Monday, July 11, 2016



                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 5875 OF 2012





                     CIVIL APPEAL NOS. 1973-1974 OF 2014

                               J U D G M E N T


1.    Is the tariff fixed under a PPA (Power Purchase Agreement)  sacrosanct
and inviolable and beyond review and correction  by  the  State  Electricity
Regulatory Commission which is  the  statutory  authority  for  fixation  of
tariff under the Electricity Act, 2003 (hereinafter for  short  ‘the  Act’).
This is the short question that arises  for  determination  in  the  present
appeals.  The Regulatory Commission  did  not  consider  it  appropriate  to
confer on itself the said power upon a construction  of  the  provisions  of
the Act and the terms of the PPA(s) in  question.   The  Appellate  Tribunal
disagreed  and  held  that  the  power  would  be  available  to  the  State
Regulatory Commission.  This is how the matter has come up before us in  the
present appeals filed at the instance of the distribution licensee which  is
common in both the cases, namely, Gujarat Urja Vikas Nigam Limited.

2.    A very brief resume of the relevant facts  would  be  appropriate  and
would  assist  a  determination   of   the   question   arising   identified
      The respondent No. 1 in Civil Appeal No. 5875 of 2012, namely,  Tarini
Infrastructure Ltd., is a power producer  which  has  set  up/installed  two
small hydro power projects in the State of Gujarat.  In  January,  2008  the
respondent No. 1-power producer entered  into  a  PPA  with  the  appellant-
distribution licensee for sale of electricity from the  generating  stations
to the extent of the contracted quantity for a period of  35  years  at  Rs.
3.29 per KWH subject to escalation of 3% per annum till date  of  commercial
operation.  In March, 2010, just  before  commissioning  of  the  generating
station, the respondent power producer sought an increase in the  tariff  to
Rs. 4.70 per unit on the ground that though under the  Concession  Agreement
power was to be evacuated at the nearest sub-station at  Rakholi  under  the
jurisdiction of the Gujarat Electricity Transmission Company  (GETCO)  which
was at a distance of 4 Kms from its switch yard, it was later realized  that
Rakholi was in Dadar Nagar Haveli. Consequently, the transmission  line  was
required to be laid up to a point known as  Mota  Pondha  which  involved  a
total distance of 23 Kms. instead of the  originally  envisaged  4Kms.   The
additional infrastructure, admittedly, cost about   Rs. 10 crores which  was
not  envisaged  in  the  Concession  Agreement  entered  into  between   the
respondent-power   producer   and   Narmada   Water   Resources   Department
(respondent No. 2).  In these circumstances, the power producer  applied  to
the State Regulatory Commission for a redetermination of  the  tariff.   The
said request was refused by an order dated  03.09.2010,  primarily,  on  the
ground that once the tariff was determined and  thereafter  incorporated  in
the PPA  there  was  no  scope  for  redetermination  of  the  same  at  the
unilateral request of the power producer.
3.    Insofar as Civil Appeal Nos. 1973-1974  of  2014  are  concerned,  the
respondent-power producer, namely, Junagadh Power Projects  Pvt.  Ltd.,  has
set up a biomass based power generation plant and had  entered  into  a  PPA
with  Gujarat  Urja  Vikas  Nigam   Limited   (distribution   licensee)   on
26.11.2010.  The  tariff  incorporated in the PPA was  earlier  approved  by
the State Regulatory Commission by tariff  order  dated  17.05.2010  on  the
basis of cost of biomass at Rs. 1600 per MT with escalation of 5% per  annum
for a period of 20  years  of  operation.   The  Biomass  Energy  Developers
Association sought revision of the biomass fuel cost to Rs.  3000/-  per  MT
and for consequential  redetermination  of  the  tariff.   The  said  review
petition  was  dismissed  by  the  State  Commission  in   November,   2010.
Thereafter, the power producer, on  its  own,  moved  the  State  Regulatory
Commission  seeking  modification  of  tariff  on  account  of  air   cooled
condenser  and  also  seeking  increase  in  the  biomass  fuel   cost   and
consequential redetermination of  the  tariff  on  that  basis.   The  State
Regulatory Commission by its  order  dated  05.12.2010,  while  allowing  an
increase in tariff on account of air cooled condenser, rejected the  request
of the power producer to review the price of biomass fuel  cost,  primarily,
on the ground that the review of the  price  of  biomass  fuel  having  been
earlier rejected in the case of Biomass Energy Developers  Association,  the
review of the said price at the request of the power producer cannot now  be
4.    The learned Appellate Tribunal by the impugned  orders  overruled  the
view taken by the State Regulatory Commission  on  a  consideration  of  the
provisions of the Act and the terms  and  conditions  of  the  PPA(s).   The
above view of the learned Appellate  Tribunal  is  primarily  based  on  the
reasoning that under the Act it is the  State  Regulatory  Commission  which
has been statutorily vested with the power to determine the tariff and  that
the tariff as  may  be  fixed  and  incorporated  in  the  PPA  between  the
distribution licensee and the power producer is liable  to  be  reviewed  in
the light of changes in the circumstances of a given case.  In the  case  of
Junagadh Power Projects Pvt. Ltd. the learned Appellate Tribunal  even  went
to the extent of holding that if in the changed  scenario  occasioned  by  a
drastic  alteration  of  the  facts  and   circumstances   surrounding   the
determination of tariff, a review is  declined/refused  the  power  producer
will be left with no option but to  shut  down  its  plants.   Therefore,  a
review of the tariff in exercise of the statutory power vested in the  State
Regulatory Commission would be fully justified.  It is  the  correctness  of
the aforesaid view that has been  assailed  in  the  present  appeals  under
Section 125 of the Act.

