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Thursday, December 15, 2016

Section 63 of the Electricity Act, 2003 = whether, when public interest is involved, waiver can at all take place of a right in favour of the generator of electricity under a PPA if the right also has an impact on consumer interest. This substantial question of law has been answered by us in the course of the judgment. We have also pointed out that the Appellate Tribunal’s finding that the Independent Engineer’s test certificate can pass muster and that there is a waiver on facts is not a possible conclusion, and such finding is, therefore, perverse and hence set aside. That apart, we have also pointed out the contradictory nature of the judgment of the Appellate Tribunal, when it points out that the requirement of Article 6.3.1 is not merely for the private benefit of the procurers of electricity, but is as a matter of general policy; and then later on in the judgment finds that no question of public interest or public policy arises in the present case. In these circumstances, this plea must also be turned down. In the result, the appeals are allowed but with no order as to costs.


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                     CIVIL APPEAL NOS.5881-5882 OF 2016

      FEDERATION & ORS.                            … APPELLANTS



                     CIVIL APPEAL NOS.5239-5240 OF 2016
                        CIVIL APPEAL NO.5246 OF 2016
                     CIVIL APPEAL NOS.5342-5343 OF 2016
                        CIVIL APPEAL NO.5879 OF 2016
                        CIVIL APPEAL NO.5355 OF 2016
                        CIVIL APPEAL NO.5365 OF 2016
                        CIVIL APPEAL NO.5367 OF 2016
                        CIVIL APPEAL NO.5956 OF 2016

                              J U D G M E N T

      R.F. Nariman, J.

      1.    These appeals have been  argued  over  a  number  of  days,  but
      ultimately the points raised in them lie within a narrow compass.

      2.    On 19.1.2005, the Central  Government,  in  exercise  of  powers
      under Section 63 of the Electricity Act, 2003 issued guidelines for  a
      tariff based competitive bid process to be initiated  by  distribution
      licensees  /procurers  for  procurement  of  power   from   generating
      companies. The electricity to be procured by such procurers is for the
      purpose of distribution and retail supply to consumers generally.   On
      10.2.2006, in pursuance of these guidelines,  procurers  in  different
      States, namely, appellants 1 to 3 and respondents 5 to  15  (in  Civil
      Appeal Nos.5239-5240 of  2016)  nominated  Power  Finance  Corporation
      Limited, a Government of India undertaking  as  the  Nodal  Agency  to
      complete a competitive bid process for development of  an  ultra  mega
      power  project  based  on  linked  coalmines  using   super   critical
      technology of units of 660 mega watts (MW) each, plus or minus 20%, in
      Sasan District, Singrauli, Madhya Pradesh.  On 10.2.2006, Sasan  Power
      Limited was incorporated as a special purpose vehicle by Power Finance
      Corporation in order to implement the aforesaid purpose.  On 1.8.2007,
      based on  the  competitive  bidding  process  held  by  Power  Finance
      Corporation, Reliance Power Limited, having quoted the lowest  amount,
      was selected as the successful bidder, and  a  letter  of  intent  was
      issued to Reliance Power Ltd.  The quoted tariff, year by year, for  a
      period of 25 years, which was accepted and incorporated as Schedule 11
      in the Power Purchase Agreement dated 7.8.2007 (PPA) had tariffs at an
      extremely depressed rate for the first  two  years,  after  which  the
      tariffs were fixed at a significantly higher rate.  On  the  very  day
      that the  PPA  was  executed  between  Sasan  Power  Limited  and  the
      procurers for generation and sale of electricity, 100%  share  holding
      of the special purpose vehicle was acquired by Reliance Power Limited.
       The PPA contains detailed clauses with respect to generation of power
      and the tariffs payable for the period of 25 years.  Apart from  other
      provisions, we are really concerned with Article 6 read with  Schedule
      5 which provides for pre-conditions to be satisfied for declaration of
      a  generating  unit  as  Commercial  Operation  Date,  “COD”,   namely
      readiness to commence commercial operations.  This happens only when a
      performance test, by operating the  generating  unit  at  95%  of  the
      contracted capacity as existing on the Effective Date on a  continuous
      running basis for 72 hours,  has  been  certified  by  an  independent
      engineer, by giving a final test certificate to the aforesaid  effect.
      The PPA also contains various other clauses  which  will  be  set  out
      during the course of this judgment.

      3.    The bone of contention in these matters is whether the  COD  for
      Unit No.3, which was the first  Unit  to  be  commissioned,  had  been
      achieved on 31.3.2013.  If it had, then under  Schedule 11 to the PPA,
      the entire first year would get  exhausted  in  one  day,  i.e.,  31st
      March being the end of the contract year,  for  which  tariff  payable
      would be at the rate of 69 paise per unit.  If not, then it is only on
      and from the commencement of COD that such year  would  begin,  which,
      according to the appellants before us, would only begin  on  16.8.2013
      when a final test certificate in accordance with Article 6 of the  PPA
      was given by the independent engineer to the effect that  95%  of  the
      contracted capacity had been achieved for a continuous  period  of  72
      hours.  We are informed that if the COD is said to be on 31.3.2013, as
      has been held by the Appellate Tribunal, the consumers would  have  to
      pay a sum of over ?1000 crores, being  the  differential  tariff  that
      would apply.

       4.   The date for commissioning the first unit was  fixed  under  the
      PPA as 7th May, 2013.  However, under Schedule 11 thereof,  this  date
      was preponed to 27th November, 2012.  As Sasan  kept  postponing  this
      date, it appears that the commissioning tests for generating Unit No.3
      commenced  from  20.3.2013.   Various  emails  were   exchanged   from
      27.3.2013 to 30.3.2013 between  Sasan  and  the  Western  Region  Load
      Dispatch Centre (hereinafter referred to as “the WRLDC”), a  statutory
      authority under the Electricity Act, 2003.  It is the  case  of  Sasan
      that though they were ready to deliver electricity on 31.3.2013 at 95%
      of the contracted capacity of 620 MW of the unit, they could not do so
      as WRLDC did not give them the necessary green  signal  to  go  ahead.
      They relied heavily upon the independent engineer’s  test  certificate
      dated 30.3.2013 to show that a COD took place on  the  following  day,
      which we will consider in some detail later.  At this  stage,  suffice
      it to say that a petition  was  filed  by  WRLDC  before  the  Central
      Electricity Regulatory Commission (CERC) on 25.4.2013, in which it was

           “1. Kindly look into the veracity of the certificate  issued  by
           the Independent Engineer in view of deliberate  suppression  and
           misrepresentation of the facts and issue suitable directions  to
           respondent no.2 to desist from such act.

           2.    Kindly look into the matter of Respondent No. 1  including
           into  intentional  mis-declaration  of  parameters  related   to
           commercial mechanism in vogue and has purported  to declare  the
           part (de-rated) capacity of 101.38 MW  as  commercial  on    the
           grounds   of   load

           restriction by WRLDC  and  issued  suitable  directions  in  the

           3.    Issue specific guidelines with respect to  declaration  of
           COD of the generators who are not governed by  the  CERC  (Terms
           and Conditions of Tariff) Regulations, 2009 to be in  line  with
           CERC regulations so that  the  same  can  be  implemented  in  a
           dispute free manner and eliminate any possibility of  gaming  by

           4.    Hon’ble Commission may  give  any  further  directions  as
           deemed fit in the circumstances of the case.”

      5.    This petition was  allowed  by  the  CERC  by  its  order  dated
      8.8.2014, by which it first set out five issues as follows:-

        a) Whether the petition filed by WRLDC is maintainable?

        b) Whether the Certificate issued by IE is in accordance  with  the
           PPA and if not, whether IE has made  deliberate  suppression  or
           misrepresentation of facts while issuing the certificate?

        c) Whether COD of the station as declared by SPL is  in  accordance
           with the PPA?

        d) Whether the Respondent No.1 has indulged in  mis-declaration  of
           parameters relating to commercial mechanism in vogue?

        e)  Guidelines  with  regard  to  the  commercial  operation  of  a
           generating  station  which  is  not  regulated  by  the   tariff
           regulations of the Commission.”

      6.    The  CERC  answered  issues  (a),  (b),  (c),  and  (e)  in  the
      affirmative, and issue (d) in the negative.  Ultimately the Commission
      arrived at the conclusion that COD had not been achieved on  31.3.2013
      but had only been achieved later, on 16th August  of  the  same  year.
      This finding was set aside by the Appellate Tribunal by  its  judgment
      dated 31.3.2016, in which the Appellate Tribunal found that though COD
      had not been achieved on 31.3.2013 in accordance  with  the  PPA,  but
      that the procurers under the PPA had  waived  their  right  to  demand
      performance at 95%, and that the performance of Unit No.3,  which  was
      only roughly 17% of its contracted capacity, was accepted by  all  the
      procurers, and that therefore there was a  waiver  of  this  essential
      condition, which would then entitle the generator to  treat  31.3.2013
      as the date on which commercial operation of Unit No.3 commenced.   It
      is the correctness of this judgment which has  been  assailed  by  the
      various appellants before us.

      7.    Mr. Jayant Bhushan, learned  senior  counsel,  Mr.  Gopal  Jain,
      learned senior counsel, Mr. M.G. Ramachandran,  learned  counsel,  Mr.
      Purusha Indra Kavrar, learned AAG, and   Mr.  Alok   Shankar,  learned
      counsel appearing for the appellants have relied  heavily  on  Article
      6.3.1 read with Schedule 5 of the PPA, and  stated  that  this  is  an
      Article which does  not  merely  reflect  the  individual  rights  and
      liabilities of the generator and procurers of  electricity  but  would
      also sound in public interest inasmuch as the declaration of COD would
      have effect on the tariff that  is  payable  by  consumers  generally.
      They, therefore, argued that Article  6.3.1  cannot  be  waived  as  a
      matter of law.  They also argued that it cannot also be  waived  as  a
      matter of fact inasmuch as when the PPA expressly  allowed  a  certain
      provision to be waived, it  expressly  stated  so.   In  this  regard,
      Articles 3.1.2, 4.4.2(b) 10.1(c), 10.2(c) were pointed  out  by  them.
      Referring to Article 18.3 of the PPA, it  was  argued  that  the  said
      Article is  not  a  substantive  provision  for  waiver,  but  only  a
      provision dealing with the manner in which waiver is to be  exercised,
      and has reference only  to  the  aforesaid  Articles.   Further,  even
      assuming that there was a waiver, such waiver took place  as  late  as
      15.4.2013 when the  last  communication  from  Uttarakhand  Power  was
      received.  There was, therefore, no waiver of the aforesaid  condition
      on 31.3.2013.  They also argued that as a matter of  fact  the  emails
      exchanged between the parties would show that the  lead  procurer  and
      all the other procurers had in fact never consented  to  31.3.2013  as
      being the COD for the purpose of  the  PPA.   They  also  argued  that
      really speaking any such alleged waiver was not a waiver at  all,  but
      an amendment to the PPA which would require the  Commission’s  consent
      under Article 18.1, inasmuch as it would affect the tariff payable  by
      consumers.    They also argued that it is clear from a  reading  of  a
      chart which showed generation from March to August,  2013  that  Sasan
      was not able to achieve anywhere near 95% of contracted capacity until
      16th August which is when the COD took  place  on  facts.   They  also
      pointed out that, for example, in the month  of  July,  there  was  no
      supply of power at all by Sasan Power.  Ultimately, it was stated that
      the Independent Engineer’s certificate dated 30.3.2013 was a  document
      made only to favour Sasan, so that Sasan could swallow one entire year
      of tariff in one day, so that the  consumer  would  have  to  pay  the
      higher tariff for what is in reality the first year, but is now  being
      treated as the second year of generation and supply.

