P.T.C. India Ltd. Formerly Power Trading Co. vs Gujarat Urja Vikas Nigam Ltd.

M.S. Shah, J.—As indicated in the order dated 5.2.2008, we have taken up the petition for final disposal and the learned counsel for the

parties have been heard at length. In this petition under Article 226 of the Constitution, the petitioner has challenged the decision of the respondent

Gujarat Urja Vikas Nigam Ltd. (Gujarat Energy Development Corporation Ltd.) not to enter into the Power Purchase Agreement with the

petitioner for supply of 440 MW of power at the levelised tariff rate of Rs. 2.89 per unit, in spite of the judgment dated 24.9.2007 of this Court in

Special Civil Application No. 3514 of 2007, the SLP against which has also been dismissed by the Hon''ble Supreme Court on 10.12.2007.

PTC India Ltd. (hereinafter referred to as ""the petitioner"") was formerly known as Power Trading Corporation of India Ltd. It is a Government

of India initiated Public-Private Partnership, whose primary focus is to develop a commercially vibrant power market in the country. The petitioner

is also engaged in the business of supplying power after purchasing from generating companies.

The respondent Gujarat Urja Vikas Nigam Ltd. (Gujarat Energy Development Corporation Ltd.) (hereinafter referred to as ""the respondent or

the GUVNL"") is a company incorporated under the Companies Act, 1956 and is a successor to the erstwhile Gujarat Electricity Board which is

now divided into several companies for generation, transmission and distribution of electricity. The respondent is the holding company for all these

companies. The distribution companies in the State of Gujarat are required to source their requirement of power only from the respondent herein

which is wholly owned by the State Government and there is no dispute about its status as an instrumentality of the State within the meaning of

Article 12 of the Constitution.

FACTS

Since the present petition is a sequel to the previous petition (Special Civil Application No. 3514 of 2007) which was allowed by our judgment

dated 24.9.2007, we would set out the broad facts leading to filing of this petition from the judgment in the above petition.

By Request for Qualification (RFQ) dated 7.2.2006, the respondent invited the bidders for submitting information for supply of power. It was

specifically stated in the advertisement published in the leading newspapers on 2.2.2006 that the Corporation intended to procure power under the

three competitive bidding processes denoted as bid specification numbers 01, 02 and 03 and that following are the salient features of each of the

bids:-

Bid No. 01 Bid No. 02 Bid No. 03

Max/Min 2000MW / 2000MW / 2000MW/

capacity 100M.W. 100MW 1000MW

Fuel Coal/Lignite Unspecified Imported Coal

Term 25 years 15/25/35 years 25 years

of PPA

1 2 3 4

Location Unspecified Unspecified Sarkhadi, VeeraSangath

or any other coastal

location

Tariff Variable and Capacity Capacity charges Capacity charges

charges are to be Escalable & Non- Escalable & Non-

quoted for 25 years escalable Variable escalable Variable

(year wise) on which charges linked to charges linked to

no escalations will be Index Index

allowed

Commencement Within 36 months Within 60 months Within 60 months

of supply from the signing from the signing from the signing

of PPA of PPA of PPA

Note : The period for commencement of supply for bid Nos. 2 and 3 was 48 months in the first advertisement dated 2.2.2006, but subsequently

that period was changed to 60 months.

It appears that although 11 parties submitted information in response to RFQ, when by Request for Proposal dated 26.6.2006 the respondent

called for bids for supply of electricity, only the following three parties submitted their Request for Proposal for bid No. 1 :-

Name of Party Power offered Rate per unit in Original Bid EMD Bank Guarantee furnished

M/s Adani Enterprises Ltd 500 MW Rs. 3.7038 Rs. 25.0 crores

M/s Jindal Power Ltd. 150 MW Rs.3.4801 Rs. 7.5 crores

PTC India Ltd. 190 MW (Chitarpur) Rs.3.2502 Rs. 9.5 crores

250 MW (Ratnagiri) Rs.3.4947 Rs. 12.5 crores

The Bid Evaluation Committee opined that the rates quoted by the bidders for bid No. 1 were on the higher side. On 9.11.2006, the respondent,

therefore, re-invited financial bids from the bidders who had already submitted their RFQ documents.

The three parties, therefore, submitted their revised financial bids and also the quantum of power offered for sale whereupon the following picture

emerged :-

Name of Party Power offered Rate per unit

M/s Adani Enterprises Ltd 1000 MW Rs. 3.2939

M/s Jindal Power Ltd. 150 MW Rs. 3.2483

P.T.C. India Ltd. (190+250) = 440 MW Rs. 3.2497

Total contract capacity of all 1590 MW

successful bidders u/Bid No. 1

Thereafter on 7.12.2006, the Bid Evaluation Committee recommended that the respondent may buy at the lowest tariff quoted under the revised

financial bid offered by Jindal Power under bid No. 1 i.e. Rs. 3.2483 per unit.