5.    We have heard Shri C.A. Sundaram,  learned  senior  counsel  appearing
for the appellant and Shri Sanjay Sen, learned senior counsel appearing  for
the respondent-power producers in both sets of appeals.

6.    The arguments on behalf  of  the  appellant-distribution  licensee  in
both  the  cases  are  more  or  less  common.  In  the   case   of   Tarini
Infrastructure Ltd. it is urged  that  under  Clause  5.2  of  the  PPA  the
appellant is required to pay tariff as determined by  the  State  Commission
which is liable to escalation @ 3% per annum.   The  tariff  order  has  not
been challenged by the power producer. Therefore,  the  tariff  approved  by
the State Regulatory Commission and incorporated in the PPA would remain  in
force for the period of time agreed upon and  the  same  cannot  be  altered
unilaterally.  Reliance in this regard is placed on two recent decisions  of
this Court in the case of Gujarat Urja Vikas Nigam Limited Vs. EMCO  Ltd.  &
Anr.[1] and Bangalore Electricity  Supply  Co.  Vs.  Konark  Power  Projects
Ltd.[2]. It is contended that in the said cases it has been held that a  PPA
duly entered into and otherwise consistent with  the  tariff  order  of  the
State Regulatory Commission cannot  be  reopened.   A  somewhat  “discordant
note” struck by this Court in Transmission  Corporation  of  Andhra  Pradesh
Vs. Sai Renewable Power Pvt. Ltd.[3] has been sought to be explained by  the
appellant by contending that in the PPA involved in that case  there  was  a
specific clause that the tariff would be as revised by orders of  the  State
Regulatory Commission from time to time.
Specifically in the case of Junagadh Power Projects  Pvt.  Ltd.  (respondent
No. 1 in Civil Appeal Nos. 1973-1974 of 2914) it is urged  that  the  demand
raised by Biomass Energy Developers Association for redetermination  of  the
tariff by enhancing the fuel cost to Rs. 3000  per  MT  had  been  dismissed
earlier and the issue has attained finality in law.  The PPA  stood  novated
to the extent of modification of tariff allowed on account of the  issue  of
air cooled condenser is concerned and no further, it is urged.  For  clarity
it may be noted that in an earlier  proceeding  a  higher  tariff  had  been
allowed to biomass based power plants with air cooled condensers.

7.    On the other hand, on behalf of the power producers it is argued  that
determination and fixation of tariff are  instances of the exercise  of  the
statutory powers of the State Regulatory Commission under  Section  62  read
with Section 86(1)(a) of the Act.  The mere incorporation of the  tariff  in
a PPA between the generating company and  the  distribution  licensee  would
not make the tariff a consensual decision by  and  between  the  contracting
parties which, can only  be  altered  by  the  Commission  with  the  mutual
consent of the parties.

8.    The decisions relied upon in Gujarat  Urja  Vikas  Nigam  Limited  Vs.
EMCO Ltd. & Anr. (supra) and Bangalore Electricity  Supply  Co.  Vs.  Konark
Power Projects Ltd. (supra) have sought to be distinguished by reference  to
the facts in the context  of  which  the  same  have  been  rendered.    The
observations of this Court in Transmission  Corporation  of  Andhra  Pradesh
Vs. Sai Renewable Power Pvt. Ltd. (supra) (para 64) with regard to the  role
and authority of the Regulatory Commission in  the  matter  of  fixation  of
tariff have been  relied  upon.   Furthermore,  the  language  appearing  in
Section 86(1)(b) of the Act has been specifically  relied  upon  to  contend
that the  said  provision  of  the  Act  confers  on  the  State  Regulatory
Commission the power “to regulate the price at which  electricity  shall  be
procured from the generating companies or licensees …….. through  agreements
for purchase of  power  for  distribution  and  supply  within  the  State.”
Reliance has also been placed on the decisions on this Court in Sri  Venkata
Setaramanjaneya Rice  &  Oil  Mills  and  Ors.  Vs.  State  of  A.P.[4],  K.
Ramanathan Vs. State of T.N. & Anr.[5] and D.K. Trivedi & Sons Vs. State  of
Gujarat & Ors.[6]  with regard to wide meaning of word  “regulate”.   It  is
further pointed out that power production for  purposes  of  supply  on  the
terms envisaged in the PPA is commercially not viable resulting  in  closure
of the Junagadh Power Projects Ltd. for the past 3 years  and  the  possible
loss of the huge investment made.