      8.    As against this, Shri Chidambaram and Shri Sibal, learned senior
      counsel appearing on behalf of Sasan Power Ltd., have argued  that  as
      against 69 and 70 paise per unit for electricity  supplied  under  the
      PPA, the procurers were in fact procuring electricity at  much  higher
      rates.  It was the procurers themselves, therefore, who  kept  telling
      Sasan to supply power as soon as possible.  For this, they relied,  in
      particular, on the minutes of a meeting dated  27.2.2013  between  the
      procurers and Sasan, in which the procurers unequivocally stated  that
      any time upto 31.3.2013, the power generation should begin  from  Unit
      No.3.  This was  because  the  moment  such  power  generation  began,
      whether it was 69 paise or 70 paise for the second year, the aforesaid
      tariff was much, much lower than what the procurers would have to  pay
      otherwise.  It was their argument that it was only at  the  behest  of
      the procurers themselves that the COD was declared on 31.3.2013.  They
      further argued that  on  a  correct  reading  of  emails  and  letters
      exchanged between  the  parties,  the  lead  procurer  and  all  other
      procurers had actually and unequivocally waived the requirement of 95%
      of contracted capacity demand and  that  the  Appellate  Tribunal  was
      right in this behalf.  Countering the arguments of the appellant, they
      referred to and relied upon Section 63 of  the  Indian  Contract  Act,
      1872 to buttress their submission that waiver is a  right  granted  by
      the Contract Act  and  does  not  depend  upon  the  PPA.   Therefore,
      whatever the construction of Article 18.3 of the PPA, it is clear that
      the Contract Act itself gives them  this  right  which  the  procurers
      themselves have exercised in accordance with law, for  the  very  good
      reason that they wanted the supply of cheap energy at any  cost,  even
      at the cost of being at 17% instead of 95% of contracted  demand.   It
      was also their case that they were ready to supply electricity on 31st
      March at  95%  of  the  contracted  demand,  but  unfortunately  WRLDC
      prevented them from doing so,  and  that  the  independent  engineer’s
      certificate had been wrongly castigated by CERC, as was correctly held
      by the Appellate Tribunal.  The independent  engineer  laid  bare  the
      facts  correctly  and  therefore  did  not  give  a  false  or   wrong
      certificate as was found by CERC. They also met an argument raised  by
      the appellant that Haryana at  least  had  waived  its  right  without
      prejudice to its other  rights  and  contentions.   This  was  met  by
      stating that Haryana accounted only  for  roughly  12%  of  the  total
      electricity demanded by all the procurers and that as per a clause  in
      the PPA, if the lead procurer and the other procurers  constitute  65%
      or more, they can bind all the other procurers.

      9.    In order to appreciate the rival submissions, it is necessary to
      refer to the relevant provisions of the PPA, which reads as follows:-

           “1.   Definitions

                 The terms used in this Agreement, unless as defined  below
           or repugnant to the context, shall  have  the  same  meaning  as
           assigned to them by the Electricity Act, 2003 and the  rules  or
           regulations framed thereunder, including those issued/framed  by
           Appropriate Commission (as defined hereunder), as amended or re-
           enacted from time to time.

           The following terms when used in this Agreement shall  have  the
           respective meanings, as specified below:

|“Commercial Operation |Means, in relation to a Unit, the |
|“Date” or “COD”       |date one day after the date when  |
|                      |each of the Procurers receives a  |
|                      |Final Test Certificate of the     |
|                      |Independent Engineer as per the   |
|                      |provisions of Article 6.3.1 and in|
|                      |relation to the Power Station     |
|                      |shall mean the date by which such |
|                      |Final Test Certificates as per    |
|                      |Article 6.3.1 are received by the |
|                      |Procurers for all the Units;      |
|“Commissioning” or    |Means, in relation to a Unit, that|
|“commissioned with its|the Unit or in relation to the    |
|grammatical variations|Power Station all the Units of the|
|                      |Power Station have passed the     |
|                      |Commissioning Tests successfully; |
|“Commissioning Tests” |Means the Tests provided in       |
|or “Commissioning     |Schedule 5 herein;                |
|Test”                 |                                  |
|“Commissioned Unit”   |Means the Unit in respect of which|
|                      |COD has occurred;                 |
|“Contract Year”       |Means the period beginning on the |
|                      |date of this Agreement and ending |
|                      |on the immediately succeeding     |
|                      |March 31 and thereafter each      |
|                      |period of 12 months beginning on  |
|                      |April 1 and ending on March 31    |
|                      |provided that:                    |
|                      |In the financial year in which    |
|                      |Scheduled COD of the first Unit   |
|                      |would have occurred, a Contract   |
|                      |Year shall end on the date        |
|                      |immediately before the Scheduled  |
|                      |COD of the first Unit and a new   |
|                      |Contract Year shall begin once    |
|                      |again from the Scheduled          |
|                      |Commercial Operation Date of the  |
|                      |first Unit and end on immediately |
|                      |succeeding March 31 and provided  |
|                      |further that                      |
|                      |(ii) The last Contract Year of    |
|                      |this Agreement shall end on the   |
|                      |last day of the term of this      |
|                      |Agreement;                        |
|“Contracted Capacity” |Means (i) for the first Unit,     |
|                      |620.4 MW; (ii) for the second     |
|                      |Unit, 620.4 MW; (iii) for the     |
|                      |third Unit, 620.4 MW; (iv) for the|
|                      |fourth Unit, 620.4 MW; (v) for the|
|                      |fifth Unit, 620.4 MW and (vi) for |
|                      |the sixth Unit 620.4 MW rated net |
|                      |capacity at the Interconnection   |
|                      |Point, and in relation to the     |
|                      |Power Station as a whole means    |
|                      |3722.4 MW rated net capacity at   |
|                      |the Interconnection Point, or such|
|                      |rated capacities as may be        |
|                      |determined in accordance with     |
|                      |Article 6.3.4 or Article 8.2 of   |
|                      |this Agreement;                   |
|“Effective Date”      |Means the date of signing of this |
|                      |Agreement by last of all the      |
|                      |Parties;                          |
|“Declared Capacity”   |In relation to a Unit or the Power|
|                      |Station at any time means the net |
|                      |capacity of the Unit or the Power |
|                      |Station at the relevant time      |
|                      |(expressed in MW at the           |
|                      |Interconnection Point) as declared|
|                      |by the Seller in accordance with  |
|                      |the Grid Code and dispatching     |
|                      |procedures as per the Availability|
|                      |Based Tariff;                     |
|“Final Test           |Means                             |
|Certificate”          |A certificate of the Independent  |
|                      |Engineer certifying and accepting |
|                      |the results of a Commissioning    |
|                      |Test/s in accordance with Article |
|                      |6.3.1 of this Agreement; or       |
|                      |A certificate of the Independent  |
|                      |Engineer certifying the result of |
|                      |a Repeat Performance Tests in     |
|                      |accordance with Article 8.2.1 of  |
|                      |this Agreement;                   |
|“Grid Code” or “IEGC” |Means any set of regulations or   |
|                      |codes issued by CERC as amended   |
|                      |and revised from time to time and |
|                      |legally binding on the Sellers’   |
|                      |and Procedures’ governing the     |
|                      |operation of the Grid System or   |
|                      |any succeeding set of regulations |
|                      |or code;                          |
|“Independent Engineer”|Means an independent consulting   |
|                      |engineering firm or group         |
|                      |appointed jointly by all the      |
|                      |Procurers (jointly) and the       |
|                      |Seller, to carry out the functions|
|                      |in accordance with Article 4.7.1  |
|                      |and Article 6, Article 12 and     |
|                      |Article 8 herein.                 |
|“Lead Procurer”       |Shall have the meaning scribed    |
|                      |thereto in Article 2.5;           |
|“Performance Test”    |Means the test carried out in     |
|                      |accordance with Article 1.1 of    |
|                      |Schedule 5 of this Agreement;     |
|“Scheduled COD” or    |Means (i) for the first Unit, May |
|“Scheduled Commercial |7, 2013; (ii) for the second Unit,|
|Operation Date”       |December 7, 2013; (iii) for the   |
|                      |third Unit, July 7, 2014; (iv) for|
|                      |the fourth Unit, February 7, 2015;|
|                      |(v) for the fifth Unit, September |
|                      |7, 2015 and (vi) for the sixth    |
|                      |Unit, April 7, 2016 or such other |
|                      |dates from time to time specified |
|                      |in accordance with the provisions |
|                      |of this Agreement;                |
|“Scheduled            |Means in relation to a Unit, the  |
|Synchronization Date” |date, which shall be maximum of   |
|                      |one hundred and eighty (180) days |
|                      |prior to the Schedule COD of the  |
|                      |respective Unit;                  |
|“Tariff”              |Means the tariff as computed in   |
|                      |accordance with Schedule 7;       |
|“Tested Capacity”     |In relation to a Unit, or the     |
|                      |Power Station as a whole (if all  |
|                      |the Units of the Power Station    |
|                      |have been commissioned) means the |
|                      |results of the most recent        |
|                      |Performance Test or Repeat        |
|                      |Performance Test carried out in   |
|                      |relation to the Power Station in  |
|                      |accordance with Article 6, Article|
|                      |8 and Schedule 5 of this          |
|                      |Agreement;                        |
|“Unit”                |Means one steam generator, steam  |
|                      |turbine, generator and associated |
|                      |auxiliaries of the Power Station  |
|                      |based on Supercritical Technology;|

           6: Synchronization, Commissioning and Commercial Operation

           6.1   Synchronisation

           6.1.1 The Seller shall give the  Procurers  and  RLDC  at  least
           sixty (60) days advance preliminary written notice and at  least
           thirty (30) days advance final written notice, of  the  date  on
           which it intends to synchronize  a  Unit  to  the  Grid  System,
           Provided that no Unit shall be synchronized prior to  36  months
           from NTP.

           6.1.2 Subject to Article 6.1.1, a Unit may  be  synchronized  by
           the Seller to the Grid  System  when  it  meets  all  connection
           conditions prescribed in  any  Grid  Code  then  in  effect  and
           otherwise  meets  all  other  Indian  legal   requirements   for
           synchronization to the Grid System.

           6.2   Commissioning

           6.2.1 The Seller shall be responsible  for  ensuring  that  each
           Unit is Commissioned in accordance with Schedule 5  at  its  own
           cost, risk and expense.

           6.2.2  The  Seller  shall  give  all  the  Procurers   and   the
           Independent Engineer not less than ten (10) days  prior  written
           notice of Commissioning Test of each Unit.

