M/S Bangalore Electricity vs. Sri H M Ramachandra
Original PDF →Facts
The petitioners installed a Solar Rooftop Photo Voltaic (SRTPV) System of 1000 KWh capacity. They entered into a Power Purchase Agreement (PPA) with Bangalore Electricity Supply Company Ltd. (BESCOM) on December 31, 2015, to sell net energy exported at Rs. 9.56 per unit. The Karnataka Electricity Regulatory Commission (KERC) approved the PPA on April 28, 2016, subject to completion of the SRTPV system by December 31, 2016. BESCOM reiterated this deadline on August 19, 2016. However, KERC issued a show-cause notice on August 29, 2016, proposing to revise the commissioning time to six months and the tariff to Rs. 5.20 per KWh. The petitioners' explanation was rejected, and KERC passed an order on October 20, 2016, revising the completion time to six months and the tariff to Rs. 5.20 per KWh. A review petition was rejected on August 24, 2017. The petitioners filed writ petitions challenging these orders.
Held
The Court held that the KERC's action in revising the commissioning time to six months and reducing the tariff was unreasonable, unfair, and arbitrary. The Court found that the PPA and subsequent communications from BESCOM clearly indicated an understanding that the project would be completed by December 31, 2016, and the project was indeed installed by September 30, 2016. The Court applied the principle of promissory estoppel, citing the Supreme Court's decision in ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION VS. R.V.K. ENERGY PRIVATE LIMITED, stating that the petitioners should not suffer due to the unreasonable stand taken by KERC. The Court also held that the contention regarding the availability of an alternative remedy was unsustainable at that stage, as the writ petition had been entertained and decided on merits. The ratio is that regulatory bodies are bound by the principle of promissory estoppel when parties alter their position based on promises or assurances, and once a writ petition is entertained on merits, the existence of an alternative remedy is generally not a ground to interfere.
Key Issues
1. Whether the KERC could revise the commissioning time for the SRTPV system from the agreed period of one year (or December 31, 2016) to six months, and consequently revise the tariff, when the PPA and subsequent communications indicated a longer period and the project was installed within the original timeframe. This issue turns on the principle of promissory estoppel and the sanctity of contractual obligations. The petitioners argued that KERC's action was arbitrary and violated the principle of promissory estoppel, as they acted on the assurances given in the PPA and BESCOM's communications. They contended that the KERC could not revisit the terms agreed upon and approved, especially when the project was installed by September 30, 2016. The appellant (BESCOM) argued that the Solar Policy fixed a six-month period for commissioning and that the learned Single Judge should not have entertained the writ petition due to the availability of an alternative statutory remedy before the Appellate Tribunal.
Sections Cited
Section 4 of the Karnataka High Court Act, 1961
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Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
Cause title — parties, addresses and appearances
CAV JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)
Both the above appeals are filed under Section 4 of the Karnataka High Court Act, 1961 questioning the common order passed by the learned Single Judge dated 28.09.2021 in C/w. W.P.No.43260/2017 whereunder the impugned order under challenge was quashed with a direction to the appellants herein to act upon tariff fixed in the Power Purchase Agreement (for short, ‘PPA’) and to grant all consequential benefits on that basis.
The parties would be referred to as they stood before the Writ Court. The appellant herein was respondent No.3 in both the petitions and respondent No.1 in W.A.No.95/2022 and respondent No.1 in W.A.No.121/2022 were petitioners before the learned
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Single Judge in and W.P.No.43260/2017 respectively.
The respondent No.3 is a Government company and distribution licensee in the State of Karnataka in the matter of distributing electricity. The respondent No.2 – State of Karnataka under notification dated 22.05.2014 brought into force the Solar Policy. Thereafter, under notification dated 12.01.2017 the second respondent – State brought certain amendments to the Solar Policy. The petitioners installed a Solar Rooftop Photo Voltaic System (for short, ‘SRTPV System’) of 1000 KWh capacity on the rooftop of the warehouse situated at Dasanapura Hobli, Bengaluru Rural District. In that regard, the petitioners had submitted an application on 15.12.2015 to the third respondent and the petitioners and third respondent entered into a PPA
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dated 31.12.2015 to sell the net energy exported from the SRTPV System to the third respondent.