9.    The Electricity Act of  2003  has  been  enacted  to  consolidate  and
upgrade  the   existing   laws   relating   to   generation,   transmission,
distribution, trade and use of electricity; for  taking  measures  conducive
to development  of  electricity  as  an  industry;  to  promote  competition
therein and to protect the interest of  consumers;  rationalize  tariff  and
promote  efficient  and  environment  friendly  policies  besides   creating
different regulatory and  appellate  bodies  to  deal  with  highly  complex
technical issues  with  regard  to  production,  distribution  and  sale  of
electricity including fixation of tariff.  A reading of  the  provisions  of
the 2003 Act would go to show that  apart  from  fixation  of  tariff  in  a
“situation of open access” or in a situation of competitive bidding  covered
by Section 63 of  the  Act,  determination  and  fixation  of  tariff  is  a
statutory function to be  performed  by  the  State  Regulatory  Commissions
constituted under the  Electricity  Regulatory  Commissions  Act,  1988  and
exercising powers in  consonance  with  the  principles  enunciated  by  the
Electricity Act, 2003.  Insofar as fixation of  tariff  is  concerned,  Part
VII of the Act read with the functions of the State Commission contained  in
Section 86 thereof  are  relevant  and  would  require  to  be  specifically
noticed. Sections 61, 62 64 and Section 86 of the Act  therefore  are  being
extracted herein below.
“61. Tariff regulations:- The Appropriate Commission shall, subject  to  the
provisions  of  this  Act,  specify  the  terms  and  conditions   for   the
determination of tariff, and in doing so, shall be guided by the  following,

(a) the principles and methodologies specified  by  the  Central  Commission
for determination of the  tariff  applicable  to  generating  companies  and
transmission licensees;

(b) the generation, transmission, distribution  and  supply  of  electricity
are conducted on commercial principles;

(c) the factors which would encourage  competition,  efficiency,  economical
use of the resources, good performance and optimum investments;

(d) safeguarding of consumers' interest and at the same  time,  recovery  of
the cost of electricity in a reasonable manner;

(e) the principles rewarding efficiency in performance;

(f) multi year tariff principles;

1[(g)  that  the  tariff  progressively  reflects  the  cost  of  supply  of
electricity and also reduces cross-subsidies in the manner specified by  the
Appropriate Commission;]

(h) the promotion  of  co-generation  and  generation  of  electricity  from
renewable sources of energy;

(i) the National Electricity Policy and tariff policy:

Provided that the terms and conditions for  determination  of  tariff  under
the Electricity (Supply) Act, 1948 (54 of 1948), the Electricity  Regulatory
Commission Act, 1998 (14 of  1998)  and  the  enactments  specified  in  the
Schedule  as  they  stood  immediately  before  the  appointed  date,  shall
continue to apply  for  a  period  of  one  year  or  until  the  terms  and
conditions for  tariff  are  specified  under  this  section,  whichever  is

“62. Determination  of  tariff:  -  (1)  The  Appropriate  Commission  shall
determine the tariff in accordance with the provisions of this Act for –

(a) supply  of  electricity  by  a  generating  company  to  a  distribution
Provided that the Appropriate Commission may, in case of shortage of  supply
of electricity, fix the minimum and maximum ceiling of tariff  for  sale  or
purchase of electricity in pursuance of an agreement, entered  into  between
a generating company and a licensee or between licensees, for a  period  not
exceeding one year to ensure reasonable prices of electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:

Provided that in case of distribution of electricity in  the  same  area  by
two or more distribution licensees,  the  Appropriate  Commission  may,  for
promoting  competition  among  distribution  licensees,  fix  only   maximum
ceiling of tariff for retail sale of electricity.

(2) The Appropriate Commission  may  require  a  licensee  or  a  generating
company to furnish separate details, as  may  be  specified  in  respect  of
generation, transmission and distribution for determination of tariff.

(3) The Appropriate Commission  shall  not,  while  determining  the  tariff
under this Act, show undue preference to any  consumer  of  electricity  but
may differentiate according to the consumer's  load  factor,  power  factor,
voltage, total consumption of electricity during  any  specified  period  or
the time at which the supply is required or  the  geographical  position  of
any area, the nature of supply and the  purpose  for  which  the  supply  is

(4) No tariff or  part  of  any  tariff  may  ordinarily  be  amended,  more
frequently than once in  any  financial  year,  except  in  respect  of  any
changes expressly permitted under the terms of any  fuel  surcharge  formula
as may be specified.

(5) The Commission may require a licensee or a generating company to  comply
with such procedures as  may  be  specified  for  calculating  the  expected
revenues from the tariff  and  charges  which  he  or  it  is  permitted  to

(6) If any licensee or a generating  company  recovers  a  price  or  charge
exceeding the tariff determined under this section, the excess amount  shall
be recoverable by the person who has paid such price or  charge  along  with
interest equivalent  to  the  bank  rate  without  prejudice  to  any  other
liability incurred by the licensee.”

“64. Procedure for tariff order: - (1) An application for  determination  of
tariff under section 62 shall be made by a generating  company  or  licensee
in such manner and  accompanied  by  such  fee,  as  may  be  determined  by

(2) Every applicant shall publish the application,  in  such  abridged  form
and manner, as may be specified by the Appropriate Commission.