           6.2.3 The Seller (individually), the Procurers (jointly) and the
           Independent  Engineer  (individually)   shall   each   designate
           qualified and authorized representatives to witness and  monitor
           Commissioning Test of each Unit.

           6.2.4       Testing and measuring procedures applied during each
           Commissioning Test  shall  be  in  accordance  with  the  codes,
           practices  and  procedures  mentioned  in  Schedule  5  of  this

           6.2.5 Within five (5) days of a Commissioning Test,  the  Seller
           shall  provide  the  Procurers  (jointly)  and  the  Independent
           Engineer with copies of the detailed Commissioning Test results.
            Within five (5) days  of  receipt  of  the  Commissioning  Test
           results, the Independent Engineer shall provide to the Procurers
           and the Seller in writing, his findings from the  evaluation  of
           Commissioning Test results, either in the  form  of  Final  Test
           Certificate certifying the matters specified in Article 6.3.1 or
           the reasons for non-issuance of Final Test Certificate.

           6.3   Commercial Operation

           6.3.1 A Unit shall be Commissioned on the  day  after  the  date
           when all the Procurers receive a Final Test Certificate  of  the
           Independent Engineer stating that:

           a)     the  Commissioning  Tests  have  been  carried   out   in
           accordance with Schedule 5 and are acceptable to him; and

           b)    the results of the Performance Test show that  the  Unit’s
           Tested Capacity, is not less than ninety five  (95)  percent  of
           its Contracted Capacity as existing on the Effective Date.

           6.3.2 If a Unit fails  a  Commissioning  Test,  the  Seller  may
           retake the relevant test, within a reasonable period  after  the
           end of the previous test, with three  (3)  day’s  prior  written
           notice to the Procurers and the Independent Engineer.   Provided
           however, the Procurers shall have a right to  require  deferment
           of any such re-tests for a period  not  exceeding  fifteen  (15)
           days, without incurring any liability for such deferment, if the
           Procurers are unable  to  provide  evacuation  of  power  to  be
           generated, due to reasons outside the reasonable control of  the
           Procurers or due to inadequate demand in the Grid.

           6.3.3 The Seller may retake the Performance Test  by  giving  at
           least fifteen  (15)  days  advance  notice  in  writing  to  the
           Procurers, up to eight (8) times, during a period of one hundred
           and eighty (180) days (“Initial Performance Retest Period”) from
           a Unit’s  COD  in  order  to  demonstrate  an  increased  Tested
           Capacity over and  above  as  provided  in  Article  6.3.1  (b).
           Provided however, the Procurers shall have a  right  to  require
           deferment of any  such  re-tests  for  a  period  not  exceeding
           fifteen (15) days, without  incurring  any  liability  for  such
           deferment, if the Procurers are unable to provide evacuation  of
           power to be generated, due to  reasons  outside  the  reasonable
           control of the Procurers or due  to  inadequate  demand  in  the

           6.3.4 (i)   If a Unit’s Tested Capacity after  the  most  recent
           Performance Test mentioned in Article 6.3.3 has been  conducted,
           is  less  than  its  Contracted  Capacity  as  existing  on  the
           Effective Date, the Unit shall be de-rated  with  the  following
           consequences  in  each  case  with  effect  from  the  date   of
           completion of such most recent test:

           a)    the Unit’s Contracted Capacity shall  be  reduced  to  its
           Tested Capacity, as existing at the most recent Performance Test
           referred to in Article 6.3.3 and Quoted Capacity  Charges  shall
           be paid with respect to such reduced Contracted Capacity;

           b)    The Quoted Non  Escalable  Capacity  Charge  (in  Rs./kwh)
           shall be reduced by the following in the event  Tested  Capacity
           is less than ninety  five  (95%)  per  cent  of  its  Contracted
           Capacity as existing on the Effective Date: Rs.0.25/kwh x  [1  –
           {(Tested  Capacity  of  all  Commissioned  Units  +   Contracted
           Capacity of all Units not Commissioned at the  Effective  Date)/
           Contracted Capacity of all Units at the Effective Date})

           c)    the Seller shall not be permitted to declare the Available
           Capacity of  the  Unit  at  a  level  greater  than  its  Tested

           d)    the Availability Factor  of  the  derated  Unit  shall  be
           calculated by reference to the reduced Contracted Capacity; and

           e)    the Capital Cost and each element of the Capital Structure
           Schedule shall be reduced in proportion to the reduction in  the
           Contracted Capacity of the Power Station as a result of that de-
           rating (taking into account the Contracted Capacity of any  Unit
           which has yet to be Commissioned).

           (ii)  If at the end of Initial Performance Retest Period or  the
           date of the eighth Performance Test mentioned in Article  6.3.3,
           whichever is earlier, the  Tested  Capacity  is  less  than  the
           Contracted Capacity (as existing on the date of this Agreement),
           the consequences mentioned in Article 8.2.2 shall  apply  for  a
           period of one year.  Provided that such consequences shall apply
           with respect to the Tested  Capacity  existing  at  the  end  of
           Initial Performance Retest Period or  the  date  of  the  eighth
           Performance  Test  mentioned  in  Article  6.3.3,  whichever  is

           6.3.5 If a Unit’s Tested Capacity as at the end of  the  Initial
           Performance Retest Period or the date of the eighth  Performance
           Test mentioned in Article 6.3.3, whichever is earlier, is  found
           to be more than it’s Contracted  Capacity  as  existing  on  the
           Effective Date, the Tested Capacity shall be deemed  to  be  the
           Unit’s  Contracted  Capacity  if  any  Procurer/s   agrees   and
           intimates the same to the Seller  within  thirty  (30)  days  of
           receipt of the results of the last Performance Test to  purchase
           such excess Tested Capacity  and  also  provide  to  the  Seller
           additional Letter  of  Credit  and  Collateral  Arrangement  (if
           applicable) for  payments  in  respect  of  such  excess  Tested
           Capacity agreed to be purchased by such Procurer/s.  In case the
           Procurer/s decide not to purchase such excess  Tested  Capacity,
           the Seller shall be free to sell such excess Tested Capacity  to
           any third party and the Unit’s Contracted Capacity shall  remain
           unchanged, notwithstanding that the Tested Capacity exceeded the
           Contracted Capacity.

           Provided that in all the  above  events,  the  Seller  shall  be
           liable to obtain/maintain all the necessary consents  (including
           Initial  Consents),  permits  and  approvals   including   those
           required under the environmental laws  for  generation  of  such
           excess Tested Capacity.

           6.4   Costs Incurred.

                 The Seller expressly agrees that all costs incurred by him
           in synchronizing, connecting, Commissioning  and/or  Testing  or
           Retesting a Unit shall be solely and completely to  his  account
           and the Procurer’s or Procurers’ liability shall not exceed  the
           amount of the Energy Charges payable for such power  output,  as
           set out in Schedule 7.

            18: Miscellaneous Provisions

           18.1 Amendment

           The Agreement may only be amended or supplemented by  a  written
           agreement between the  Parties  and  after  duly  obtaining  the
           approval of the Appropriate Commission, where necessary.

           18.3. No Waiver

           A valid waiver by a Party shall be in writing and executed by an
           authorized representative of that Party.  Neither the failure by
           any Party to insist on the performance of the terms, conditions,
           and provisions of this Agreement nor time  or  other  indulgence
           granted by any Party to the other Parties shall act as a  waiver
           of  such  breach  or  acceptance  of  any   variation   or   the
           relinquishment of any such right or any other right  under  this
           Agreement, which shall remain in full force and effect.

           Schedule 5: Commissioning and Testing

           1.1   Performance Test

           i.    (a)   The Performance Test shall be  conducted  under  any
           and all ambient conditions (temperature, humidity etc.) and  any
           and all Fuel qualities that may exist during  the  time  of  the
           Performance Test and no  corrections  in  final  gross  and  net
           output of the Unit will be allowed as  a  result  of  prevailing
           ambient conditions or Fuel quality.

           (b)   The correction curves will only be used if the Grid System
           operation during the Performance Test exceeds Electrical  System

           (c)   The Performance Test shall be deemed to have  demonstrated
           the  Contracted  Capacity  of  the  Unit  under   all   designed
           conditions and therefore no adjustments shall be made on account
           of fuel quality or ambient conditions.

           (d)   The Seller  shall  perform  in  respect  of  each  Unit  a
           Performance Test, which such Unit shall be deemed to have passed
           if it operates continuously for seventy two consecutive hours at
           or above ninety five (95) percent of its Contracted Capacity  as
           existing on the Effective Date and within the Electrical  System
           Limits and the Functional Specifications.

           ii.   For the purposes of any Performance Test pursuant to  this
           sub-article 1.1, the Electrical System  Limits  to  be  achieved
           shall be as follows:

           (a) Voltage

                 The Unit must operate within the voltage levels  described
           in  the  Functional  Specification  for  the  duration  of   the
           Performance Test.  If,  during  the  Performance  Test,  voltage
           tests cannot be performed due to Grid System, data supplied from
           tests of  the  generator  step-up  transformers  and  generators
           supplied by the manufacturers shall be  used  to  establish  the
           ability of the Unit to  operate  within  the  specified  voltage

           (b)   Grid System Frequency

                 The Unit shall operate within the  Grid  System  frequency
           levels  described  in  the  Functional  Specification  for   the
           duration of the Performance Test.

           (c)   Power Factor

                 The Unit shall  operate  within  the  power  factor  range
           described in the Functional Specification for  the  duration  of
           the Performance Test.  If, during the  Performance  Test,  power
           factor tests cannot be performed due to the  Grid  System,  data
           supplied from tests of the generators and the generator  step-up
           transformers supplied by the  manufacturers  shall  be  used  to
           establish  the  ability  of  the  Unit  to  operate  within  the
           specified power factor range.

           (d)   Fuel quality and cooling water temperature

                 The Unit must operate to its Contracted Capacity with Fuel
           quality and water temperature available at the time  of  Testing
           and no adjustment shall be allowed for any  variation  in  these

           iii.  As a part  of  the  Performance  Test,  the  Seller  shall
           demonstrate that the Unit meets  the  Functional  Specifications
           for Ramping rate as mentioned in Schedule 4.  For this  purpose,
           representative samples of ramp rates shall be taken, by  ramping
           up or down the gross turbine load while maintaining the required
           temperature and temperature  differences  associated  with  each
           ramp  rate  within  the  turbine  while  maintaining  all  other
           operational parameters within equipment limits.

           iv.   Further, as a part of the Performance Test, the Unit shall
           be  tested  for  compliance  with  parameters  of  Supercritical

           1.2    Testing  and  Measurement   procedures   applied   during
           Performance Test shall be in accordance with codes, practices or
           procedures as generally/normally  applied  for  the  Performance

           1.3   The Seller shall comply with the prevalent Laws, rules and
           regulations as applicable to the provisions  contained  in  this
           Schedule from time to time.