Both Adani Enterprises and PTC India Ltd. communicated their acceptance to match the lowest levelised tariff to Rs. 3.2483 per unit as offered

by Jindal Power and, therefore, on 8.12.2006, the Corporation issued Letter of Intent to each of the three successful bidders at the following rate

for bid No. 1 :-

Name of Party Power offered Rate per unit

M/s Adani Enterprises Ltd 1000 MW Rs. 3.2483

M/s Jindal Power Ltd. 150 MW Rs. 3.2483

PTC India Ltd. (petitioner) (190 + 250) = 440 MW Rs. 3.2483

Total contract capacity of all 1590 MW

successful bidders

It appears that after receipt of the aforesaid Letter of Intent, PTC India Ltd. wrote a letter on the same day expressing its intention to increase the

quantum of power from 190 MW to 380 MW with reference to the supply of power from Chitrapur Coal & Power Ltd. i.e. total supply of 380 +

250 = 630 MW. However, the Corporation did not consider it on the ground that it was received after issuance of the Letter of Intent.

On 11.12.2006, the respondent sent a soft copy of the Power Purchase Agreement (PPA) to each successful bidder with a request to fill in the

relevant information in the soft copy and return the same to the respondent. While all the above named three bidders returned the soft copy

incorporating the relevant details in the month of December 2006, the present petitioner and Jindal Power requested the respondent to intimate to

them the convenient date for signing of PPA. However, the petitioner and Jindal Power were thereafter informed by letters dated 12.1.2006 that

the respondent had cancelled the Letter of Intent issued to the present petitioner and Jindal Power and returned their earnest money bank

guarantees of Rs. 22 Crores and Rs. 7.5 Cr6res respectively. These communications were based on the respondent''s decision dated 8.1.2007 on

which date die respondent held a meeting with Adani Enterprises Ltd. at which meeting the Adani Enterprises Ltd. agreed to reduce the levelised

tariff from Rs. 3.2483 per unit to the levelised tariff of Rs. 2.89 per unit without giving a similar opportunity to the present petitioner and Jindal

Power. Aggrieved by the above decision, both Jindal Power and the present petitioner filed Special Civil Application Nos. 2186 and 3514 of

2007.

PREVIOUS LITIGATION

In the petition of Jindal Power, which was filed earlier in point of time, a Division Bench of this Court passed order dated 24.1.2007 at the

preliminary hearing issuing notice and also granting ad-interim injunction by directing the respondent to maintain status-quo. In that petition, Adani

Enterprises in whose favour the respondent had taken the decision to enter into PPA for purchasing 1000 MW of power at the levelised tariff of

Rs. 2.89 per unit, filed a civil application for vacating the interim injunction. On 6.2.2007, after recording the statement made by the learned

Advocate General appearing for the respondent that in the event of Jindal Power succeeding in the matter, they will be accommodated for the

purpose of bid No. 1 in respect of their offered quantity of power, the Court vacated the ad-interim injunction granted earlier. No sooner was the

injunction vacated, the respondent entered into PPA with Adani Power Ltd. (a group company of Adani Enterprises which had submitted the RFQ

and RFP documents on 6.2.2007.

On 6.2.2007, the present petitioner also filed Special Civil Application No. 3514 of 2007 challenging cancellation of LOI dated 8.12.2006.

While admitting the petition on 22.2.2007, the Court declined to grant interim relief after recording the following statement.

Learned Advocate General Shri Trivedi for the respondent-Nigam states that in the event of the petitioner finally succeeding in the matter, they will

be accommodated for the purpose of bid No. 1 in respect of their offered quantity of 440 MW of power.

The present petitioner carried the matter before the Hon''ble Supreme Court and the SLP came to be disposed of on 26.3.2007 in terms of the

following order :-

We do not want to interfere with the impugned interim order passed by the High Court specially in view of the statement made by the Advocate

General of the State that in the event the petitioner succeeds, they would be accommodated for the purpose of bid No. 1 in respect of their offered

quantity.

We would request Hon''ble Chief Justice of the Gujarat High Court to direct the office to list the matter for final disposal at an early date and if

possible, within six months from today.

[emphasis supplied]

Both the petitions, that is the one filed by Jindal Power and the one by present petitioner were accordingly taken up for final hearing within six

months from the disposal of the SLP and the learned counsel for the parties were heard at length including the learned counsel for the respondent-

Corporation and the learned counsel for Adani Enterprises Ltd. and Adani Power Ltd.. Since Jindal Power expressed inability to match the tariff

of Rs. 2.89 per unit, its petition was disposed of but the present petitioner PTC India made the following statement on 3.9.2007:-

The petitioner states that in the event of the Hon''ble Court allowing this petition, it stands by its offer to sell 440 M.W. of power to GUVNL i.e.

at a Levelised Tariff of Rs. 2.89/kWH as per the tariff stream to be submitted to GUVNL, for a period of 25 years commencing from three years

from the execution of the Power Purchase Agreement in favour of the petitioner.

(emphasis supplied)

This Court then allowed the petition of present petitioner PTC India and directed the respondent to enter into Power Purchase Agreement (PPA)

with petitioner M/s. PTC India Ltd. at the levellised rate of Rs. 2.89 per unit on the same terms and conditions which were incorporated in PPA

dated 6.2.2007 between the respondent and M/s. Adani Power Pvt. Ltd. within one month. That decision of this Court came to be challenged by

the respondent by filing SLP (Civil) No. 20454 of 2007, which came to be dismissed by the Hon''ble Supreme Court on 10.12.2007 by the

following order :-""Heard. The SLP is dismissed.

