. Union of India[(1979) 2 SCC 491 : 1979 SCC (L&S) 216 : AIR 1979 SC 49], Stateof A.P. v. Goverdhanlal Pitti [(2003) 4 SCC 739 : AIR 2003 SC1941], BPL Ltd. v. S.P. Gururaja [(2003) 8 SCC 567] and W.B.SEB v. Dilip Kumar Ray [(2007) 14 SCC 568 : (2009) 1 SCC(L&S) 860] .)

26. Passing an order for an unauthorised purpose constitutesmalice in law. (Vide Punjab SEB Ltd. v. Zora Singh [(2005) 6SCC 776] and Union of India v. V. Ramakrishnan [(2005) 8 SCC394 : 2005 SCC (L&S) 1150] .)”

107. We have no hesitation to hold that I.A. No.1 of 2018 in O.P.No.19 of 2016 and I.A. No.2 of 2018 in O.P. No.21 of 2015 filed by theappellants – DISCOMS, are acts, which have been done wrongfullyand wilfully without reasonable and probable cause. It may not necessarilybe an act done out of ill feeling and spite. However, the act is one,affecting public interest and public good, without there being any rationalor reasonable basis for the same.

108. Though serious allegations of mala fide have been made byHNPCL, we do not find it necessary to go in those allegations. However,in our view, the present case would squarely fit in the realm of ‘legalmalice’ or ‘malice in law’.

109. In any case, we find that the judgment impugned before uscannot be said to be of such nature, which can be said to be prejudicialto the interests of any of the parties. What has been done by the APTELis only to direct the State Commission to dispose of O.P. No.21 of 2015filed for determination of capital cost and O.P. No.19 of 2016 filed forapproval of Amended and Restated PPA (Continuation Agreement) onmerits. On remand, the State Commission would be bound to take intoconsideration all the relevant factors and the contentions to be raised byboth the parties before deciding the said O.Ps.

110. We therefore find no reason to interfere with the impugnedjudgment. However, before parting with the judgment, it is necessary to

Aplace on record the conduct of the appellants – DISCOMS. Thoughvide order dated 14[th] July, 2020, this Court had stayed the impugnedjudgment passed by the APTEL, vide order dated 21[st] August, 2020, thisCourt had clarified that there shall be no stay of the order dated 16[th]March, 2018 passed by the APTEL. It is not in dispute that in pursuanceof the interim order dated 16[th] March, 2018, passed by the APTEL, theBappellants – DISCOMS were purchasing the power at the rate of Rs.3.82per unit from HNPCL till 14[th] July, 2020. It is thus clear that in view ofthe order passed by this Court on 21[st] August, 2020, the appellants –DISCOMS were required to continue to purchase the power fromHNPCL at the rate of Rs.3.82 per unit. Undisputedly, this has not beenCdone. The reason given for the same is that the appellants - DISCOMShad already filed an application for vacation of the order dated 21[st] August,2020. By merely filing an application, the appellants – DISCOMS couldnot have avoided abiding with the order of the APTEL dated 16[th] March,2018, as maintained by this Court vide order dated 21[st] August, 2020. Itis brought to our notice that though the appellants – DISCOMS couldDhave purchased the power from HNPCL at the rate of Rs.3.82 per unitin view of the orders passed by the APTEL and by this Court, they havechosen to purchase the power at higher rate from various generatorsincluding KSK Mahanadi from whom the power is being purchased atthe rate of Rs.4.33 per unit.E111. We ask question to ourselves, as to whether public interest,which is so vociferously pressed into service in the present matter bythe appellants – DISCOMS, lies in purchasing the power at the rate ofRs.3.82 per unit from HNPCL or by purchasing it at the rate of Rs.4.33per unit from KSK Mahanadi. We strongly deprecate such conduct of

Fthe appellants – DISCOMS, which are instrumentalities of the State.The appellants – DISCOMS, rather than acting in public interest, haveacted contrary to public interest. For defying the orders passed by thisCourt, we could very well have initiated the action against the officialsof the appellants – DISCOMS for having committed contempt of thisCourt, but we refrain ourselves from doing so.G

112. In the result, the present appeal is dismissed with costs,quantified at Rs.5,00,000/- (Rupees Five lakh only). Pending I.As., ifany, shall stand disposed of.

113. Taking into consideration that the issue before the StateHCommission is pending since long, we direct the State Commission to

decide O.P. No.21 of 2015 and O.P. No.19 of 2016, as expeditiously aspossible, and in any case, within period of six months from the date ofthis judgment.

114. Needless to say that till O.P. No.21 of 2015 and O.P. No.19of 2016 are decided by the State Commission, the appellants – DISCOMSshall forthwith start purchasing the power from HNPCL at the rate ofRs.3.82 per unit as per the orders passed by the APTEL dated 16[th]March, 2018 and by this Court dated 21[st] August, 2020.

Bibhuti Bhushan Bose

Appeal dismissed.

(Assisted by : Neha Sharma, LCRA)