           Schedule 11: Quoted Tariff

|Contrac|Commence    |End Date of|Quoted    |Quoted    |Quoted   |Quoted    |
|t Year |ment Date of|Contract   |Non-      |Escalable |Non-     |Indexed   |
|       |Contract    |Year       |Escalable |Capacity  |Indexed  |Energy    |
|       |Year        |           |Capacity  |Charges   |Energy   |Charges   |
|       |            |           |Charges   |(Rs. 1kwh)|Charges  |(Rs.1kwh) |
|       |            |           |(Rs.1kwh) |          |(Rs.1kwh)|          |
|1      |27 Nov 2012 |31 May 2013|0.21      |0.001     |0.575    |0.001     |
|2      |1-Apr-2013  |31-Mar-2014|0.125     |Same as   |0.575    |Same as   |
|       |            |           |          |Above     |         |Above     |
|3      |1-Apr-2014  |31-Mar-2015|0.163     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|4      |1-Apr-2015  |31-Mar-2016|0.171     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|5      |1-Apr-2016  |31-Mar-2017|0.169     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|6      |1-Apr-2017  |31-Mar-2018|0.169     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|7      |1-Apr-2018  |31-Mar-2019|0.169     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|8      |1-Apr-2019  |31-Mar-2020|0.168     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|9      |1-Apr-2020  |31-Mar-2021|0.167     |Same as   |1.148    |Same as   |
|       |            |           |          |Above     |         |Above     |
|10     |1-Apr-2021  |31-Mar-2022|0.166     |Same as   |1.147    |Same as   |
|       |            |           |          |Above     |         |Above     |
|11     |1-Apr-2022  |31-Mar-2023|0.165     |Same as   |1.147    |Same as   |
|       |            |           |          |Above     |         |Above     |
|12     |1-Apr-2023  |31-Mar-2024|0.164     |Same as   |1.147    |Same as   |
|       |            |           |          |Above     |         |Above     |
|13     |1-Apr-2024  |31-Mar-2025|0.164     |Same as   |1.147    |Same as   |
|       |            |           |          |Above     |         |Above     |
|14     |1-Apr-2025  |31-Mar-2026|0.163     |Same as   |1.147    |Same as   |
|       |            |           |          |Above     |         |Above     |
|15     |1-Apr-2026  |31-Mar-2027|0.162     |Same as   |1.146    |Same as   |
|       |            |           |          |Above     |         |Above     |
|16     |1-Apr-2027  |31-Mar-2028|0.161     |Same as   |1.146    |Same as   |
|       |            |           |          |Above     |         |Above     |
|17     |1-Apr-2028  |31-Mar-2029|0.160     |Same as   |1.146    |Same as   |
|       |            |           |          |Above     |         |Above     |
|18     |1-Apr-2029  |31-Mar-2030|0.160     |Same as   |1.146    |Same as   |
|       |            |           |          |Above     |         |Above     |
|19     |1-Apr-2030  |31-Mar-2031|0.159     |Same as   |1.145    |Same as   |
|       |            |           |          |Above     |         |Above     |
|20     |1-Apr-2031  |31-Mar-2032|0.158     |Same as   |1.145    |Same as   |
|       |            |           |          |Above     |         |Above     |
|21     |1-Apr-2032  |31-Mar-2033|0.157     |Same as   |1.145    |Same as   |
|       |            |           |          |Above     |         |Above     |
|22     |1-Apr-2033  |31-Mar-2034|0.136     |Same as   |1.145    |Same as   |
|       |            |           |          |Above     |         |Above     |
|23     |1-Apr-2034  |31-Mar-2035|0.126     |Same as   |1.144    |Same as   |
|       |            |           |          |Above     |         |Above     |
|24     |1-Apr-2035  |31-Mar-2036|0.126     |Same as   |1.144    |Same as   |
|       |            |           |          |Above     |         |Above     |
|25     |1-Apr-2036  |31-Mar-2037|0.137     |Same as   |1.144    |Same as   |
|       |            |           |          |Above     |         |Above     |
|26     |1-Apr-2037  |25th       |0.169     |Same as   |1.143    |Same as   |
|       |            |anniversary|          |Above     |         |Above     |
|       |            |of the     |          |          |         |          |
|       |            |Scheduled  |          |          |         |          |
|       |            |COD of the |          |          |         |          |
|       |            |first Unit |          |          |         |          |

      10.   It is also necessary to set out the relevant provisions  of  the
      Electricity Act,  2003.  Sections  28,  29,  61,  62  and  63  of  the
      Electricity Act, 2003 read as under:-

           “Section 28. Functions of Regional Load Despatch Centre:

           (1) The Regional Load Despatch Centre shall be the apex body  to
           ensure integrated operation of the power system in the concerned

           (2) The Regional Load Despatch Centre  shall  comply  with  such
           principles, guidelines  and  methodologies  in  respect  of  the
           wheeling and optimum scheduling and despatch of  electricity  as
           the Central Commission may specify in the Grid Code.

           (3) The Regional Load Despatch Centre shall –

           (a) be  responsible  for  optimum  scheduling  and  despatch  of
           electricity within the region, in accordance with the  contracts
           entered into with the  licensees  or  the  generating  companies
           operating in the region;
           (b) monitor grid operations;
           (c) keep accounts of quantity of electricity transmitted through
           the regional grid;
           (d)  exercise  supervision  and  control  over  the  inter-State
           transmission system; and
           (e) be responsible for carrying out  real  time  operations  for
           grid control and  despatch  of  electricity  within  the  region
           through secure and economic operation of the  regional  grid  in
           accordance with the Grid Standards and the Grid Code.

           (4) The Regional Load Despatch Centre may levy and collect  such
           fee and charges  from  the  generating  companies  or  licensees
           engaged in inter-State transmission of  electricity  as  may  be
           specified by the Central Commission.

           Section 29. Compliance of directions: --- (1) The Regional  Load
           Despatch Centre may  give  such  directions  and  exercise  such
           supervision  and  control  as  may  be  required  for   ensuring
           stability of grid  operations  and  for  achieving  the  maximum
           economy and efficiency in the operation of the power  system  in
           the region under its control.

           (2) Every licensee, generating company, generating station, sub-
           station and any other person connected with the operation of the
           power system shall comply with  the  directions  issued  by  the
           Regional Load Despatch Centres under subsection (1).

           (3) All directions issued by the Regional Load Despatch  Centres
           to any transmission licensee of State transmission lines or  any
           other licensee of the State or generating  company  (other  than
           those connected to inter  State  transmission  system)  or  sub-
           station in the State shall be  issued  through  the  State  Load
           Despatch Centre and the State Load Despatch Centres shall ensure
           that such directions are duly  complied  with  the  licensee  or
           generating company or sub-station.

           (4) The Regional Power Committee in the region may, from time to
           time, agree on  matters  concerning  the  stability  and  smooth
           operation of the integrated grid and economy and  efficiency  in
           the operation of the power system in that region.

           (5) If any dispute arises  with  reference  to  the  quality  of
           electricity or safe, secure  and  integrated  operation  of  the
           regional grid or in relation to any direction given  under  sub-
           section (1), it shall be referred to the Central Commission  for
           decision : Provided that pending the  decision  of  the  Central
           Commission, the directions of the Regional Load Despatch  Centre
           shall be complied with by the State Load Despatch Centre or  the
           licensee or the generating company, as the case may be.

           (6) If any licensee, generating  company  or  any  other  person
           fails to comply with the directions issued under sub-section (2)
           or sub-section  (3),  he  shall  be  liable  to  a  penalty  not
           exceeding rupees fifteen lacs.

           Section  61.  Tariff  regulations:  The  Appropriate  Commission
           shall, subject to the provisions of this Act, specify the  terms
           and conditions for the determination of tariff, and in doing so,
           shall be guided by the following, namely:-

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

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

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

           (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;

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

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

           (a)  supply  of  electricity  by  a  generating  company  to   a
           distribution licensee: Provided that the Appropriate  Commission
           may, in case of shortage  of  supply  of  electricity,  fix  the
           minimum and 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
           (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

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

           Section  63.  Determination  of  tariff  by   bidding   process:
           Notwithstanding  anything   contained   in   section   62,   the
           Appropriate Commission shall adopt the tariff if such tariff has
           been  determined  through  transparent  process  of  bidding  in
           accordance  with  the   guidelines   issued   by   the   Central

      11.   Since counsel for the opposing parties have  made  wide  ranging
      arguments on the effect of Article 18 and waiver as a  legal  concept,
      it is important first to find out as to which pigeonhole the facts  of
      the present case fit – whether the emails  exchanged  by  the  parties
      would amount to an “amendment” governed by Article 18.1, or whether it
      would amount to a “waiver” governed by Article 18.3.

      12.   A perusal of the emails exchanged between the parties would show
      that the parties did not intend to amend by a written agreement any of
      the provisions of the PPA.  Whereas an  amendment  of  the  PPA  under
      Article 18.1 would be bilateral, a waiver of a provision  of  the  PPA
      would be unilateral under Article 18.3.

      13.   In order to  better  understand,  conceptually,  the  difference
      between amendment and waiver, it is necessary to advert to Sections 1,
      62 and 63 of the Indian Contract Act, 1872.

           “Section 1.Short  title.-This  Act  may  be  called  the  Indian
           Contract Act, 1872.

           Extent, Commencements.-It extends to the whole of  India  except
           the State of Jammu and Kashmir; and it shall come into force  on
           the first day of September, 1872.

           Nothing herein contained shall  affect  the  provisions  of  any
           Statute, Act or Regulation not hereby  expressly  repealed,  nor
           any usage or custom of trade, nor any incident of any  contract,
           not inconsistent with the provisions of this Act.

           Section 62. Effect of novation, rescission,  and  alteration  of

           If the parties to a contract agree to substitute a new  contract
           for it, or to rescind or alter it, the  original  contract  need
           not be performed.

           Section 63. Promisee may dispense with or remit  performance  of
           promise.- Every promisee may dispense with or remit,  wholly  or
           in part, the performance of the promise  made  to  him,  or  may
           extend the time for such performance, or may accept  instead  of
           it any satisfaction which he thinks fit.”

      14.   Under  Section  62,  apart  from  novation  of  a  contract  and
      rescission of a contract,  alteration  of  a  contract  is  mentioned.
      Alteration is understood here, in the facts of the  present  case,  in
      the sense of amendment.  It is settled law  that  an  amendment  to  a
      contract being in the nature of a modification of  the  terms  of  the
      contract must be read in and become a part of the original contract in
      order to amount to an  alteration  under  Section  62  of  the  Indian
      Contract  Act.  This  is  clear  from  Juggilal   Kamlapat   v.   N.V.
      Internationale Crediet-En-Handels Vereeninging ‘Rotterdam’,  AIR  1955
      Cal 65 in paragraph 15 of which it is stated:-

           “The effect of the alterations or modifications is that there is
           a new  arrangement;  in  the  language  of Viscount  Haldane  in
           Morris v. Baron & Co. (1) (1918 Appeal Cases, 1 at 17),  “a  new
           contract containing as an entirety the old terms  together  with
           and  as  modified  by   the   new   terms   incorporated.”   The
           modifications are read into and become part and  parcel  of  the
           original contract. The original terms also continue to  be  part
           of the contract and are not rescinded and/or  superseded  except
           in so far as they are inconsistent with the modifications. Those
           of the original terms which cannot make sense when read with the
           alterations must be rejected. In my view the arbitration  clause
           in this case is in  no  way  inconsistent  with  the  subsequent
           modifications and continues to subsist.” [para 15]

      15.   No such thing having occurred on the present facts, it is  clear
      that there is in fact no amendment by written agreement  to  the  PPA.
      To this extent, learned counsel for Sasan are correct.