CONTROVERSY IN PREVIOUS PETITION & COURTS FINDINGS

Before setting out the petitioner''s grievances in the present petition, it is also necessary to refer to the exact controversy dealt with by this

Court in the petition of the present petitioner PTC India (SCA No. 3514 of 2007). Challenge in that petition was to communication dated

12.1.2007 based on the respondent''s decision dated 8.1.2007 for cancellation of Letter of Intent dated 8.12.2006 under which the respondent

had agreed to enter into PPA with petitioner PTC India for purchase of 440 MW of power at the levelised tariff of Rs. 3.24 per unit. The

respondent gave two justifications for supporting its decision -

(i) the petitioner had failed to furnish the performance bank guarantee within one month from the date of LOI.

(ii) the respondent was in a position to procure power at much lower rate than Rs. 2.89 per unit on long term basis.

After examining all the relevant clauses of RFQ and RFP, this Court noted that the tender notice in question invited bids for supply of power

on long term basis for 2000 MWs under bid No. 1 and the total quantity of power offered to be supplied by the three successful bidders (i.e.

Adanis, the present petitioner and Jindal Power) in the aggregate was 1590 MW of power under bid No. 1 (1000 + 440 + 150). This Court also

held that both petitioner PTC India and Jindal Power were ready and willing to furnish performance bank guarantees as per the LOI dated

8.12.2006. This Court held that in the above view of the matter and in view of the admitted power shortage for the last many years on account of

which the respondent-Corporation was purchasing power on temporary basis at as high a rate as Rs. 5.21 to 5.41 per unit from the Adanis, if the

respondent was really interested in purchasing power from all the three successful bidders, it would have responded to the letters from the present

petitioner as well as Jindal Power requesting the respondent for a convenient date to sign PPA and would have also given an opportunity to both

these parties also to reduce their levelised tariff rate to Rs. 2.89 per unit. In spite of repeated requests and inquiries from these two parties, the

respondent did not inform them about the date on which PPA was to be signed. The respondent did not even reply that the date for signing PPA

will be intimated after the parties submit enhanced bank guarantees. There was no dispute about the financial capacity of these two parties for

furnishing bank guarantees for the requisite amounts by way of enhanced bank guarantees (i.e. performance bank guarantees) in case the

respondent had intimated the convenient date for signing PPAs. In fact the present petitioner PTC India Ltd. had already kept ready a bank

guarantee for Rs. 14.25 crores on 5.1.2007 which was adequate performance bank guarantee for supplying 190 MWs of power and had also

shown readiness for furnishing bank guarantee for another 250 MWs of power. This Court also noted the brazen defence of the respondent in the

counter affidavit dated 19.2.2007 in the following terms which this Court considered as unreasonable and even arbitrary :- Jindal Power Ltd. and

Another Vs. Gujarat Urja Vikas Nigam Ltd. and Another,

whether concerned representative (of the petitioner- PTC India) was waiting for indication of the date for execution of agreement is immaterial

and mere preparation of enhanced bank guarantee would also be immaterial.

This Court thereafter made the following observations in paragraph 19 of the judgment :-

The Court finds considerable substance in the submission of the petitioners, particularly of PTC India that respondent Nos. 2 and 3 (Adani

Enterprises Ltd. and Adani Power Pvt. Ltd.) agreeing to reduce the tariff rate under bid No. 1 from Rs. 3.24 to Rs. 2.89 per unit and the decision

of the respondent-Corporation to cancel the Letters of Intent earlier issued to the petitioners -both events taking place on 8.1.2007 was not a

mere coincidence. Allowing the Adanis to reduce the tariff rate from Rs. 3.24 to Rs. 2.89 on 8.1.2007 and not giving a similar opportunity to the

petitioners, though the State of Gujarat has deficiency of power and the offers received under bid No. 1 were only for 1590 MWs as against

required 2000 MW of power and the fact that on the ground of power deficiency in the State, the respondent-Corporation continues to purchase

power on temporary basis from the Adani Enterprises Ltd. (respondent No. 2) at the average rate ranging from Rs. 5.31 to Rs. 5.45 per unit or

thereabout and that 90% of the power thus procured on short term basis since October 2006 is purchased from Adani Enterprises Ltd. (Rs.322

crores out of the short term power purchase of total Rs. 358 crores from October 2006 to August 2007) - these facts are sufficient to substantiate

the petitioners'' case that the petitioners were deliberately kept away from signing of Power Purchase Agreements.

(emphasis supplied)

This Court also held that different considerations will apply where there are more bidders than the number of contracts put up for sale. In the

instant case, the respondent had invited bids under bid No. 1 for minimum 100 MW and maximum 2000 MW, but the aggregate of power offered

to be supplied by the three successful bidders was only 1590 MW and, therefore, even if the respondent had entered into PPA with all the

successful bidders, the respondent still needed to enter into PPA with a fourth party which was yet to be found out and till the date of completion

of hearing in September 2007, no such PPA on long term basis was entered into with any fourth party under bid No. 1.

