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Gujarat Urja Vikas Nigam Limited & Ors. vs Renew Wind Energy (Rajkot) Private Limited & Ors.

Civil Appeal · 2023 INSC 366Decided 13 Apr 2023
Civil Appeal Nos. 3480-3481 of 2020

Background

Wind power generators (including Renew Wind Energy) signed 25-year Power Purchase Agreements (PPAs) with Gujarat Urja Vikas Nigam (which buys power for Gujarat's electricity distributors) under a "Renewable Energy Certificate" (REC) scheme in 2012, agreeing to a fixed tariff of Rs. 2.64/unit plus the ability to separately trade RECs for extra income, instead of taking a higher fixed "preferential tariff" of Rs. 3.56/unit (which came without REC benefits). In 2013, the Central Electricity Regulatory Commission amended the REC rules so that, going forward, the price of power sold under this scheme had to exactly equal (not merely "not exceed") the buyer's average pooled power cost. Years after signing their PPAs, and only after finding this arrangement less profitable than expected, the generators applied to Gujarat's State Electricity Regulatory Commission to have their already-fixed Rs. 2.64/unit tariff replaced with a fluctuating year-by-year "average pooled purchase cost." The State Commission and the Appellate Tribunal for Electricity (APTEL) both sided with the generators, also holding (without real evidence) that the generators had been coerced into signing the original PPAs on unfair terms.

Decision Breakdown

The Supreme Court reversed both the State Commission and APTEL. It held that the 2013 amendment to the REC Regulations was prospective only, as the regulator itself had clarified when making the amendment, and could not be used to reopen the terms of PPAs that were freely negotiated by commercially sophisticated parties years earlier. The Court found the generators' sudden claim, made years later, that they had been "coerced" into the deal to be legally unsubstantiated: a plea of coercion or fraud requires specific, detailed factual pleadings and evidence, not a bare assertion, and APTEL had "rubber stamped" this finding without any real analysis. The Court also emphasized the general principle that once regulators fix a tariff which parties freely incorporate into a signed contract, that contract's terms bind the parties for its duration and cannot later be re-opened simply because market conditions shifted in one party's favour. The appeals were allowed with costs, and the orders of the State Commission and APTEL were set aside.

Lesson Learnt

Once a business freely signs a long-term supply/pricing contract (such as a 25-year power purchase agreement) under an existing regulatory scheme, it generally cannot later ask regulators to rewrite the price simply because a subsequent regulatory change or shifting market conditions make the original deal less profitable, and a claim of "coercion" to escape a contract must be backed by specific facts and evidence, not raised as an afterthought years later.

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

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