      16.   The relevant section therefore that would apply on the facts  of
      the present case is Section 63.  At this stage,  it  is  important  to
      advert to an argument made by counsel for the appellants that  Article
      18.3 only refers to waivers that can expressly be made  under  various
      provisions of the agreement and not to Article 6 which,  according  to
      learned counsel, cannot be waived under the PPA.  Assuming  that  such
      argument is correct, and that Article 18.3 refers only to the mode  of
      carrying out a waiver under the PPA, yet it is clear that  Section  63
      would operate on the facts of this case.  This is for the reason that,
      when read with Section 1 of the Contract Act, it  becomes  clear  that
      the PPA is subject to Section 63 of  the  Contract  Act,  which  would
      allow a promisee to dispense with or remit, wholly  or  in  part,  the
      performance of the promise made to him, and accept instead of  it  any
      satisfaction  which  he  thinks  fit.   This  is  made  clear  in   an
      interesting judgment by Chief Justice Stone in  Official  Assignee  of
      Bombay v. Madholal Sindhu, ILR 1948 (2)  Bom  1.   The  learned  Chief
      Justice after setting out the facts had this to say on the  effect  of
      Section 1 of the Contract Act:

           “The Indian Contract Act of 1872 applies  to  all  contracts  in
           India and with regard to a pawn is a codification of the English
           common law. Speaking of the common law right to sell Mr. Justice
           Story in his  commentaries  on  the  Law  of  Bailments,  eighth
           edition, says at p. 262:—
           “Another right resulting, by the common law, from  the  contract
           of pledge is the right to sell the pledge, where there has  been
           a default in the pledge in complying with his engagement, but  a
           sale before default would be a conversion. Such a right does not
           divest the general property of the pawner but still leave in him
           (as we shall presently see) a right of redemption.”

           And at p. 263:—
           “The common law of England, existing in the time  of  Glanville,
           seems to have required a judicial process to justify  the  sale,
           or at least to destroy the right of redemption. But the  law  as
           at present established leaves an election to the pawnee. He  may
           file a bill in equity against the pawner for a  foreclosure  and
           sale; or, he may proceed  to  sell ex  mero  motu,  upon  giving
           notice of his intention to the pledger.”

           The terms of an instrument of pledge, such as there is  in  this
           case, giving an unqualified power of sale, are inconsistent with
           the provisions of s.  176  of  the  Indian  Contract  Act,  and,
           therefore, by virtue of s. 1 of that Act must give place to  the
           express provisions of the  Act:  See Chitguppi  &  Co. v. Vinaya
           Kashinath [(1920) 45 Bom. 157, s.c.22 Bom L.R. 959] .

           The group of sections in the Indian Contract  Act  dealing  with
           bailment commence with s. 148, and it is to be observed that  in
           the ss. 152, 163, 171 and 174 the power is given to contract out
           of the Act. In the former section the words are “in the  absence
           of any special contract” and in the three  latter  sections  the
           expression used is “in the absence of any contract to contrary”.
            In my opinion, therefore, except in these  four  sections,  the
           provisions of the Act with regard  to  bailment  are  mandatory:
           see The  Co-operative   Hindustan   Bank,   Ltd. v. Surendranath
           De [(1931) 59 Cal. 667.].”

      17.   It is thus clear that if  on  facts  there  is  a  waiver  of  a
      provision of the PPA by one of the parties to the PPA, then Section 63
      of the Contract Act will operate in  order  to  give  effect  to  such

      18.   At this juncture, it is important to understand what exactly  is
      meant by waiver.  In Jagad Bandhu Chatterjee v. Nilima Rani,  (1969) 3
      SCC 445, this Court held:

                 “In India the general principle with regard  to  waiver  of
                 contractual obligation is to be found in Section 63 of  the
                 Indian Contract Act. Under that section it  is  open  to  a
                 promisee to dispense with or remit, wholly or in part,  the
                 performance of the promise made to him  or  he  can  accept
                 instead of it any satisfaction which he thinks  fit.  Under
                 the Indian law neither consideration nor an agreement would
                 be necessary to constitute waiver. This Court  has  already
                 laid down in Waman Shriniwas Kini v. Ratilal  Bhagwandas  &
                 Co.[1959  Supp  2  SCR  217,  226]  that  waiver   is   the
                 abandonment of a  right  which  normally  everybody  is  at
                 liberty to waive. “A waiver is nothing unless it amounts to
                 a release. It signifies nothing more than an intention  not
                 to insist upon the right”. It is well-known that in the law
                 of pre-emption the general principle which can be  said  to
                 have been uniformly adopted by the Indian  courts  is  that
                 acquiescence in the sale by any positive act  amounting  to
                 relinquishment of a pre-emptive right has the effect of the
                 forfeiture of such a right. So  far  as  the  law  of  pre-
                 emption is concerned  the  principle  of  waiver  is  based
                 mainly on Mohammedan Jurisprudence. The contention that the
                 waiver of the appellant's right under Section 26-F  of  the
                 Bengal Tenancy Act must be founded on contract or agreement
                 cannot be acceded to and must be rejected.” [para 5]

      19.   In P. Dasa Muni Reddy v. P. Appa Rao, (1974)  2  SCC  725,  this
      Court held:
                 “Waiver is an intentional relinquishment of a  known  right
                 or advantage, benefit, claim or privilege which except  for
                 such waiver the party would have enjoyed. Waiver  can  also
                 be a voluntary surrender of a right. The doctrine of waiver
                 has  been  applied  in  cases   where   landlords   claimed
                 forfeiture of lease or tenancy because of  breach  of  some
                 condition in the contract of tenancy.  The  doctrine  which
                 the courts of law will recognise  is  a  rule  of  judicial
                 policy  that  a  person  will  not  be  allowed   to   take
                 inconsistent position to gain advantage through the aid  of
                 courts. Waiver sometimes  partakes  of  the  nature  of  an
                 election. Waiver is consensual  in  nature.  It  implies  a
                 meeting of the minds. It is a matter of  mutual  intention.
                 The doctrine does not depend on  misrepresentation.  Waiver
                 actually  requires  two  parties,  one  party  waiving  and
                 another receiving the  benefit  of  waiver.  There  can  be
                 waiver so intended by one party and so  understood  by  the
                 other. The essential element of waiver is that  there  must
                 be a voluntary and intentional relinquishment of  a  right.
                 The voluntary choice is the essence of waiver. There should
                 exist an opportunity for choice between the  relinquishment
                 and an enforcement of the right in question. It  cannot  be
                 held that there has been a waiver of valuable rights  where
                 the circumstances show that what was done was  involuntary.
                 There can be no waiver of a non-existent right.  Similarly,
                 one cannot waive that which is not one's as a right at  the
                 time of waiver. Some mistake or misapprehension as to  some
                 facts which constitute the  underlying  assumption  without
                 which parties would not  have  made  the  contract  may  be
                 sufficient to justify the court in saying that there was no
                 consent.” [para 13]

      20.   Regard being had to the aforesaid decisions, it  is  clear  that
      when waiver is spoken of in the realm of contract, Section 63  of  the
      Indian Contract Act governs.  But it is important to note that  waiver
      is  an  intentional  relinquishment  of  a  known  right,  and   that,
      therefore, unless there is a clear intention  to  relinquish  a  right
      that is fully known to a party, a party cannot be said  to  waive  it.
      But the matter does not end here.   It  is  also  clear  that  if  any
      element of public interest is involved and a waiver takes place by one
      of the parties to an agreement, such waiver will not be  given  effect
      to if it is contrary to such public interest.  This is  clear  from  a
      reading of the following authorities.

      21.   In Lachoo Mal v. Radhey Shyam, (1971) 1 SCC 619, it was held:-

           “The general principle is that everyone has a right to waive and
           to agree to waive the advantage of a law or rule made solely for
           the benefit and protection of  the  individual  in  his  private
           capacity which may be  dispensed  with  without  infringing  any
           public right or public policy. Thus the  maxim  which  sanctions
           the non-observance of the statutory provision is cuilibet  licet
           renuntiare   juri   pro   se   introducto.    (See Maxwell    on
           Interpretation of Statutes, Eleventh Edn., pp. 375 and 376).  If
           there is any express prohibition against contracting  out  of  a
           statute in it then no question can arise of anyone entering into
           a contract which is so prohibited but where  there  is  no  such
           prohibition it will have to be seen whether an Act  is  intended
           to have a  more  extensive  operation  as  a  matter  of  public
           policy.” [para 6]

      22.   In Indira Bai v. Nand Kishore, (1990) 4 SCC 668, it was held:-

                 “The test to determine  the  nature  of  interest,  namely,
                 private or public is whether the right which is renunciated
                 is the right of party alone or of the public  also  in  the
                 sense that the general welfare of the society is  involved.
                 If the answer is latter then it may  be  difficult  to  put
                 estoppel as a defence. But if it is right  of  party  alone
                 then it is capable of being abnegated either in writing  or
                 by conduct.” [para 5]

      23.   In Krishna Bahadur v. Purna Theatre, (2004) 8 SCC  229,  it  was

                 “The principle of waiver although is akin to the  principle
                 of estoppel; the difference between the  two,  however,  is
                 that whereas estoppel is not a cause of  action;  it  is  a
                 rule of evidence; waiver is contractual and may  constitute
                 a cause of action; it is an agreement between  the  parties
                 and a party fully knowing of its rights has agreed  not  to
                 assert a right for a consideration.
                 A right can be  waived  by  the  party  for  whose  benefit
                 certain requirements or conditions had been provided for by
                 a statute subject to the condition that no public  interest
                 is involved therein. Whenever waiver is pleaded it  is  for
                 the party pleading the  same  to  show  that  an  agreement
                 waiving the right in consideration of some compromise  came
                 into being. Statutory right, however, may also be waived by
                 his conduct.” [para 9]

      24.   It is thus clear that if there is any element of public interest
      involved, the court steps  in  to  thwart  any  waiver  which  may  be
      contrary to such public interest.