In the above petition, the respondent had also pleaded that the respondent was not purchasing power from PTC India Ltd. i.e. the present

petitioner even at the levelised tariff of Rs. 2.89 per unit because the tariff rates quoted by bidders under bid Nos. 2 and 3 were lower. It was the

case of the respondent that when the decision was taken on 8.1.2007, the rates available to the respondent for bid Nos. 1, 2 and 3 were as under

:-

Sr. Name of Parties BidNo.CapacityofferedinLevelisedtariff Rs. Date ofopeningbids Date ofsigning

No. MWs per unit PPA

(A) (B) (C) (D) (E) (F)

1 Aryan Coal BeneficationBidNo.200 2.25 4.1.07 26.02.07

Pvt. Ltd. 2

2 Adani Power Pvt. Ltd. Bid 1000 2.35 "" 02.02.07

No.2

3 Essar Power Ltd. Bid 1000 2.40 "" 26.02.07

No. 3

4 Adani Power Pvt. Ltd. Bid 1000 3.24 reduced to Reducedon8.1.07 06.02.07

No. 1 2.89

5 PTC India Ltd. Bid 190 + 250440 3.24 Readyfor Opportunity not given Decisionto

(Petitioner) No. 1 2.89 to reduce cancelLOI

6 Jindal Power Ltd. Bid 150 3.24

No. 1

After considering the above information, this Court noted that the respondent thought it fit to enter into PPA with M/s. Adani Power Ltd. for

purchasing 1000 MW of power at the rate of Rs. 2.35 per unit under bid No. 2 on the basis of the bids received on 4.1.2007 and that PPA was

signed on 2.2.2007. Even then the respondent negotiated behind the back of the petitioner with Adani Enterprises for purchasing 1000 MW of

power under bid No. 1 at the rate of Rs. 2.89 per unit and executed PPA in favour of M/s. Adani Power Ltd. on 6.2.2007 i.e. the same date on

which the adinterim injunction granted earlier by this Court was vacated. This Court further noted the difference between bid Nos. 1, 2 and 3 that

whereas under bid Nos. 2 and 3, power supply was to commence within 60 months from signing of PPA, under bid No. 1 power supply is to

commence within 36 months from the date of signing PPA. This Court also noted the difference that under bid No. 1 variable and capacity charges

are to be quoted for 25 years (year-wise) on which no escalation would be allowed. On the other hand, under bid Nos. 2 and 3, capacity charges

are escalable and non-escalable variable charges are linked to index. Thus, the tariff rates under bid No. 1 on the one hand and tariff rates for bid

Nos. 2 and 3 on the other hand were not at all comparable which was also the stand of the respondent in its affidavit dated 20.2.2007 (Para 6-g).

This Court therefore, held that there was no justification for not permitting PTC India (the present petitioner) to reduce tariff from the agreed rate

of Rs. 3.24 per unit as indicated in the Letter of Intent dated 8.12.2006 to the levelised rate of Rs. 2.89 per unit. This Court then held as under :-

...the respondent Corporation is not in a position to dispute that the respondent Corporation was eager to purchase power from M/s. Adani

Power Pvt. Ltd. -respondent No. 3 at the rate of Rs. 2.89 per unit for a period of 25 years from February 2010 by entering into the PPA on

6.2.2007, but refused to give the same opportunity to the petitioners on 8.1.2007 even after admitting power shortage which necessitates purchase

of power on short term basis at the rate of Rs. 5.45 per unit from respondent No. 2 - Adani Enterprises -in the last eleven months power is

purchased from respondent No. 2 on short term basis to the tune of Rs. 322 crores.

This Court also dealt with the defence of the respondent that even after its decision dated 8.1.2007 cancelling the LOI dated 8.12.2006 in

favour of PTC India Ltd., there were other parties which were ready to supply power at the levelised rate of Rs. 2.20 per unit, such as KSK

Energy Ltd.. This defence was also rejected after noting that till the petition was decided on 24.9.2007, the respondent had not entered into any

PPA except under bid Nos. 1, 2 and 3 and that the Court''s attention was not even invited to any notice inviting tenders for supplying power at any

such rates lower than Rs. 2.89 on the same terms and conditions as applicable under bid No. 1. This Court also noted that the respondent was

purchasing power from M/s. Adani Enterprises Ltd. (both M/s. Adani Power Pvt. Ltd. and M/s. Adani Enterprises Ltd. belong to the same Adani

group) on a short term basis at the average rate of Rs. 5.31 to 5.45 per unit since October 2006 and the amount being paid for such short term

purchase from the Adani group was Rs. 322 crores from October 2006 to August 2007 as against power purchased from other suppliers on short

term basis aggregating to only Rs. 36.35 crores during the same period. The Court then made the following observations in paras 28 to 30 of the

judgment :-

.... the Court finds considerable substance in the submissions of the petitioners and particularly PTC India that the decisions of the respondent

Corporation impugned in these petitions were not bona fide, but were made with a view to engineer an appearance of default so as to weed out

the other successful bidders like M/s PTC India Ltd. from the arena. Yes, ""from the arena"", and not ""from the competition"", because there is no

competition. There was and is enough power demand - to accept the power offered by the respondent - Adanis as well as by the petitioners.

At the hearing, reference was made to the advantage the Adani Group of Industries (to which the second and third respondents belong) have

of ""local accessibility"". In view of the findings already given earlier, it is not necessary to look into this issue.