(3) The Appropriate Commission shall, within one  hundred  and  twenty  days
from receipt of an application under sub-section (1) and  after  considering
all suggestions and objections received from the public,-

(a) issue a tariff order accepting the application with  such  modifications
or such conditions as may be specified in that order;

(b) reject the application for reasons to be recorded  in  writing  if  such
application is not in accordance with the provisions of  this  Act  and  the
rules and regulations made thereunder or the provisions  of  any  other  law
for the time being in force:

Provided that an applicant shall be given a reasonable opportunity of  being
heard before rejecting his application.

(4) The Appropriate Commission  shall,  within  seven  days  of  making  the
order, send  a  copy  of  the  order  to  the  Appropriate  Government,  the
Authority, and the concerned licensees and to the person concerned.

(5) Notwithstanding anything  contained  in  Part  X,  the  tariff  for  any
interstate supply, transmission or wheeling of electricity, as the case  may
be, involving the territories of two States may, upon  application  made  to
it by the parties  intending  to  undertake  such  supply,  transmission  or
wheeling, be determined under this section by the  State  Commission  having
jurisdiction  in  respect  of  the  licensee  who  intends   to   distribute
electricity and make payment therefor.

(6) A tariff order shall, unless amended  or  revoked,  continue  to  be  in
force for such period as may be specified in the tariff order.”

“86. Functions of  State  Commission:  -  (1)  The  State  Commission  shall
discharge the following functions, namely: -

(a) determine the tariff for generation, supply, transmission  and  wheeling
of electricity, wholesale, bulk or retail, as the case may  be,  within  the
Provided that where  open  access  has  been  permitted  to  a  category  of
consumers under section 42, the State Commission shall  determine  only  the
wheeling charges and surcharge thereon, if any, for  the  said  category  of

(b) regulate electricity purchase and procurement  process  of  distribution
licensees including the price at which electricity shall  be  procured  from
the  generating  companies  or  licensees  or  from  other  sources  through
agreements for purchase of power for  distribution  and  supply  within  the

(c) facilitate intra-State transmission and wheeling of electricity;

(d) issue licences to persons seeking  to  act  as  transmission  licensees,
distribution  licensees  and  electricity  traders  with  respect  to  their
operations within the State;

(e) promote co-generation  and  generation  of  electricity  from  renewable
sources of energy by providing suitable measures for connectivity  with  the
grid and sale of electricity to any person, and also specify,  for  purchase
of electricity from such sources, a percentage of the total  consumption  of
electricity in the area of a distribution licensee;

(f) adjudicate upon the  disputes  between  the  licensees,  and  generating
companies and to refer any dispute for arbitration;

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

(h) specify State Grid Code consistent with the Grid  Code  specified  under
clause (h) of sub-section (1) of section 79;

(i) specify or enforce standards with respect  to  quality,  continuity  and
reliability of service by licensees;

(j) fix the trading margin in the intra-State  trading  of  electricity,  if
considered, necessary; and

(k) discharge such other functions as may be assigned to it under this  Act.

(2) The State Commission shall advise the State Government on all or any  of
the following matters, namely:-

(i) promotion of competition, efficiency and economy in  activities  of  the
electricity industry;

(ii) promotion of investment in electricity industry;

(iii) reorganization  and  restructuring  of  electricity  industry  in  the

(iv) matters concerning generation, transmission , distribution and  trading
of electricity or any other matter referred to the State Commission by  that

(3) The State Commission shall  ensure  transparency  while  exercising  its
powers and discharging its functions.

(4) In discharge of its functions, the State Commission shall be  guided  by
the National  Electricity  Policy,  National  Electricity  Plan  and  tariff
policy published under section 3.”

10.    While  Section  61  of  the  Act  lays  down   the   principles   for
determination of tariff, Section 62 of the  Act  deals  with  the  different
kinds of tariffs/charges to be fixed. Section 64 enumerates  the  manner  in
which determination of tariff is required to be made by the Commission.   On
the other hand Section 86 which deals with the functions of  the  Commission
reiterates determination of tariff to be one of  the  primary  functions  of
the Commission which determination includes, as noticed above, a  regulatory
power  with  regard  to  purchase  and  procurement  of   electricity   from
generating  companies  by  entering  into  PPA(s).   The  power  of   tariff
determination/ fixation undoubtedly is statutory and that has been the  view
of  this  Court  expressed  in  paragraphs  36  and  64   of    Transmission
Corporation of Andhra Pradesh Vs. Sai Renewable  Power  Pvt.  Ltd.  (supra).
This, of course, is subject to determination  of  price  of  power  in  open
access (Section 42) or in the case of open bidding  (Section  63).   In  the
present case, admittedly, the tariff incorporated in  the  PPA  between  the
generating company and the distribution licensee is the tariff fixed by  the
State Regulatory Commission in exercise of its statutory powers. In  such  a
situation it is not possible to hold that the tariff agreed by  and  between
the parties, though finds mention in a contractual context,  is  the  result
of an act of volition of the parties which  can,  in  no  case,  be  altered
except by mutual consent.   Rather,  it  is  a  determination  made  in  the
exercise of statutory powers which got incorporated in  a  mutual  agreement
between the two parties involved.