      25.   On the  facts  of  this  case,  it  is  clear  that  the  moment
      electricity tariff gets affected, the consumer interest comes  in  and
      public interest gets affected.  This is in fact statutorily recognized
      by the Electricity Act in Sections 61 to 63 thereof. Under Section 61,
      the appropriate commission, when it specifies terms and conditions for
      determination  of  tariff,  is  to  be  guided  inter  alia   by   the
      safeguarding of the consumer interest and the recovery of the cost  of
      electricity in a reasonable manner.  For this  purpose,  factors  that
      encourage competition, efficiency and good performance are also to  be
      heeded.  Under Section 62 of the Act, the appropriate commission is to
      determine such tariff in accordance with the principles  contained  in
      Section 61. The present case, however, is covered by Section 63, which
      begins  with  a  non  obstante  clause  stating  that  notwithstanding
      anything contained in Section 62,  the  appropriate  commission  shall
      adopt the  tariff  if  such  tariff  has  been  determined  through  a
      transparent process of  bidding  in  accordance  with  the  guidelines
      issued by the Central  Government.   The  guidelines  dated  19.1.2005
      issued by the Central Government under Section 63 make it  clear  that
      such guidelines are framed with the following objectives in mind:

           “These guidelines have been framed under the above provisions of
           section 63  of  the  Act.   The  specific  objectives  of  these
           guidelines are as follows:

              1)  Promote  competitive   procurement   of   electricity   by
                 distribution licensees;

              2)  Facilitate  transparency  and  fairness   in   procurement

              3) Facilitate reduction of information asymmetries for various

              4) Protect  consumer  interests  by  facilitating  competitive
                 conditions in procurement of electricity;

              5) Enhance standardization and reduce ambiguity and hence time
                 for materialization of projects;

              6) Provide flexibility to  suppliers  on  internal  operations
                 while ensuring  certainty  on  availability  of  power  and
                 tariffs for buyers.

      Clause 2.3 of the said guidelines reads as follows:

           “2.3. Unless  explicitly  specified  in  these  guidelines,  the
           provisions of these guidelines shall be binding on the procurer.
            The process to be adopted in event of  any  deviation  proposed
           from these guidelines is specified  later  in  these  guidelines
           under para 5.16.”

      26.   Paragraph 4  of  the  aforesaid  guidelines  relates  to  tariff
      structure and paragraph 4.11 in particular, which  relates  to  energy
      charges, is as follows:-

                 “4.11 Where applicable, the energy charges  payable  during
                 the operation of the contract shall be related on the  base
                 energy charges specified in the bid with suitable provision
                 for escalation.  In case the bidder  provides  firm  energy
                 charge rates for each of the years of  the  contract  term,
                 the same shall be permitted in the tariffs.”

      27.   Para 5.4  then  speaks  of  a  model  power  purchase  agreement
      proposed to be entered into with the seller of electricity as follows:-

                 “(ii) Model PPA proposed to be entered into with the seller
                 of electricity.  The PPA shall  include  necessary  details

            • Risk allocation between parties;

            • Technical requirements on minimum load conditions;

            • Assured offtake levels;

            • Force majeure clauses as per industry standards;

            • Lead times for scheduling of power;

            • Default conditions and cure thereof, and penalties;

            • Payment security proposed to be offered by the procurer.”

      28.   Paragraph 5.16 then goes on to state:-

                 “Deviation from process defined in the guidelines

                 5.16  In case there is any deviation from these guidelines,
                 the  same  shall  be  with  the  prior  approval   of   the
                 Appropriate Commission.  The Appropriate  Commission  shall
                 decide on the modifications to the bid documents  within  a
                 reasonable time not exceeding 90 days.”

      29.   A perusal of the CERC tariff adoption order in the present  case
      dated 17.10.2007 makes it clear that the  tariff  is  adopted  by  the
      Commission only because the competitive bidding process which has been
      undertaken is in accordance with the guidelines so issued.

      30.   All this would make it clear that even if a waiver is claimed of
      some of the provisions of the PPA, such waiver, if it affects  tariffs
      that are ultimately payable by the consumer, would necessarily  affect
      public interest and would have to pass muster of the Commission  under
      Sections 61 to 63 of the Electricity Act.  This is for the reason that
      what is adopted by the Commission under Section 63 is  only  a  tariff
      obtained by competitive bidding in conformity with guidelines  issued.
      If at any subsequent point of time such  tariff  is  increased,  which
      increase is outside the four corners of the PPA, even in cases covered
      by Section 63, the legislative intent and the language of Sections  61
      and 62 make it clear that the Commission alone can accept such amended
      tariff as it would  impact  consumer  interest  and  therefore  public

      31.   But on the facts of these cases, it is argued by learned counsel
      for Sasan that in point of fact the tariff laid down in Schedule 11 of
      the PPA has not been sought to be changed. All that  has  happened  is
      that, as a result of COD being declared on 31.3.2013, the very  tariff
      laid down in Schedule 11 becomes applicable, but for  year  one  being
      treated as one day and year two commencing from 1.4.2013.  Counsel for
      Sasan may be right in saying this, but the substance of the matter  is
      that a consumer would have to pay substantially more by way of  tariff
      under the PPA if year one is gobbled up in  one  day,  as  year  two’s
      tariff is one paisa more than year one and  year  three’s   tariff  is
      substantially more than year two. In short,  instead  of  getting  two
      years or part thereof exceeding one  year  at  a  substantially  lower
      tariff, the consumer now gets only one year and one day at  the  lower
      tariff rates.  This may also by itself not lead to the parties  having
      to go to the Commission as this is envisaged by the PPA.   But  it  is
      clear that if a waiver is to be accepted on the facts of this case, it
      would clearly impact the public interest, in that consumers would have
      to pay substantially more for  electricity  consumed  by  them.   This
      being the case, on facts  it  may  not  be  necessary  to  go  to  the
      Commission as had Sasan in fact met the parameters of  Schedule  5  on
      30th March, then as per Schedule 11, year one would in fact have  been
      only for one day.  However, any waiver of the requirement of  Schedule
      5 would  definitely  impact  the  generation  of  electricity  at  the
      mandated percentage of contracted capacity as also the amounts payable
      by consumers, and would therefore affect the  public  interest.   This
      being the case, this is not a case covered by the judgments  cited  on
      behalf  of  Sasan,  in  particular  the  judgment  of  this  Court  in
      Commissioner of Customs, Bombay v. Virgo Steels Bombay, (2002)  4  SCC
      316, in which it has been held that even the mandatory requirement  of
      a statute can be  waived  by  the  party  concerned,  provided  it  is
      intended only for  his  benefit.  This  case  would  fall  within  the
      parameters of  the  other  judgments  referred  to  above,  and  would
      therefore be governed by judgments which state that any waiver of  the
      requirements of Article 6.3 and Schedule  5  would  ultimately  impact
      consumer interest and therefore  the  public  interest.   Such  waiver
      therefore cannot be allowed to pass muster on the facts of the present

      32.   Since the result of this case  also  depends  upon  the  correct
      reading of Article 6 read with Schedule 5  of  the  PPA,  and  whether
      there has been waiver in fact in the sense of  being  the  intentional
      relinquishment of a known right by the procurers or on  their  behalf,
      it is necessary to advert to the scheme of Article 6, the  independent
      engineer’s certificate, and  various  meetings,  emails,  and  letters
      exchanged between the parties.  Article 6 deals with  synchronization,
      commissioning, and commercial operations.  In the  first  step  to  be
      taken by  the  seller,  the  unit  producing  electricity  has  to  be
      synchronized to the grid system.  It  is  only  after  synchronization
      takes place that the unit is to be commissioned.  What is important is
      that at the commissioning stage, the parameters mentioned in  Schedule
      5 are to be met.  The most important parameter mentioned  in  Schedule
      5, when the performance test  is  to  be  taken  for  the  purpose  of
      commissioning, is that a unit shall be deemed to have passed such test
      only if it operates continuously for 72 consecutive hours at or  about
      95% of its contracted capacity as existing on the effective  date  and
      within the electrical system  limits  and  functional  specifications.
      Further,  as  a  part  of  the  performance  test,  the  seller   must
      demonstrate that the unit meets functional specifications for  ramping
      rate separately mentioned in Schedule 4 of the PPA.  It is  only  when
      such test is passed that a unit can be said to be  commissioned  under
      the PPA.  This then is to be certified  by  the  independent  engineer
      jointly appointed by the parties under Article 6.3.1, in the form of a
      final test certificate, which states that  (a)  the  commission  tests
      have been carried in accordance with Schedule 5 and are acceptable  to
      him, and (b) the result of the performance test shows that the  unit’s
      tested capacity is not less than  95%  of  the  contracted  demand  as
      existing on the effective date.

      33.   If the Schedule 5 parameters are not met, it is incumbent on the
      independent engineer to then state reasons for the non-issuance of the
      final test certificate.  Once this is done, under Article  6.3.2,  the
      seller may retake the relevant test within a reasonable  period  after
      the end  of  the  previous  test  so  as  to  comply  with  the  basic
      requirements of Schedule 5.  It is only after this that a unit can  be
      said to be a “commissioned unit” as defined, which means that it is  a
      unit in  respect  of  which  COD  has  occurred.   COD  or  commercial
      operation date is also separately defined as meaning, in relation to a
      unit, the date one day after the  date  when  each  of  the  procurers
      receives a final test certificate of the independent engineer  as  per
      Article 6.3.1.  It is thus clear that the scheme of Article 6 is  that
      a unit cannot be said to have a commercial operation date  unless  and
      until it is first synchronized with the grid  and  commissioned  after
      meeting the parameters mentioned in Schedule 5 of the PPA.

      34.   Article 6.3.3 refers to performance tests of a unit  during  the
      period of the PPA.  If under Article 6.3.3 after COD has been achieved
      in a unit, an increased tested capacity over and above  that  provided
      in 6.3.1 (b) is achieved in a  subsequent  performance  test,  certain
      consequences follow.  Equally, if after COD has  been  obtained  in  a
      unit, and the  most  recent  performance  test  mentioned  during  the
      working of the PPA has been conducted, and it is found  that  in  such
      test a figure less than contracted  capacity  is  achieved,  the  unit
      shall be de-rated with certain consequences  which  are  mentioned  in
      Article 6.3.4 read with Article  8.2.2.    The  scheme  of  Article  6
      therefore read as a whole appears to be that COD  cannot  be  achieved
      until the parameters mentioned in Schedule 5 are achieved and there is
      a final test certificate to  that  effect.   The  subsequent  clauses,
      Article 6.3.3 and Article 6.3.4 only kick in after COD is obtained  in
      a unit, leading to either increased capacity or to  de-rated  capacity
      with consequences which follow under the PPA.

      35.   The meetings, emails, and letters between the parties  have  now
      to be examined. The first important meeting that is necessary  for  us
      to advert to is the meeting of 27.2.2013.  The meeting was Chaired  by
      the Managing Director of the lead procurer i.e. M.P. Power  Management
      Company Limited.  It was attended by  all  the  other  procurers,  and
      officials of Sasan.  What is emphasized on behalf of Sasan is that the
      revised COD of the Sasan units was accepted by all the procurers under
      article 4.5.1 of the PPA to be  –  (first  unit)  by  31.3.2013.   The
      procurers asked Sasan for the estimated date for  synchronization  and
      COD of  the  first  unit.  Sasan  indicated  that  synchronization  is
      expected in the  first  week  of  March,  2013,  and  the  COD  before
      31.3.2013.  What is important about this meeting is that the procurers
      were no doubt interested in getting electricity from Sasan as soon  as
      possible, but obviously only in accordance  with  article  6.3.1  read
      with the 5th Schedule.  This would only mean that  the  meeting  would
      disclose that the anxiety of the procurers to get electricity at cheap
      rates would be in accordance with the PPA  and  not  against  it.   In
      other words, if a final test certificate had been given to the  effect
      that 95% of contracted capacity could have been delivered by Unit No.3
      on or before 31.3.2013, the procurers were anxious to avail of it, and
      not otherwise.