The respondent Corporation through the learned Advocate General had already made a statement before this Court on 22.2.2007 which was

also reiterated before the Hon''ble Supreme Court on 26.3.2007 that in the event of the petitioner PTC India finally succeeding in the matter, they

will be accommodated for the purpose of bid No. 1 in respect of their offered quantity of 440 MW of power. In view of the readiness and

willingness of PTC India to enter into PPA at the levelised average tariff rate of Rs. 2.89 per unit, we direct the respondent Corporation to enter

into a similar PPA with PTC India Ltd. which it has entered into with the third respondent.

(emphasis supplied)

Thereafter the final direction given by the Court was in the following terms :-

Special Civil Application No. 3514 of 2007 is allowed. Respondent No. 1 is directed to enter into the Power Purchase Agreement (PPA) with

petitioner - M/s. PTC India Ltd. at the levelised rate of Rs. 2.89 per unit on the same terms and conditions which were incorporated in the PPA

dated 6.2.2007 between the respondent Corporation and M/s. Adani Power Pvt. Ltd. - third respondent, within one month from today.

The above judgment dated 24.9.2007 came to be challenged by the respondent before the Hon''ble Supreme Court by filing SLP (Civil) No.

20454 of 2007, which came to be dismissed by the Hon''ble Supreme Court on 10.12.2007 by the following order :-

Heard. The SLP is dismissed.

31.3.2008

DEVELOPMENTS AFTER 24.9.2007

After the above judgment dated 24.9.2007, JSW Energy Ltd. at Ratnagiri informed the petitioner on 16.10.2007 that it was not possible to

supply power at the rate of Rs. 2.89 per unit. The petitioner, therefore, turned to Chitrapur Coal and Power Ltd. (which was now renamed as

Corporate Power Ltd.) who agreed on 21.10.2007 to supply additional 250 MW of power in addition to 190 MW which was already agreed to

be supplied from Chitrapur power plant. The following correspondence was then exchanged between the petitioner and the respondent: -

(i) On 23.10.2007, the petitioner addressed two letters dated 23.10.2007 to the respondent. By one letter dated 23.10.2007, the petitioner

forwarded the executed Power Purchase Agreement for 190 MW capacity at the levelised tariff rate of Rs. 2.89 per unit along with the requisite

bank guarantee of Rs. 14.25 crores. The petitioner also quoted the tariff stream and transmission network path. By the other letter dated

23.10.2007, the petitioner also enclosed signed Power Purchase Agreement in original at the levelised tariff rate of Rs. 2.89 per unit for 250 MW

to be sourced from Corporate Power Ltd. (formerly known as Chitrapur Power Ltd.) instead of JSW and requested for consent for such

procurement.

(ii) The respondent sent reply dated 18.12.2007 stating that the change in the earlier selected source of supply of 250 MW from JSW to

Corporate Power Ltd. was not as per the RFP submitted earlier and, therefore, the request for change could not be entertained. The signed PPAs

for 190 MW power supply as well as for 250 MW power supply were returned on the ground that they were not as per the PPAs signed with

Adani Power Ltd.

(iii) The petitioner responded to the above communication by writing letter dated 31.12.2007 contending that the request for change of source of

supply did not violate any clause of RFP and particularly pointing out that Chitrapur Coal and Power Ltd. which was subsequently renamed as

Corporate Power Ltd. was already approved as the source of power supply and now the entire quantity of 440 MW was to be supplied from

Corporate Power Ltd.. It was also contended that evaluation under the bid process was based on the credentials of the bidder alone and the

source of power was not a relevant or a qualifying criterion.

(iv) The respondent then sent letter dated 7.1.2008 stating that RFP document specifically stipulated that no change or supplemental information to

a proposal once submitted could be accepted and that no alternation or modification could be allowed to the revived Letter of Intent which was in

respect of power supply from Chitrapur Coal and Power Ltd. (Corporate Power Ltd.) 190 MW and 250 MW from JSW. The bank guarantee of

Rs. 18.75 crores submitted by the petitioner for the additional bid of 250 MW was returned and the draft PPA finalised by the respondent was

enclosed.

(v) On 29.1.2008, the petitioner sent another letter to the respondent objecting to certain clauses of the draft PPA forwarded by the respondent,

particularly regarding the fact that the PPA was not suitably modified so as to be applicable to a Trader and mechanically adopted clauses

applicable to PPA executed with a Generator. The petitioner also objected to the tariff stream, which was not as offered by the petitioner. The

petitioner also objected to the rejection of request for substitution of the source of supply in respect of the additional bid of 250 MW.

(vi) Ultimately, on 2.2.2008, the respondent sent communication to the petitioner stating that individual clauses of the PPA were not required to be

modified in view of the clause in the initial part of the PPA recognising PTC as a Trader. The respondent also conveyed that the front loaded year

to year tariff indicated by the petitioner was not acceptable to the respondent and that the PPA should be signed in line with the PPA between the

respondent and Adani Power Ltd. and that consequently the tariff stream should also be as offered by the Adani Power Ltd..

