REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.5881-5882 OF 2016
ALL INDIA POWER ENGINEER
FEDERATION & ORS. … APPELLANTS
VERSUS
SASAN POWER LTD. & ORS. ETC. ...RESPONDENTS
WITH
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
prayed:-
“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
matter.
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
generator.
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
Agreement.
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
Grid.
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
Capacity;
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
earlier.
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
Limits.
(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
limits.
(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
parameters.
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
Technology.
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
Tests.
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
region.
(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
investments;
(d) safeguarding of consumers' interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi year tariff principles;
(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
electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same
area by two or more distribution licensees, the Appropriate
Commission may, for promoting competition among distribution
licensees, fix only maximum ceiling of tariff for retail sale of
electricity.
(2) The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be
specified in respect of generation, transmission and
distribution for determination of tariff.
(3) The Appropriate Commission shall not, while determining the
tariff under this Act, show undue preference to any consumer of
electricity but may differentiate according to the consumer's
load factor, power factor, voltage, total consumption of
electricity during any specified period or the time at which the
supply is required or the geographical position of any area, the
nature of supply and the purpose for which the supply is
required.
(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
Government.”
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
contract.
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
waiver.
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
held:
“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
processes;
3) Facilitate reduction of information asymmetries for various
bidders;
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
on:
• 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
interest.
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
case.
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)
CERTIFICATE OF INDEPENDENT ENGINEER (IE)
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
Festival.
b) All the Units in the grid were operating at their technical minimum
capacity.
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
conditions.
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)
since:
(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)
Sd/-
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
follows:
“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
us.”
41. However, Sasan relies heavily upon an email sent on 2.4.2013 by
the lead procurer to Sasan. This email reads as follows:
“To
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,
Sd/-
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
be
treated as infirm power under Article 11.1 proviso, and paid for as
such.
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.
Regards.
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.
………………………….J.
(Kurian Joseph)
………………………….J.
(R.F. Nariman)
New Delhi;
December 08, 2016.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.5881-5882 OF 2016
ALL INDIA POWER ENGINEER
FEDERATION & ORS. … APPELLANTS
VERSUS
SASAN POWER LTD. & ORS. ETC. ...RESPONDENTS
WITH
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
prayed:-
“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
matter.
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
generator.
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
Agreement.
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
Grid.
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
Capacity;
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
earlier.
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
Limits.
(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
limits.
(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
parameters.
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
Technology.
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
Tests.
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
region.
(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
investments;
(d) safeguarding of consumers' interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi year tariff principles;
(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
electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same
area by two or more distribution licensees, the Appropriate
Commission may, for promoting competition among distribution
licensees, fix only maximum ceiling of tariff for retail sale of
electricity.
(2) The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be
specified in respect of generation, transmission and
distribution for determination of tariff.
(3) The Appropriate Commission shall not, while determining the
tariff under this Act, show undue preference to any consumer of
electricity but may differentiate according to the consumer's
load factor, power factor, voltage, total consumption of
electricity during any specified period or the time at which the
supply is required or the geographical position of any area, the
nature of supply and the purpose for which the supply is
required.
(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
Government.”
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
contract.
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
waiver.
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
held:
“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
processes;
3) Facilitate reduction of information asymmetries for various
bidders;
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
on:
• 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
interest.
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
case.
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)
CERTIFICATE OF INDEPENDENT ENGINEER (IE)
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
Festival.
b) All the Units in the grid were operating at their technical minimum
capacity.
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
conditions.
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)
since:
(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)
Sd/-
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
follows:
“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
us.”
41. However, Sasan relies heavily upon an email sent on 2.4.2013 by
the lead procurer to Sasan. This email reads as follows:
“To
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,
Sd/-
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
be
treated as infirm power under Article 11.1 proviso, and paid for as
such.
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.
Regards.
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.
………………………….J.
(Kurian Joseph)
………………………….J.
(R.F. Nariman)
New Delhi;
December 08, 2016.