      36.   It is unnecessary for us to burden this judgment with the emails
      that passed between Sasan and WRLDC between 27.3.2013  and  30.3.2013.
      It is enough for us to state that Sasan contends that it was ready  to
      deliver at 95% of the contracted  demand  but  for  WRLDC,  and  WRLDC
      states that Sasan was never obstructed by WRLDC, and in fact  was  not
      capable of delivering electricity at 95% of the contracted  demand  at
      the relevant time.  WRLDC appears to be correct in this for the simple
      reason that if we see the performance of  Sasan  for  the  period  1st
      April to 16th August, 2013,  it  is  clear  that  various  tests  were
      undertaken, but 95% of contract capacity for a continuous period of 72
      hours had only been achieved in June even according to Sasan.

      37.   In  any  event,  the  performance  test  certificate  issued  on
      30.3.2013 leaves  much  to  be  desired.   Since  the  Commission  has
      castigated this certificate and the Appellate  Tribunal  has  absolved
      the Independent Engineer completely, it is necessary to set  out  this
      certificate in full.

      “Lahmeyer International (India) Pvt. Ltd.
      Corporate Office & Correspondence address:
      Intec House, 37 Institutional Area, Sector 44, Gurgaon-122002 ,
      National Capital Region (INDIA)


      Test Certificate of Performance  Test  for  the  Commercial  Operation
      Declaration of the First Unit (Unit-3 of 660 MW) of SASAN  ULTRA  MEGA
      POWER PROJECT (6x660 MW)

      This Certificate is issued by IE with reference to  article  6.3.1  of
      PPA executed on 7th August 2007 between Sasan Power Limited (SPL,  the
      Seller) and the  Power  Procurers.   Based  on  the  Performance  Test
      witnessed by IE from 27th March 2013 to 30th March 2013 and review  of
      the detailed Performance Test results provided by the  Seller,  it  is
      certified that:

   1. The Unit was synchronized with the grid at 15.18  hrs  on  27th  March
      2013 after receiving the permission of WRLDC.

   2. The Seller (SPL) had submitted the power injection schedule  to  WRLDC
      at 15.35 hours on 27th March 2013 for raising the  load  gradually  to
      100% of the Contracted Capacity of 620.4 MW(ex bus) by  2000  hrs.  on
      27th March 2013 for demonstrating continuous operation  at  that  load
      for continuous 72 (seventy two) consecutive  hours.   However,  WRLDC,
      did not permit the Seller to operate the Unit beyond 100 MW  (ex  bus)
      till the morning of 28th March 2013 due to the following reasons:

   a) The demand in the grid was low due to the Holiday on account  of  Holi

   b) All the Units in the grid were operating at  their  technical  minimum

   3. The Seller was continuously keeping in touch  with  WRLDC  till  21.40
      hours on 29th March 2013 for seeking permission to raise the load.  At
      22.19 hrs on 29th March 2013 WRLDC permitted the seller to  raise  the
      load.  Accordingly, Seller raised the load to around 150 MW (ex bus).

   4. At 07.13 hours on 30th March 2013, WRLDC asked the  seller  to  submit
      its revised power injection schedule for raising the  load.   At  this
      point of time, the Unit had already completed continuous operation  of
      50 (fifty) consecutive hours at a low load of about  100  MW  (ex-bus)
      and another 9 (nine) consecutive hours immediately thereafter  at  150
      MW.  Seller informed WRLDC at 14.18 hrs that  it  would  increase  the
      load from 20.00 hours to reach full load.  As such, in line with WRLDC
      instructions and grid conditions.  Seller maintained  load  of  around
      100 MW (ex bus) for around 50 hours and maintained load of around  150
      MW (ex bus) for remaining 22 hours as per WRLDC instructions and  grid

   5. The Commissioning  Test  has  been  carried  out  in  accordance  with
      Schedule 5 of  PPA  and  the  results  of  the  Performance  Test  are
      acceptable to IE.  The results of the Performance Test show  that  the
      Unit’s Tested Capacity is not  less  than  101.38  MW  (ex  bus),  the
      maximum permitted load by WRLDC for injection into the  grid.   During
      the above stated period of continuous  72  (seventy  two)  consecutive
      hours, the performance of  the  unit  was  found  to  conform  to  the
      Electrical Limits of the Functional Specifications in accordance  with
      Schedule 4 of PPA.

      The salient details of the Performance Test are as follows:

|Minimum Hourly Net Generation of the|101.38 mw FROM 0600 HRS TO 0700 hrs |
|Unit during 72 Hours Test (MW)      |on 28th March 2013                  |
|Maximum Hourly Net Generation of the|161.01 MW from 1900 hrs to 2000 hrs |
|Unit during 72 Hours Test (MW)      |on 30th March 2013.                 |
|Average Hourly Net Generation of the|120.84 MW                           |
|Unit during 72 Hours Test (MW)      |                                    |
|Tested Capacity of the Unit (MW)*   |101.38 MW                           |
|Generator Terminal Voltage          |21.66 KV to 21.83 KV (Parameter as  |
|                                    |per OCM-22 KV)                      |
|Power factor                        |096 Max (lagging), 0.89 MIN         |
|                                    |(lagging)                           |

      (*) Due to load restriction by WRLDC.

      6.    Since the Unit was operating below 50% of the rated load due  to
      grid restriction, the Unit could not be demonstrate the  Ramping  Rate
      above 50% of the rated load in accordance  with  Schedule  4  of  PPA.
      However,  as  per  the  certificate  provided  by  Original  Equipment
      Manufacturer of Boiler, Turbine & Generator, minimum ramp up and  ramp
      down rate of 1% of Contracted Capacity per minute can be achieved.

           7. The Unit could not be tested for the following parameters  of
      Supercritical Technology at the steam turbine inlet as defined in  PPA
      due to grid restriction.

           i)    Main Steam Pressure: 247 kg/cm2 (abs)

           ii)   Main Steam Temperature: 535 deg C.

           iii)  Reheat Temperature: 565 deg C.

           However, the Unit  was  found  to  operate  with  the  following
      parameters at the steam turbine inlet during one hour  operation  from
      1200 hrs to 1300 hrs on 29th March 2013.

   i) Main Steam Pressure: 77.36 Kg/cm2 (abs)

  ii) Main Steam Temperature: 535.64 deg.C.

 iii) Reheat Temperature: 575.04 deg C.

      8.    All the systems and equipment have  been  commissioned  and  are
      operational with two coal mills which  were taken into  service.   The
      balance mills could not be taken into service due to the  restrictions
      imposed by the grid.  The furnace was found to operate stably even  at
      a low load of 101.38 MW (ex-bus) and the parameters of  Turbine  shaft
      vibrations, Generator slot temperature and Generator core  temperature
      were found to be well within the equipment limits recommended by OEM.

      9.    In view of the above, the Unit-3 is certified to  have  achieved
      Commercial Operation, with a tested capacity of  101.38  MW  (ex  bus)

      (a) Commissioning Test was carried out in accordance  with  Article  6
      and Schedule 5 of the PPA.

      (B)  Results  of  the  test  show  that  Unit-3  has  met   functional
      specifications stipulated in Schedule 4 of the PPA.

      For Lahmeyer International s(India)


      R.K. Soni

      Project Manager

      Dated: 30th March 2013”

      38.   It will be seen from this certificate that the  tested  capacity
      of the Unit was found to be only 101.38 MW as against 95%  of  620  MW
      i.e. 587 MW. It was also stated that  since  the  unit  was  operating
      below 50% of the rated load due to grid restriction,  the  unit  could
      not demonstrate ramping rate above 50% of  rated  load  in  accordance
      with the Schedule 4 of the PPA.

      39.   Paragraph 9 of  the  certificate  leaves  much  to  be  desired.
      Obviously, if  the  tested  capacity  is  101.38  MW  as  against  the
      required  95% i.e. 587 MW, the test could not have been carried out in
      accordance with article 6 read with schedule 5, and that  despite  the
      fact that ramping up  and  down  could  not  be  achieved,  functional
      specifications stipulated in Schedule 4 of the PPA were said  to  have
      been met.  We are constrained, therefore, to agree with CERC which  in
      its order  dated  8.8.2014  has  castigated  this  certificate.   What
      article 6.3.1 requires is first and foremost a final test  certificate
      of the Independent Engineer.  The certificate dated 30.3.2013 given by
      the Independent Engineer is not a final test certificate.  Indeed,  it
      is only  in  August  that  a  final  test  certificate  was  given  in
      accordance with Article 6.3.1 of the PPA by the very same  independent
      engineer.  Obviously the  commissioning  tests  could  not  have  been
      carried out in accordance  with Schedule 5, which requires  in  clause
      1.1 (i) (d)     that the seller shall  perform,  in  respect  of  each
      unit, a performance test, by which such unit shall be deemed  to  have
      passed only if it operates continuously for 72 consecutive  hours,  at
      or above 95% of its contracted capacity as existing on  the  effective
      date. Also, part of the same schedule requires that as a part  of  the
      performance test, the seller shall demonstrate that the unit meets the
      functional specifications for ramping rate as mentioned in Schedule 4,
      which  was  again  conspicuous  by  its  absence.  According  to   the
      Independent Engineer, “… the Unit 3  is  certified  to  have  achieved
      Commercial Operation, with a tested capacity 101.38 MW” after carrying
      out the commissioning test in accordance with Article 6 and Schedule 5
      of the PPA.  In the certificate dated 30.3.2013 he has stated that  on
      witnessing the performance test from  27.03.2013  to  30.03.2013,  the
      tested capacity of the Unit is 101.38  MW.   However,  it  is  clearly
      recorded that Unit was operated beyond 100 MW only from the morning of
      28.03.2013.  In the chart on the  performance  test,  the  Independent
      Engineer has noted that 101.38 MW is operated only from 06.00 a.m.  on
      28.03.2013. Under Article 6 read with Schedule 5 …  “Unit   shall   be
      deemed  to  have passed if it operates continuously for 72 consecutive
      hours at or above 95% of its contracted capacity as  existing  on  the
      Effective Date.” Even according to the Independent Engineer, 101.38 MW
      was injected only at 06.00 a.m. on 28.03.2013. Such a tested  capacity
      of 101.38 MW for 72  hours  continuously  could  therefore  have  been
      certified only at 06.00 a.m.  on  31.03.2013.   If  that  be  so,  the
      Commercial Operation Date would have been only one day after the  date
      when the  test  certificate  of  the  Independent  Engineer  has  been
      received  by  the  procurers.    For  this  reason  also,   the   test
      certificate is by no means in accordance with Article 6.3.1 of the PPA
      read with Schedule 5 thereof.