11.   The principles on which tariff is to be determined by  the  Commission
as  set  out  in  Section  61  have  already  been   noticed.    Generation,
transmission, distribution and supply  of  electricity  is  required  to  be
conducted on commercial principles; while the consumers’ interest is  to  be
safeguarded, recovery of cost of electricity  in  a  reasonable  manner  has
also to be ensured.  Under Section 64(6) a tariff order continues to  remain
in force for such period as may be specified.   In  the  State  of  Gujarat,
currently,  the  Gujarat  Electricity  Regulatory   Commission   (multi-year
tariff) Regulations, 2016  govern  the  fixation  of  tariff  by  the  State
Commission.  As per Regulation 31 the Commission is  required  to  determine
the  tariff  of  a  generating  company,  transmission  licensee,  SLDC  and
distribution licensee for each financial  year  during  the  control  period
(control period is 5 years) (financial year 2016  to  financial  year  2021)
having regard to the following factors:
“(a)  The approved forecast of Aggregate Revenue  Requirement  and  expected
revenue from tariff and charges  of  the  Generating  company,  Transmission
Licensee, SLDC and Distribution Licensee for such financial year,  including
modification approved at the time of mid-term review, if any, and

(b)   Approved gains and losses, including the  incentive  available  to  be
passed through in tariffs, following the Truing Up of previous year.

12.   Not only the tariff fixed is subject to periodic  review,  furthermore
the above Regulations  provide  for  taking  into  consideration  the  force
majeure events.  Any  force  majeure  is  considered  as  an  uncontrollable
factor.  In fact Regulation 23 provides that the approved aggregate gain  or
loss on account of uncontrollable factor  shall  be  passed  through  as  an
adjustment in the tariff over such period as may be specified in  the  Order
of the Commission.
13.     Regulations  23  and  31  of  the  Gujarat  Electricity   Regulatory
Commission (multi-year tariff) Regulations, 2016 are reproduced hereunder.
23.    Mechanism  for  pass  through  of  gains  or  losses  on  account  of
uncontrollable factors

23.1 The approved aggregate gain  or  loss  to  the  Generating  Company  or
Transmission Licensee  or  SLDC  or  Distribution  Licensee  on  account  of
uncontrollable factors shall be passed  through  as  an  adjustment  in  the
tariff of the  Generating  Company  or  Transmission  Licensee  or  SLDC  or
Distribution Licensee over such period as may be specified in the  Order  of
the Commission passed under these Regulations.

23.2  The  Generating  Company  or  Transmission   Licensee   or   SLDC   or
Distribution Licensee shall submit such details  of  the  variation  between
expenses incurred and  revenue  earned  and  the  figures  approved  by  the
Commission, in the prescribed format  to  the  Commission,  along  with  the
detailed computations and  supporting  documents  as  may  be  required  for
verification by the Commission.

23.3 Nothing contained in this Regulation 23shall apply in  respect  of  any
gain or loss arising out of variations  in  the  price  of  fuel  and  power
purchase, which shall be dealt with as  specified  by  the  Commission  from
time to time.

31. Annual determination of tariff

The  Commission  shall  determine  the  tariff  of  a  Generating   Company,
Transmission Licensee, SLDC and Distribution Licensee covered under a Multi-
Year Tariff framework for each financial year during the Control Period,  at
the commencement of such financial year, having regard to the following:
(a)   The approved forecast of Aggregate Revenue  Requirement  and  expected
revenue from tariff and charges  of  the  Generating  Company,  Transmission
Licensee, SLDC and Distribution Licensee for such financial year,  including
modifications approved at the time of mid-term review, if any; and
(b)   Approved gains and losses, including the  incentive  available  to  be
passed through in tariffs, following the Truing Up of previous year.”

14.   When the tariff order itself is  subject  to  periodic  review  it  is
difficult to see how incorporation of a particular tariff prevailing on  the
date of commissioning of the power project can be  understood  to  bind  the
power producer for the entire duration of the plant life (20 years)  as  has
been envisaged by Clause 4.6 of the PPA  in  the  case  of  Junagadh.   That
apart, modification of the tariff on account of air  cooled  condensers  and
denying the same on account of claimed inadequate pricing of biogas fuel  is
itself contradictory.