Aggrieved by the above stand of the respondent, PTC filed the present petition praying for the following reliefs :-

(A) to declare that the action of the respondent, inter alia, of (i) not permitting the petitioner to change the supplier of power under its Additional

Bid, to the supplier of power under the Main Bid, (ii) refusing to modify the draft Power Purchaser Agreement (PPA) though the same contains

conditions and clauses relevant for a PPA with a Generator of Power and not a Trader, like the petitioner and (iii) objecting to the tariff stream

proposed by the petitioner though the levelised tariff is identical with that offered by M/s Adani Power Pvt. Ltd. is invalid, illegal, unconstitutional

and contrary to the judgment of this Hon''ble Court dated 24.9.2007 in Special Civil Application No. 3514 of 2007;

(B) to issue a writ of mandamus or a writ order or direction in the nature of mandamus or any other appropriate writ, order or directions, requiring

the respondent to enter into the Power Purchase Agreement with the petitioner for 440 M.W. Of power, sourced from Corporate Power Limited,

at the levelised rate of Rs. 2.89 per unit, in terms of tariff stream proposed by the petitioner vide letter dated 23.10.2007, recognizing the status of

the petitioner as a Trader;

When the petition came up for preliminary hearing on 5.2.2008, after hearing the learned counsel for the petitioner and the learned Advocate

General for the respondent, notice was issued for final disposal. After referring to the judgment dated 24.9.2007 in Special Civil Application No.

3514 of 2007, the Court also expected the hope that the parties would arrive at an amicable settlement to resolve the disputes which are the

subject matter of the petition. The Court also directed that in the meantime the petitioner not signing the PPA draft prepared by the respondent was

not to be treated as a default.

On 12.2.2008, the respondent addressed letter to the petitioner reiterating its stand taken in the previous letters. On 12.3.2008, the petitioner

clarified to the respondent that in view of the respondent''s letter dated 7.1.2008 returning the bank guarantee of Rs. 18.75 crores, there was no

occasion for the petitioner to submit the documents for procurement of 250 MW of power proposed to be offered through Corporate Power Ltd.

(earlier Chitrapur Coal & Power Pvt. Ltd,). The petitioner, therefore, enclosed the relevant documents in relation to sourcing of power through

Corporate Power Ltd. (earlier Chitrapur Coal & Power Pvt. Ltd.) as contemplated under the RFP being the following:-

(i) Format 3 : Time Schedule for commencement of supply,

(ii) Format 4 : Details of proposed power project,

(iii) Copy of Fuel Agreements/Allocation Letter,

(iv) Copy of agreement between PTC and CPL,

(v) Copy of performance bank guarantee for Rs. 18.75 crores, which is valid and subsisting (the original would be handed over at the time of

execution of PPA)

(vi) Project Promoter''s Commitment to investment.

(vii) Details of transmission network path as required under Annexure 2 Volume 2.

The petitioner also indicated that the petitioner were willing to comply with all the other necessary requirements under RFP as may be indicated by

the respondent. The petitioner also requested the respondent to extend the same benefit as extended to the other bidder, thus providing due and

fair consideration to the petitioner''s proposal which would amicably resolve the entire matter. In response to the above letter, the respondent

replied to the petitioner on 14.3.2008 mat the required documents were to be submitted at the time of RFP Bid submission only and, therefore, the

documents now submitted by the petitioner cannot be considered at this stage as the Bid submission date was over more than a year ago. Hence

the documents submitted by the petitioner through the letter dated 12.3.2008 were returned to the petitioner.

PETITIONER''S CONTENTIONS

Mr. Mihir Joshi, learned Senior Advocate instructed by Singhi & Co. for the petitioner has raised the following contentions:-

(i) Once this Court allowed Special Civil Application No. 3514 of 2007 directing the respondent to enter into Power Purchase Agreement for 440

MW of power at the levelised tariff of Rs. 2.89 per unit, the respondent could not have refused to carry out the above direction. When the Court

observed that the PPA be in the same terms and conditions which were incorporated in PPA dated 6.2.2007 between the respondent-

Corporation and M/s. Adani Power Ltd., all that the Court intended to convey was that the Power Purchase Agreement to be entered into with

the petitioner should be under Bid No. 1 and should not contain any terms less favourable than the terms on which the PPA was signed with the

Adanis.

(ii) As far as the tariff stream is concerned, the levelised tariff of Rs. 2.89 per unit was required to be maintained. How the detailed tariff stream

was to be prepared was not the subject matter of any direction of THE Court. RFP and RFQ require the margin between the minimum and

maximum of the capacity charges to be maintained at above 0.70. The tariff stream submitted by the petitioner does not violate any of the terms

and conditions of the RFP and RFQ and, therefore, the respondent is not justified in rejecting the tariff stream submitted by the petitioner which is

the levelised tariff at Rs. 2.89 per unit which is also the levelised tariff offered by M/s. Adani Power Pvt. Ltd..

(iii) When the petitioner had submitted the RFP, two sources of power supply were indicated - Chitrapur Coal and Power Ltd. (subsequently

called Corporate Power Ltd.) for 190 MW and JSW for 250 MW. When the Letter of Intent was issued in favour of the petitioner on 8.12.2006,

the levelised tariff rate agreed was Rs. 3.24 per unit. However, it was subsequently that there was reduction of the levelised tariff by Adanis from

Rs. 3.24 to Rs. 2.89 per unit and by judgment dated 24.9.2007 this Court directed the respondent to permit the petitioner also to supply power at

the reduced levelised tariff rate of Rs. 2.89 per unit. Hence after the judgment, the petitioner was required to go back to Chitrapur Coal and