In the PPA entered into between the parties, respondent No.3 had agreed to purchase the power at the rate of Rs.9.56 per unit in terms of the order of KERC dated 10.10.2013. It is stated that the KERC also approved the PPA on 28.04.2016 subject to amendment to clause 1(1.6) i.e., SRTPV System shall be designed, engineered, constructed, commissioned and operated by the seller or no other person on their behalf within 31.12.2016. Further, under letter dated 19.08.2016 (Annexure-E), the third respondent specifically communicated the petitioners that installation/commissioning to be completed within 30.12.2016 and SRTPV System shall be commissioned within the said date, failing which, the approval will be treated as cancelled. It is stated that, surprisingly, contrary to the PPA and earlier communications, the
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KERC issued notice dated 29.08.2016 calling upon the petitioners to show cause as to why the time allowed for commissioning the said plant should not be revised to six months on the ground that as per the accepted norms in the SRTPV System proposed to be installed on existing rooftop, the consumers were to be given time of six months for commissioning such plants. However, time of twelve months granted under the communication dated 28.04.2016 needs to be rectified. The petitioners submitted explanation dated 01.09.2016 which was rejected. The KERC by order dated 20.10.2016 (Annexure-K) rejected the request/explanation of the petitioners and revised the time to complete the project to six months and also amended the tariff in the PPA to be Rs.5.20 per KHW as determined in its order dated 02.05.2016. 5. Thereafter, the petitioners filed review petition before the KERC and in the meanwhile,
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petitioners accepted the tariff under protest and on 29.12.2016 the project was synchronized. Thereafter, by order dated 24.08.2017, the review petition filed by the petitioners was rejected. Aggrieved by the rejection of the review petition as well as aggrieved by the reducing the time to commission by six months and also reducing the tariff from Rs.9.56 per KWH to Rs.5.20 KWH, the petitioners filed W.P.No.43260/2017 and W.P.No.43261/2017. The learned Single Judge vide common impugned order dated 28.09.2021, allowed the writ petitions quashing the order dated 20.10.2016 (Annexure-K) and order in R.P.No.19/2016 dated 24.08.2017 (Annexure-T) with a further direction to act upon the tariff fixed in the PPA and to grant all consequential benefits. Aggrieved by the order of the learned Single Judge, respondent No.3 is in appeal.
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Heard learned senior counsel Sri.Sriranga for Smt.Sumana Naganand, learned counsel for respondent No.3/appellant, learned senior counsel Sri.Uday Holla for learned counsel Sri.Vivek Holla, learned counsel for respondent No.1 in both appeals as well as learned Additional Government Advocate Smt.Saritha Kulkarni for respondent No.
Perused the entire writ appeal papers.
Learned senior counsel Sri.Sriranga would submit that the order of the learned Single Judge is the result of non-appreciation of the material on record and in particular he contends that the learned Single Judge failed to appreciate that when there is a statutory alternate remedy to approach the Appellate Tribunal, learned Single Judge could not have entertained the writ petition. Learned senior counsel refers to Section 111 of the Electricity Act and submits that the petitioners ought to have approached the
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Appellate Tribunal questioning the order passed by the second respondent KERC. Learned senior counsel referring to the Karnataka Solar Policy would further contend that the petitioners were required to install the plant in terms of the Solar Policy within six months and upon failure on the part of the petitioners to install the SRTPV System within six months, the petitioners would not be entitled for the tariff at 9.26 per KWH.
Further, learned senior counsel would submit that the tariff determination is the sole prerogative of KERC and the learned Single Judge committed an error in interfering with the same. It is the specific contention of the learned senior counsel that the PPA entered into between the petitioners and third respondent ought to be read along with the Solar Policy applicable and further submits that when the Solar Policy prescribes timeline for commissioning the
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unit, contrary to the same, the petitioners cannot be granted more time than the timeline prescribed under the Solar Policy. As the petitioners have failed to commission the unit within six months as required under the Solar Policy, there exists no PPA and it is merely a contingent contract. Learned senior counsel in support of his contention places reliance on the judgments of the Hon'ble Apex Court which would be referred in the course of the judgments, if necessary.
Per contra, learned senior counsel Sri.Uday Holla appearing for the petitioners would submit that the contention of alternate remedy is raised in the appeal for the first time and no such contention was raised before the learned Single Judge. Moreover, it is submitted that the writ petition is of the year 2017 and at this length of time, the petitioners cannot be relegated to avail the alternate remedy. Learned senior counsel refers to PPA dated 31.12.2015
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(Annexure-B), particularly, the clause fixing the tariff and also clause which prescribes the timeline for completion or commissioning of the project and submits that when the said PPA is approved by the KERC by letter dated 28.04.2016 (Annexure-D), it is not open for the third respondent to vary the terms of contract. Further, learned senior counsel would submit that the KERC has no power to vary the tariff fixed under the PPA and approved by the KERC. Learned senior counsel also refers to the communication of the third respondent dated 19.08.2016 (Annexure-E) wherein also the third respondent intimated the petitioners to complete the project within 30.12.2016 and the SRTPV System be commissioned within the said period, failing which, it was stated that approval will be treated as cancelled. When that being so, learned senior counsel submits that the KERC committed an error in revising the timeline granted for
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completion and also in revising the tariff. Learned senior counsel would also submit that even before the time granted i.e., 30.12.2016, the project was completed on 30.09.2016, which was communicated to the third respondent and learned senior counsel specifically referring to Annexure-H, Format-7, work completion report, would submit that by 30.09.2016 itself, the plant was installed. Thus, learned senior counsel would pray for dismissal of the writ appeal.
