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Gujarat Urja Vikas Nigam Limited v. Tarini Infrastructure Ltd. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 5875 of 2012)Decided 5 Jul 2016
Civil Appeal No. 5875 of 2012
Justice Ranjan Gogoi · Justice Prafulla C. Pant

Background

Two small power producers in Gujarat, a hydro project (Tarini Infrastructure) and a biomass project (Junagadh Power Projects), had tariffs fixed under Power Purchase Agreements (PPAs) with distribution licensee Gujarat Urja Vikas Nigam Limited, approved by the State Electricity Regulatory Commission. After circumstances changed (unexpectedly longer transmission lines in one case, rising biomass fuel costs in the other), the producers sought a revision of the already-fixed tariff. The State Commission refused to re-open the tariff, but the Appellate Tribunal for Electricity overruled it, holding the Commission did have the power to review tariffs already incorporated into a PPA. The distribution licensee appealed both rulings to the Supreme Court.

Decision Breakdown

The core legal question was whether a tariff fixed under a PPA is final and untouchable, or whether the State Regulatory Commission retains statutory power to review and revise it. The Court held that tariff-fixation is a statutory function under the Electricity Act, 2003, not merely a private contractual term, so a tariff embedded in a PPA does not become immune from the Commission's regulatory oversight; it reasoned that the general power to "regulate" tariffs under the Act carries with it an inherent power to review and adjust, especially where public interest and changed circumstances warrant it, and that Sections 14 and 21 of the General Clauses Act similarly imply a power to amend a decision that was earlier made under statutory power. The Court distinguished its earlier rulings in Gujarat Urja Vikas Nigam v. EMCO and Bangalore Electricity Supply Co. v. Konark Power, noting those involved specific regulatory bars on tariff variation that did not apply here. Agreeing with the Appellate Tribunal's view, the Court dismissed the distribution licensee's appeals and affirmed the Tribunal's orders, leaving each side to bear its own costs.

Lesson Learnt

A price term fixed under a government-regulated contract (like a power tariff in a PPA) isn't automatically locked in forever just because both sides signed it: if the underlying law gives a regulator ongoing statutory power over that subject, the regulator can still revisit and adjust it when circumstances genuinely change, unless the specific rules say otherwise.

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

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