Power Ltd. (Corporate Power Ltd.) and JSW for confirming the rate at which they were prepared to supply power to the petitioner which the

petitioner in turn was to pass on to the respondent. The occasion for this arose when this Court ultimately allowed the petition on 24.9.2007 and

the petitioner contacted JSW which informed the petitioner that it was not ready to supply power at the levelised tariff of Rs. 2.89 per unit. In this

set of circumstances, the petitioner had no other alternative, but to change the source of power. When Chitrapur Coal and Power Ltd. (Corporate

Power Ltd.) indicated that it was ready to supply 190 MW plus 250 MW power at such a rate that the petitioner would be in a position to supply

power to the respondent at the levelised tariff of Rs. 2.89 per unit, the petitioner, inter-alia, requested the respondent to permit the petitioner to

change the source of power. It is submitted that since Chitrapur Coal and Power Ltd. (Corporate Power Ltd.) was already approved as a source

of supply of power, mere change in quantity of power from 190 MW to 440 MW did not result into any change of the basic bidding process.

(iv) As regards the terms and conditions of the PPA so as to suit the bidder being a trader, it is submitted that the request made by the petitioner

was quite reasonable.

RESPONDENT''S SUBMISSIONS

On the other hand, Mr. S.B. Vakil with Mr. Premal Joshi and Mr. N.K. Majmudar for the respondent company have opposed the petition

and made the following submissions :-

(a) As per the terms and conditions of the RFQ and the RFP, the respondent is required to approve the source of power and since the petitioner

had earlier offered to supply 190 MW power from Chitrapur and 250 MW power from JSW, any subsequent change in the source of power

would not be in consonance with the RFQ and the RFP documents and such change could not be entertained without initiating a fresh bidding

process.

(b) The tariff stream was a part of the Power Purchase Agreement between the respondent and Adani Power Pvt. Ltd. and, therefore, as per the

direction dated 24.9.2007 of this Court, the tariff stream had to be the same in the PPA between the respondent and the petitioner also. It is

vehemently submitted that the tariff stream as found in the PPA with Adani Power Pvt. Ltd. has a back loaded tariff stream whereas the tariff

stream submitted by the petitioner on 23.10.2007 is a front loaded tariff stream. In case of front loaded tariff stream, where there is premature

termination of contract or the contractor supplies the power only for the initial years, the contractor will get price of power at a rate much higher

than Rs. 2.89 per unit and that will be a sort of forced loan from the respondent to the petitioner. It is submitted that in such a case, the petitioner

would be getting advantage of a huge amount in the range of Rs. 353 crores by front loading the tariff stream. It is also submitted that it is for the

respondent to decide whether to accept the tariff stream offered by the petitioner.

(c) As regards the terms and conditions of the PPA so as to suit the bidder being a trader, it is submitted that the recitals in the Power Purchase

Agreement sufficiently deal with this situation and the omnibus clause in the agreement will take care of this aspect and that it is not at all necessary

to make any modifications in the Power Purchase Agreement.

(d) The present petition is not maintainable because under the terms and conditions of the RFP and RFQ as well as the guidelines of the Central

Government and the provisions of the Electricity Act, 2003, such disputes can only be resolved by the State Electricity Regulatory Commission.

The disputes regarding modification of PPA and tariff structure/ stream are related to the competitive bid process, for resolving which, the Central

Government Guidelines (for short ''the Guidelines'') and Bidding documents provide the remedy of adjudication by GERC. Paragraph 5.17 (p.608)

of the Guidelines reads as follows;-

5.17 Where any dispute arises claiming any change in or regarding determination of the tariff or any tariff related matters or which partly or wholly

could result in change in tariff, such dispute shall be adjudicated by the Appropriate Commission.

xxx xxx xxx

Paragraph No. 3.7.1 (p. 59) of REP provides as follows :-

3.7.1. Where any dispute arising out of or in connection with this process is not resolved mutually, then such dispute shall be submitted to

adjudication by the Appropriate Commission as provided u/s 86 of the Electricity Act, 2003."" (for short ''the Act'').

In view of the said provisions it is not open to the petitioner to seek adjudication by this Hon''ble Court of the issue involving acceptability of the

tariff stream disapproved by the respondent or of modification of P.P.A. to suit the petitioner''s status as trader.

Reference is also made to the Government of India (Ministry of Power) Resolution No. 23/11/2004-R&R (Vol.11) dated 19.1.2005.

(e) It is further submitted that the terms and conditions of the RFQ and the RFP were approved by the State Electricity Regulatory Commission

and, therefore, no change in such terms and conditions could be made without prior approval of the Commission.

(f) It is further submitted that determination of the tariff stream is a highly technical matter and it is not open to this Court in exercise of the power of

judicial review to sit in appeal over the decision of the respondent authority not to accept the tariff stream offered by the petitioner. Reliance is

placed on the following decisions of the Apex Court in support of the proposition that the power of judicial review is very limited :-

(i) Tata Cellular Vs. Union of India,

(ii) State of U.P. and Others Vs. Jeet S. Bisht and Another,

(iii) KEC International Ltd. Vs. Shankar Lal Sharma,

(iv) State of Karnataka Vs. State of Andhra Pradesh and Others,

(g) Reliance is also placed on the following decisions in support of the proposition that mandamus can only be issued on the basis of a statutory

provisions and that mandamus cannot be issued in absence of an enforceable right and also in support of the submission that the Court cannot

command the authority to exercise discretion in a particular manner in favour of a particular party:-