15.   As already noticed, Section 86(1)(b) of the  Act  empowers  the  State
Commission to regulate  the  price  of  sale  and  purchase  of  electricity
between  the  generating  companies  and  distribution   licensees   through
agreements for power produced for distribution and supply.  As held by  this
Court in              Sri Venkata Setaramanjaneya Rice & Oil Mills and  Ors.
Vs. State of A.P. (supra), K. Ramanathan Vs. State of T.N.  &  Anr.  (supra)
and D.K. Trivedi & Sons Vs. State of Gujarat & Ors.  (supra)  the  power  of
regulation is indeed  of  wide  import.  The  following  extracts  from  the
reports in the above cases would illuminate the issue.
 Sri Venkata Setaramanjaneya Rice & Oil
 Mills and Ors. Vs. State of A.P. (supra)

“20. Then it was faintly argued by Mr. Setalvad that the power  to  regulate
conferred on the respondent by Section 3(1)  cannot  include  the  power  to
increase the tariff rate; it would include the power to  reduce  the  rates.
This argument is entirely misconceived. The word “regulate” is  wide  enough
to confer power on the respondent  to  regulate  either  by  increasing  the
rate, or decreasing the rate, the test being what is it  that  is  necessary
or expedient to be done to maintain,  increase,  or  secure  supply  of  the
essential  articles  in  question  and  to   arrange   for   its   equitable
distribution     and     its     availability      at      fair      prices.

K. Ramanathan Vs. State of T.N. & Anr. (supra)

“18. The word “regulation” cannot have any rigid or  inflexible  meaning  as
to exclude “prohibition”. The word “regulate”  is  difficult  to  define  as
having any precise meaning. It is a word of broad  import,  having  a  broad
meaning, and is very  comprehensive  in  scope.  There  is  a  diversity  of
opinion as to its meaning and its  application  to  a  particular  state  of
facts, some courts giving to the term  a  somewhat  restricted,  and  others
giving to it a liberal, construction. The different shades  of  meaning  are
brought out in Corpus Juris Secundum, Vol. 76 at p. 611:
“‘Regulate’ is variously defined as meaning to adjust; to adjust, order,  or
govern by rule, method, or established mode; to adjust or control  by  rule,
method, or established mode, or governing principles or laws; to govern;  to
govern by rule; to govern by, or subject to, certain rules or  restrictions;
to govern or direct according to rule; to  control,  govern,  or  direct  by
rule or regulations.
‘Regulate’ is also defined as meaning  to  direct;  to  direct  by  rule  or
restriction; to direct or manage according to certain  standards,  laws,  or
rules; to rule; to conduct; to fix or establish; to restrain; to restrict.”
See also: Webster’s Third New International Dictionary,  Vol.  II,  p.  1913
and Shorter Oxford Dictionary, Vol. II, 3rd Edn., p. 1784.

19. It has often been said that the power to regulate does  not  necessarily
include the power to prohibit, and ordinarily the  word  “regulate”  is  not
synonymous with the word “prohibit”. This is true in a general sense and  in
the sense that mere regulation is not the same as absolute  prohibition.  At
the same time, the power to regulate carries with it  full  power  over  the
thing subject to regulation and in absence of restrictive words,  the  power
must be regarded as plenary over the entire subject. It  implies  the  power
to rule, direct and control, and involves the adoption of a rule or  guiding
principle to be followed, or the making  of  a  rule  with  respect  to  the
subject to be regulated. The power to regulate implies the  power  to  check
and may imply the power to prohibit under certain  circumstances,  as  where
the best or only efficacious regulation consists of  suppression.  It  would
therefore appear that the  word  “regulation”  cannot  have  any  inflexible
meaning as to exclude “prohibition”. It has different shades of meaning  and
must take its colour from the context in which it is used having  regard  to
the purpose and object of the legislation, and the  Court  must  necessarily
keep in view the mischief which the legislature seeks to remedy.”

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

“30. Bearing this in mind, we now turn to examine the nature  of  the  rule-
making  power  conferred  upon  the  State  Governments  by  Section  15(1).
Although under Section 14, Section 13 is one of the sections which does  not
apply to minor minerals, the language of Section 13(1) is  in  pari  materia
with the language of Section 15(1). Each of  these  provisions  confers  the
power  to  make  rules  for  “regulating”.  The   Shorter   Oxford   English
Dictionary, 3rd Edn., defines the word “regulate” as  meaning  “to  control,
govern, or direct  by  rule  or  regulations;  to  subject  to  guidance  or
restrictions; to adapt to circumstances or surroundings”.  Thus,  the  power
to regulate by rules given by  Sections  13(1)  and  15(1)  is  a  power  to
control, govern and direct by rules the grant of  prospecting  licences  and
mining leases in respect of minerals  other  than  minor  minerals  and  for
purposes connected therewith in the case of Section 13(1) and the  grant  of
quarry leases, mining leases and other mineral  concessions  in  respect  of
minor minerals and for purposes connected therewith in the case  of  Section
15(1) and to subject such grant to restrictions and to  adapt  them  to  the
circumstances of the case and the surroundings with reference to which  such
power is exercised. It is pertinent to  bear  in  mind  that  the  power  to
regulate conferred by Sections 13(1) and 15(1) is not only with  respect  to
the grant of licences and leases mentioned  in  those  sub-sections  but  is
also with respect to  “purposes  connected  therewith”,  that  is,  purposes
connected with such grant.”

