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All India Power Engineer Federation & Ors. v. Sasan Power Ltd. & Ors. Etc.

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 5881-5882 of 2016)Decided 8 Dec 2016
Civil Appeal Nos. 5881-5882 of 2016
Justice Kurian Joseph · Justice Rohinton Fali Nariman

Background

Sasan Power Limited (a Reliance Power subsidiary) was developing an ultra-mega power project in Madhya Pradesh under a 25-year Power Purchase Agreement with state electricity distributors, with tariffs deliberately set extremely low for the first year and much higher afterward. The entire dispute turned on one date: whether Sasan's Unit No. 3 achieved its "Commercial Operation Date" (COD), requiring certified operation at 95% capacity for 72 continuous hours, on 31 March 2013 (the last day of the depressed-tariff first year) or only later, on 16 August 2013, once a proper independent-engineer test certificate was actually issued. If COD was deemed to be 31 March 2013, consumers would be billed at the ultra-low first-year rate for the entire year in a single day, but if it was 16 August 2013, consumers would owe over ₹1000 crores more under the higher ongoing tariff. The electricity regulator's appellate tribunal had sided with Sasan, accepting a disputed test certificate and a "waiver" argument.

Decision Breakdown

The Supreme Court held that the appellate tribunal was wrong to accept the independent engineer's test certificate and the claim that the statutory 95%-capacity requirement had been "waived," because that requirement was not merely a private contractual safeguard between Sasan and the procurers but a matter of general regulatory policy meant to protect consumers, and such a public-interest-linked statutory safeguard cannot be waived by the parties' private conduct. The Court found the tribunal's reasoning internally self-contradictory (acknowledging the public-policy character of the requirement in one place while denying any public interest was at stake elsewhere), and held this amounted to a perverse finding. It set aside the Appellate Tribunal's judgment and restored the Central Electricity Regulatory Commission's original 2014 ruling, meaning COD was not achieved on 31 March 2013. The appeals were allowed with no order as to costs.

Lesson Learnt

A contractual pre-condition that exists to protect the broader public interest (like consumer electricity rates) cannot simply be "waived" by the private parties to that contract, even where the written agreement nominally involves only those two parties: regulators and courts will look past such private arrangements where ordinary consumers bear the real cost.

Official source (sci.gov.in)View Judgment (PDF)

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