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The State of Himachal Pradesh v. JSW Hydro Energy Limited

Civil Appeal · 2025 INSC 857Decided 16 Jul 2025
C.A. No.-012883-012883 - 2024
Justice Pamidighantam Sri Narasimha · Justice Joymalya Bagchi

Background

JSW Hydro Energy (respondent) built and ran a 1045 MW hydroelectric project in Himachal Pradesh under an Implementation Agreement with the state government, obligating it to supply escalating percentages of free power (12% rising to 18%) to the state. When the higher 18% obligation was due to kick in, the company went to the Himachal Pradesh High Court arguing that CERC's 2019 Tariff Regulations capped free power supply at 13%, and that this regulatory cap overrode the higher contractual figure in the Implementation Agreement. The High Court agreed and modified the Agreement accordingly, prompting the State to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that the CERC Regulations' cap (Note 3 of Regulation 55) does not prohibit a generator from supplying free power beyond 13%. It only governs how tariff is calculated and passed through, not a ceiling on the parties' independent contractual obligations. Consequently, the company's Implementation Agreement obligation to supply up to 18% free power remained valid and was not overridden by the Regulations; only 13% would be treated as a tariff pass-through, with the remainder governed purely by contract. The Court also held that since CERC is a specialised expert regulator with exclusive jurisdiction over interpreting its own tariff regulations, and the company had not sought relief against the State from CERC on this specific point (its CERC petition concerned different agreements), the writ petition before the High Court seeking to modify the Implementation Agreement was not maintainable. The appeal was allowed and the High Court's judgment set aside.

Lesson Learnt

A sector regulator's technical regulations (like CERC's tariff rules) govern rate calculation, not necessarily every underlying commercial obligation: parties cannot use a regulatory ceiling to escape a separately agreed, more onerous contractual commitment; and disputes squarely within a specialised regulator's domain should ordinarily be raised before that regulator, not brought directly as a writ petition to a High Court.

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

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