16.   All the above would suggest that  in  view  of  Section  86(1)(b)  the
Court must lean in favour of  flexibility  and  not  read  inviolability  in
terms of the PPA insofar as the tariff stipulated  therein  as  approved  by
the  Commission  is  concerned.   It  would  be   a   sound   principle   of
interpretation to confer such a power if public  interest  dictated  by  the
surrounding events and circumstances require a review of  the  tariff.   The
facts of the present case, as elaborately noted  at  the  threshold  of  the
present opinion, would suggest that the Court must lean in favour of such  a
view also having due regard to the provisions of Sections 14 and 21  of  the
General Clauses Act, 1898.  In this context, the views of this Court on  the
purport and effect of Sections 14 and 21 of the General Clauses Act  may  be
re-noticed by extracting paragraphs 47, 48 and 49 of the  decision  of  this
Court in D.K. Trivedi & Sons Vs. State of Gujarat & Ors. (supra).
“47. The next contention was that  though  under  Section  15(1)  the  State
Governments may have the power  to  make  rules  providing  for  payment  of
royalty and dead rent, sub-section  (3)  showed  that  such  power  did  not
extend to amending the rules so as to enhance the rate  of  dead  rent.  The
submission in this behalf was that the power to enhance the rate of  royalty
by amending the rules was expressly provided for in sub-section (3)  by  the
use of the words “at the rate prescribed for the time  being  in  the  rules
framed by the State Government in respect of minor minerals” but  there  was
no such provision in Section 15 with respect to dead rent. We are unable  to
accept this submission. Rules under Section 15(1), though made by the  State
Governments, are rules made under a Central Act and the  provisions  of  the
General Clauses Act, 1897, apply to such rules.  Under  Section  21  of  the
General Clauses Act, where by any Central Act, a  power  to  make  rules  is
conferred, then that power includes a power, exercisable in the like  manner
and subject to the like sanction and conditions if any, to  add  to,  amend,
vary or rescind any  rules  so  made.  The  power  to  amend  the  rules  is
therefore, comprehended within the power to make rules and as Section  15(1)
confers upon the State Governments the power to  make  rules  providing  for
payment  of  dead  rent  and  royalty,  it  also  confers  upon  the   State
Governments the power to amend those rules so  as  to  alter  the  rates  of
royalty and dead rent so prescribed, either by enhancing  or  reducing  such
rates.    ……………     ………….   ………….  ………….

48. It was then contended that the  very  language  of  sub-section  (1)  of
Section 15  shows  that  it  does  not  confer  any  power  upon  the  State
Governments to enhance the rate of royalty or dead rent  because  the  rules
which are to be made under that sub-section are for regulating the grant  of
quarry leases, mining leases and other mineral  concessions  in  respect  of
minor minerals and, therefore, the rules under that sub-section can be  made
only with respect to the time when such leases or  concessions  are  granted
and not with respect to any point  of  time  subsequent  thereto  and  there
being no provision similar to sub-section (3) of Section 15 with respect  to
dead rent, any rule providing for increase in the rate of dead  rent  during
the subsistence of a lease would be ultra vires Section 15. This  submission
is devoid of substance. As pointed out earlier, sub-section (3)  of  Section
15 does not confer any power to amend the rules made  under  Section  15(1),
for the power to amend the rules is comprehended within the  power  to  make
the rules conferred by sub-section  (1)  of  Section  15.  The  construction
sought to be placed upon the word “grant” in Section 15(1)  also  cannot  be
accepted. While granting a lease it is open  to  the  grantor  to  prescribe
conditions which are to be observed during the period of the grant and  also
to provide for the forfeiture of  the  lease  on  breach  of  any  of  those
conditions. If the grant of a lease were not to prescribe  such  conditions,
the lessee could with impunity commit breaches  of  the  conditions  of  the
lease. Ordinary leases of immovable property at times provide  for  periodic
increases of rent and there is no reason why such increases  should  not  be
made in a mining or quarry lease or other mineral concession  granted  under
a regulatory statute intended for the benefit of the public  and  even  less
reason why such a statute should not confer power to  make  rules  providing
for increases in the rate of dead rent during the subsistence of the  lease.
………………      ………………    ……………  ……………