Having heard the learned senior counsels appearing for the parties and on perusal of the entire writ appeal papers, the only point which falls for our consideration is as to, Whether the learned Single Judge’s order warrants interference at the hands of this Court?
The answer to the above point would be in the Negative for the following reasons:
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Under Article 226 of the Constitution of India, the High Court would examine in its power of judicial review, the process of decision making and would not examine the decision itself. In the instant case, learned Single Judge has neither determined the tariff nor interfered with the contractual Clauses of the parties i.e., PPA dated 31.12.2015 entered into between the petitioners and respondent No.
Learned Single Judge has rightly found fault with the decision making process of the second and third respondents. Having approved the PPA under the communication dated 28.04.2016 (Annexure-D) subject to incorporation of the Clause that the SRTPV System shall be designed, engineered, constructed, commissioned and operated by the Seller or any other person on their behalf within 31.12.2016, the second respondent – KERC could not have revisited the same.
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Moreover, under the letter dated 19.08.2016 of the third respondent, it was communicated specifically that the installation/commissioning to be completed within 30.12.2016 and the SRTPV System to be commissioned within the said period, failing which, approval will be treated as cancelled. On the said assurance, when the petitioners have made all arrangements for commissioning of the plant and in fact, when the plant was installed within 30.09.2016, the action of the second respondent in curtailing the period to six months is wholly unreasonable, unfair and arbitrary. The work completion report (Annexure-H) which is not disputed by the respondent Nos.2 and 3 indicates the date of installation as 30.09.2016. 13. When the correspondences and the PPA clearly indicates the understanding of the parties that
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the project shall be completed within 30.12.2016 and when the project is installed by 30.09.2016 in terms of the PPA, the action of the second and third respondents amounts to frustrating the contractual obligations between the parties. In the above facts and circumstances, the principle of promissory estoppel would squarely apply.
The Hon'ble Apex Court in ANDHRA and 118, held as follows: “117. It is in the aforementioned situation that the doctrine of promissory estoppel should be held to be applicable. In Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and ETIO [(2007) 5 SCC 447] on the 1 (2008) 17 SCC 769
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question of doctrine of promissory estoppel, it was held: (SCC p. 495, para 121) “121. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. The appellants had undoubtedly been enjoying the benefit of (sic exemption from) payment of tax in respect of sale/consumption of electrical energy in relation to the co- generating power plants.”
The Court further opined: (SCC p. 498, para 128) “128. In MRF Ltd. [MRF Ltd. v. CST, (2006) 8 SCC 702] it was held that the doctrine of promissory estoppel will also apply to statutory notifications.”
As regards setting up of MPPs the principle of estoppel shall also apply. It is now a well-settled principle of law that nobody should suffer for the wrong done by a quasi-judicial body. In view of the principle analogous to actus curiae neminem gravabit, we are of the
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opinion that because of the unreasonable stand taken by A.P. TRANSCO before the Commission, LVS Power Ltd. should not suffer. In the aforementioned situation the High Court has issued the directions.”
The judgments relied upon by the learned counsel for the third respondent/appellant would have no application to the present fact situation and in the background of the approved PPA and specific correspondences between the parties.
As contended by the learned senior counsel for respondent No.3/appellant, the solar policy of the State Government would fix the time of six months for commission of the Unit. But, in the case on hand, the second respondent and third respondent with their eye open, entered into PPA with the petitioners granting one year time or time till 30.12.2016. Moreover, the said PPA is approved by second respondent/KERC under its communication dated
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2016 (Annexure-D).
Further, 3rd respondent/appellant herein in its communication dated 19.08.2016 categorically made it clear that installation/commission to be completed within 30.12.2016. Notwithstanding the time line contained in the Solar Policy, the agreed upon period between the parties to complete the project on or before 30.12.2016 would prevail.
Learned senior counsel for the appellant/respondent No.3 contended that in view of CT: bms
2 (2003) 7 SCC 693
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.