      40.   It is now important to examine the  correspondence  between  the
      parties in order  to  ascertain  whether  the  Appellate  Tribunal  is
      correct in stating that waiver had  in  fact  taken  place.   At  this
      stage, it is important to advert to an email dated 31.3.2013  sent  by
      the lead procurer  to  Sasan.   This  email  categorically  states  as

                 “With reference to the letter no. GEIE  12086/12-13/001/RKS
                 dt. 30th March 2013 relating to the Test Certificate of the
                 Independent  Engineer  towards  the  Performance  Test  for
                 declaration of COD of  Unit-3  of  660  MW  of  UMPP  Sasan
                 Project.  It is to inform that as per clause 6.3.1 (a)  and
                 (b) of the PPA, Commissioning Test should have been carried
                 out in accordance with Schedule  5  of  PPA  and  that  the
                 result of the test should not have been  less  than  ninety
                 five (95) percent of its  Contracted  Capacity.   The  test
                 result is not as per the aforesaid clause  and,  therefore,
                 is not acceptable to us.  If the  Seller  is  agreeable  to
                 consider the performance test under clause 6.3.4 for a  de-
                 rated capacity of 101.38 MW, the same could  be  agreed  by

      41.   However, Sasan relies heavily upon an email sent on 2.4.2013  by
      the lead procurer to Sasan.  This email reads as follows:


              The Chief Executive Officer
           M/s. Sasan Power Ltd.,
           Dhirubhai Ambani Knowledge City,
           1 Block, 2nd Floor, North Wing,
           Thane, Belapur Road, Koparkhairane,
           Navi Mumbai,
           Maharashtra 400 710

           Sub: Independent Engineer’s letter dated 30th March 2013

           Ref: Independent Engineer’s letter dated 30th March 2013

           Dear Sir,

                 Please refer the Independent Engineer’s letter dated  30th
           March 2013 pertaining to “Test Certificate of  Performance  Test
           for the Commercial Operation Declaration of the First Unit (Unit-
           3 of 660 MW) of SASAN ULTRA MEGA POWER PROJECT (6x660 MW)” and e-
           mail dated 31.3.2013 of 12.39 AM sent  by  Western  Region  Load
           Despatch Centre regarding scheduling of power from Unit No.3  of
           Sasan  UMPP.    As  lead  procurer,  the  Performance  Test,  as
           certified by the independent Engineer for a capacity  of  101.38
           MW (ex-bus), is acceptable to us under Clause 6.3.4 of the  PPA.
           You may kindly go for Performance Test under notice  to  us  for
           increasing the capacity beyond certification by the  Independent
           Engineer in accordance with Clause 6.3.3 of the PPA.

                 As provided in Article 6.3.4 of the  PPA,  in  the  period
           between this performance test and the next performance test, the
           unit’s contracted  capacity  and  available  capacity  would  be
           considered as 101.38 MW (ex-bus)  and  its  availability  factor
           shall be calculated by reference  to  101.38  MW.   The  charges
           payable for power shall be as laid down in Article 6.3.4 of  the
           PPA.  In case the unit is in position to produce  beyond  101.38
           MW, the additional quantity would be scheduled in favour of  the
           Procurers under proviso to Article 11.1 of the  PPA,  until  the
           next Performance Test is conducted under Article 6.3.3.

           Thanking you,

           Yours faithfully,


           Executive Director (IPC)”

      42.   The two emails read together would show that the  lead  procurer
      made it clear that declaration of COD of unit 3  is  not  accepted  by
      them as the test was not performed as per Article  6.3.1.  However, in
      its anxiety to procure electricity, what  was  stated  in  the  second
      email was that the capacity of 101.38 MW  was  acceptable  only  under
      Article 6.3.4 of the PPA,  meaning  thereby  that  this  ought  to  be
      treated as  de-rated  capacity,  which   should   be   paid   for   as
      provided.  And any quantity produced over and above  101.38 MW   would

      treated as infirm power under Article 11.1 proviso, and  paid  for  as

      43.   Shri Sibal argued that the moment Article 6.3.4 of  the  PPA  is
      attracted, this would necessarily mean that the Appellants have waived
      the requirement of 95% of the contracted capacity as existing  on  the
      effective date mentioned in Article 6.3.1(b). According to  him,  this
      would mean that scheduled power would have to be  supplied,  which  in
      turn can only be done if there is waiver of the aforesaid requirement.
       It is difficult to agree.  The case of the appellants has  throughout
      been, starting from 12th April,  2013,  onwards,  that  it  has  never
      consented to Schedule 5 of the PPA  and  Article  6.3.1(b)  parameters
      being lowered.  It is true that Article 6.3.4 would not apply for  the
      reason that it would come into  effect  only  after  the  last  recent
      performance test mentioned in Article 6.3.3 has been  conducted.   And
      for Article 6.3.3 to apply, a performance  test  must  first  indicate
      that from a unit’s COD an increased tested  capacity  over  and  above
      that provided in Article 6.3.1(b) must  first  occur.   Admittedly  on
      facts this has not happened.  What is important to note  therefore  is
      that the appellants desperately wanted power at a  cheaper  rate,  and
      were willing to go to any extent to get such power, including invoking
      clause 6.3.4, which would not apply, and stating  that  anything  over
      and above 101.38 MW ought to be treated as infirm power.  It is  clear
      under the  Regulations,  however,  that  infirm  power  can  never  be
      supplied to the appellants themselves but can only be supplied to  the
      grid.  This being the case,  the  question  that  is  still  posed  is
      whether the two emails read together would amount to a waiver  of  the
      right mentioned in clause 6.3.1.  Waiver is, as has been  pointed  out
      above, an intentional relinquishment of a known right.  Waiver must be
      spelled out with crystal clarity for there must be a  clear  intention
      to give up a known right.  There is no such clear intention  that  can
      be spelled out on a reading of  the  two  emails.   All  that  can  be
      spelled out is that the first email of 31.3.2013 categorically  states
      that the test  result  is  not  as  per  Article  6.3.1,  and  is  not
      acceptable. The last sentence of this very email then refers to clause
      6.3.4 and to a  de-rated capacity of 101.38 MW.  Thereafter, the email
      of 2nd April, 2013 expands on  the  aforesaid  last  sentence  of  the
      earlier email by  referring to Article 6.3.4 and Article  11  proviso.
      This is akin to a ‘without prejudice’ acceptance  of  de-rated  power,
      being a non-acceptance of the test certificate dated 30.3.2013 coupled
      with a desperate attempt to somehow get whatever power  is  available.
      But this does not amount to  a  clear  and  unequivocal  intention  to
      relinquish a known right.

      44.  It is not necessary to burden this judgment with  various  other
      acceptance emails of the other discoms inasmuch as they  are  all  in
      terms of the email sent by the lead  procurer.   Haryana  discom  has
      sent an email dated 12.4.2013 in which, even while accepting  derated
      power, it has accepted the same without prejudice to its rights.

      45.   In contrast to the aforesaid emails, the  acceptance  emails  of
      BYPL and BRPL, both Reliance Group Companies, may now be quoted:-

           “Dear Sir

           From Sasan UMPP Delhi has allocation of 450 mw as per MOP out of
           which BRPL share is 43.58 out of Delhi  allocation.   We  accept
           the COD of 1st unit of 660 mw as declared by  SPL.   May  please
           schedule Full quantum of BRPL with immediate effect and confirm.


           Sanjay Srivastav.

           Assistant VP BRPL. 9312147045

           Sanjay Srivastav (As V.P.)”

      46.   This acceptance email is in stark contrast with  the  acceptance
      email of the lead procurer, in that it unequivocally  accepts  COD  of
      the first Unit of 660 MW as declared by Sasan.  It is therefore  clear
      that on facts in this case  there  is  no  waiver  and  the  Appellate
      Tribunal in coming to an opposite conclusion, is clearly erroneous.

      47.   Interestingly enough, the Appellate Tribunal,  in  the  impugned
      judgment dated 31.3.2016, contradicts itself when  it  states  in  one
      portion as follows:-

           “e)   We have carefully gone through the ratio of the  law  laid
           down by Hon’ble Supreme Court in Waman Shriniwas and in  Krishan
           Lal’s case, wherein in the latter case the Hon’ble Supreme Court
           cited an illustration in paragraph 21 thereof.  The words of the
           Hon’ble Supreme Court are “to illustrate this principle, it  has
           been stated that if the statutory condition  be  imposed  simply
           for the security or the benefit of the  parties  to  the  action
           themselves,  such  condition   will   not   be   considered   as
           indispensable and either party may waive it.”   In  the  present
           case,  the  requirement  of  achieving  95%  of  the  contracted
           capacity for declaration of COD was  not  one  for  the  private
           benefit of the seller and procurers.  The said  requirement  and
           the  appointment  of  an  independent  expert  to  oversee   the
           commissioning process was built into the statutory contract i.e.
           PPA itself for a specific purpose, as a requirement  of  general
           policy, to ensure that generators do not declare their units  to
           be  commercially  available  without  even   demonstrating   the
           capability of  such  units  to  achieve  at  least  95%  of  the
           contracted capacity.”

      And then goes on to state:

           “We further find that in the present case, there is no  question
           of any public interest or public policy or morals  or  statutory
           regulations being violated. The  WRLDC,  who  was  a  petitioner
           before the Central  Commission,  in  its  Petition  clearly  and
           equivocally states that there are no guidelines  in  respect  of
           declaration of COD of the generators who  are  not  governed  by
           CERF (Tariff Regulations) 2009 and in the Petition, WRLDC  prays
           to the Central Commission for issuing regulations and guidelines
           in that behalf.”

      48.   We thus find that the Appellate Tribunal is wholly incorrect  in
      accepting the case of waiver put forward by learned counsel for Sasan,
      and is equally incorrect in absolving the independent engineer for the
      test certificate given by him on 30.3.2013.  We, therefore, set  aside
      the Appellate Tribunal’s judgment, and reinstate  the  judgment  dated
      8.8.2014 of the Central Electricity Regulatory Commission.

      49.   Shri Sibal’s last argument  is  that  there  is  no  substantial
      question of law so as to attract Section 125 of the  Electricity  Act,
      2003 in these appeals. We  are  afraid  that  we  cannot  agree.   One
      substantial question of  law  is  whether,  when  public  interest  is
      involved, waiver can at all take place  of  a  right  in   favour   of
      the  generator   of   electricity     under   a  PPA  if   the   right
      also  has  an  impact  on    consumer    interest.   This  substantial
      question of law has been  answered  by  us  in  the    course  of  the
      judgment.  We have also pointed  out  that  the  Appellate  Tribunal’s
      finding that the Independent  Engineer’s  test  certificate  can  pass
      muster and that  there  is  a  waiver  on  facts  is  not  a  possible
      conclusion, and such finding is, therefore,  perverse  and  hence  set
      aside. That apart, we have also pointed out the  contradictory  nature
      of the judgment of the Appellate Tribunal, when it points out that the
      requirement of Article 6.3.1 is not merely for the private benefit  of
      the procurers of electricity, but is as a matter  of  general  policy;
      and then later on in the judgment finds that  no  question  of  public
      interest or public policy arises  in  the  present  case.    In  these
      circumstances, this plea must also be turned down.  In the result, the
      appeals are allowed but with no order as to costs.

                                             (Kurian Joseph)

                                             (R.F. Nariman)
      New Delhi;
      December 08, 2016.

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