49. In support of the above contention it was also  submitted  that  in  the
absence of a provision like the one contained in Section 15(3) the power  to
enhance the  rate  of  dead  rent  cannot  be  so  exercised  as  to  affect
subsisting leases and that unless this construction were  placed  upon  sub-
section (1), the power conferred by that sub-section would be bad in law  as
being an arbitrary power. It was  submitted  that  a  mining  lease  is  the
result of a contract entered into between two parties and dead rent is  part
of the consideration for the grant of the lease, and just as in the case  of
a contract of sale of goods, it cannot be left to  the  sweet  will  of  the
seller to charge what price he liked, in the same way in the case of  leases
and concessions granted under Section 15(1), it cannot be left to the  State
Governments to amend the rules so as to charge whatever dead rent they  like
and whenever they like during the subsistence  of  the  lease.  We  find  no
substance in either of these submissions. A quarry lease,  mining  lease  or
other mineral concession in respect of a minor mineral  does  not  stand  on
the same footing as an ordinary contract. These leases and  concessions  are
granted by the State Governments pursuant to rules made under the  statutory
power conferred upon them by a regulatory Act.  Minerals  are  part  of  the
material resources which constitute a nation’s natural  wealth  and  if  the
nation is to advance industrially and if its economy is to be  benefited  by
the proper development and exploitation of these resources, they  cannot  be
permitted to  be  frittered  away  and  exhausted  within  a  few  years  by
indiscriminate exploitation  without  any  regard  to  public  and  national
interest. The same view was expressed by the Court in State  of  Tamil  Nadu
v. Hind Stone. …………   ……………  …………  The  presumption  is  that  an  authority
clothed with a statutory power will exercise such power reasonably,  and  if
in the public interest and for  the  efficacious  regulation  of  mines  and
quarries of minor minerals and the proper development of  such  minerals,  a
State Government as the delegate of  the  Union  Government  thinks  fit  to
amend the rules so as to enhance the rate of dead rent, it  cannot  be  said
that it is prevented from doing so by the principles of the ordinary law  of
contracts. It may be that in certain cases by enhancing  the  rate  of  dead
rent the holders of leases in respect of certain  types  of  minor  minerals
may be adversely affected  but  private  interest  cannot  be  permitted  to
override  public  interest.  Conservation  of  minerals  and  their   proper
exploitation result in securing the maximum benefit to the community and  it
is open to the State Governments to enhance the rate of dead rent so  as  to
ensure the proper  conservation  and  development  of  minor  minerals  even
though it may affect a lessee’s liability under a subsisting lease.”

17.    A similar view expressed in Shree Sidhbali  Steels  Ltd.  and  Others
Vs. State of Uttar Pradesh and Others[7] may also be noticed.
“41.   By virtue of Sections 14 and 21 of the General Clauses  Act,  when  a
power is conferred on an authority to do a particular act,  such  power  can
be exercised from time to time and carries with it the  power  to  withdraw,
modify, amend or cancel the notifications earlier issued,  to  be  exercised
in the like manner and subject to like conditions,  if  any,  attached  with
the exercise of the power. It would be too narrow  a  view  to  accept  that
chargeability once fixed cannot be altered. Since the charging provision  in
the Electricity (Supply) Act, 1948 is  subject  to  the  State  Government’s
power to issue notification under Section 49 of  the  Act  granting  rebate,
the State Government, in view of Section 21 of the General Clauses Act,  can
always withdraw, rescind, add to or modify  an  exemption  notification.  No
industry can claim as of right  that  the  Government  should  exercise  its
power under Section 49 and offer rebate and it  is  for  the  Government  to
decide whether the conditions are such that  rebate  should  be  granted  or

18.   Before parting, a word about the recent pronouncements of  this  Court
in Gujarat Urja Vikas Nigam  Limited  Vs.  EMCO  Ltd.  &  Anr.  (supra)  and
Bangalore Electricity Supply Co. Vs. Konark  Power  Projects  Ltd.  (supra),
relied upon by the appellant.  All that would be necessary to note  in  this
regard  is the context in which the bar of a review of the terms  of  a  PPA
was found by this Court in the above cases.  In  Gujarat  Urja  Vikas  Nigam
Limited Vs. EMCO Ltd. & Anr. (supra) the power purchaser sought the  benefit
of a second tariff order  made  effective  to  projects  commissioned  after
29.01.2012 (the power purchaser had commissioned its project on  02.03.2012)
though under the PPA it was to be governed by  the  first  tariff  order  of
January, 2010.  Under the first tariff order for such  projects  which  were
not commissioned on or before the date fixed under the said  order,  namely,
31.11.2011  the  tariff  payable  was  to  be  determined  by  the   Gujarat
Electricity Regulatory Commission. The power producer in the above case  did
not seek determination of a separate  tariff  but  what  was  sought  was  a
declaration that the second tariff  order  dated  27.01.2012  applicable  to
PPA(s) after 29.01.2012 would be applicable.  It is  in  this  context  that
this Court had taken the view that the power producer would not be  relieved
of its contractual obligations under the PPA. In  the  case  of    Bangalore
Electricity Supply Co. Vs. Konark Power Projects Ltd.  (supra),  this  Court
held that it was beyond the power of State Commission  to  vary  the  tariff
fixed under  the  approved  PPA  in  view  of  the  specific  provisions  in
Regulations 5.1 and 9 of the KERC(Power Procurement from  Renewable  Sources
by Distribution Licensee) Regulations, 2004 and  2011  respectively  as  the
same  specifically  excluded  a  PPA  concluded  prior  to   the   date   of
notification of the Regulations in question.

19.   In view of the above, the appeals are dismissed and the  orders  dated
31.05.2012 and 02.12.2013 of the Appellate Tribunal are  affirmed.   In  the
facts and circumstances of the case, the parties are left to bear their  own

                                                     [RANJAN GOGOI]

                                                      [PRAFULLA C. PANT]
JULY 05, 2016.
[1]    2016 (2) SCALE 75
[2]    2015(5) SCALE 711
[3]    (2011) 11 SCC 34
[4]    AIR 1964 SC 1781
[5]    (1985) 2 SCC 116
[6]    (1986) Supp. SCC 20
[7]    (2011) 3 SCC 193

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