(i) I.I.T.T. College of Engineering Vs. State of H.P. and Others,

(ii) Secretary to Govt., Tamil Nadu and Another Vs. K. Vinayagamurthy,

(iii) Mahesh Kumar K. Parmar and Others Vs. S.I.G. of Police and Others,

(iv) Chingleput Bottlers Vs. Majestic Bottling Company,

(v) J.R. Raghupathy and Others Vs. State of A.P. and Others,

(vi) U.P. State Road Transport Corporation and another Vs. Mohd. Ismail and others,

Statutory provisions, statutory guidelines, RFQ, RFP

Before dealing with the rival submissions, we may first refer to the relevant statutory provisions and terms and conditions of the RFQ and the

RFP.

The statement of objects and reasons to the Electricity Act, 2003 refers to the policy of encouraging private sector participation in generation,

transmission and distribution of electricity. It also refers to the need to provide for newer concepts like power trading and open access. Part VII of

the Act contains the provisions relating to tariff. Section 61 provides that the Appropriate Commission (i.e. the Electricity Regulatory Commission)

shall, subject to the provisions of this Act, specify the terms and conditions for the determination of tariff, and in doing so, shall be guided by the

factors/ considerations indicated in the section. Section 62 provides that the Appropriate Commission shall determine the tariff in accordance with

the provisions of this Act for supply of electricity by generating company to a distribution licensee, and also for transmission of electricity, wheeling

of electricity and retail sale of electricity. The material provision for the purposes of the present petition is Section 63, which reads as under :-

Determination of tariff by bidding process. - Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt the

tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government.

Thus the bidding process undertaken by the respondent is under the above statutory provisions. The Central Government in the Ministry of Power

has issued guidelines through the Resolution dated 19.1.2005. The said Resolution is annexed as Annexure-I to the reply affidavit.

Considering the subject matter of this petition, it is necessary to set out the following terms and conditions of the RFQ and RFP having a bearing

on the question of specifying the source of power where the bidder is a trader.

REQUEST FOR QUALIFICATION (RFQ)

2.2 Qualifying Criteria

2.2.2 Bidder or its promoter should have adequate financial capability

2.2.3 The bidding company or bidding consortium must have a minimum Free Cash Flow from business operations of Rs. 0.20 crores per MW of

power offered for sale.......

2.2.5 The bidding company needs to identify the generating station from which the power will be supplied and shall submit the necessary

documentary proof for the same at the time of submission in response to RFP.

2.3 Purchase of Power by Procurer

2.3.1 Procurer plans to procure power to the extent of 2000 MW.......

4.0 Evaluation Criteria

4.2.2 Financial capability

4.2.2.1 The bidding company must have a minimum free cash flow from business operations of Rs. 0.20 crores per MW of power offered for

sale.......

REQUEST FOR PROPOSAL (RFP)

4.0 Features of the Bid

4.1.5 The size and location of the plant/ (s) and the source of fuel & technology shall be decided by the Bidder. The Bidder shall assume full

responsibility to tie up the fuel linkage and to set up the infrastructure requirements for fuel transportation and its storage.

4.3.4 If supply of power from the plant is delayed beyond the Scheduled Commercial Operation Date (which is within 36 months from the date of

signing of PPA), the Bidder shall be liable to pay to GUVNL liquidated damages as power the PPA. To avoid such liquidated damages, the

Bidder shall have to option of supplying the contracted power to GUVNL from alternate sources. However, delay in Commercial Operation Date

due to non-availability of Open Access on the CTU network for reasons attributable to the CTU shall be considered to be a Force Majeure

Event.

4.4.5 Bidder can supply power from more than one power project with a minimum of 50 MW for each block and with a minimum of 100 MW in

aggregate. However, the Bidder has to quote same tariff for all blocks in a year.

5.0 Submissions from the Bidder

5.1 Technical Information (Volume I) 5.1.1 The following is the information/documents required to be submitted by the bidder under Technical

Information

In case the Bidder is a Trading Company, the following needs to be submitted -

(a) Documentary proof of identifying the power plants and

(b) Project Promoters'' Commitment for investment in the project or the signed agreement between the traders and the generating company.

6.0. Evaluation Criteria

6.1 Responsiveness check

6.1.1 The Bids submitted by Bidders/Bidding Consortia shall be initially scrutinized to establish ""Responsiveness"". The following conditions shall

cause the bid to be deemed ""Non-responsive"" :

(1) In case the Bidder is a Trading Company, non submission of

i. Documentary proof for identifying the Generator and

ii. Project Promoters'' Commitment for investment in the project or the signed agreement between the trader and the generator

As regards the tariff, the bidder is required to quote tariff with two components - capacity charges and energy charges. While the capacity charges

would reflect the return on capital investment, the energy charges would reflect the expenses for generating electricity or revenue expenses. As

regards the tariff, the RFQ and the RFP contain the following clauses :-

Request for Qualification (RFQ)

Annexure 1 - Key Technical and Financial Criteria........

- The qualified bidder shall be required to quote Capacity and Energy Charges for a period of 25 years as per the following tariff structure -

* Capacity Charges (Rs. Crores per yar and RsVkWH @ 80% availability)

* Variable Charges (RsVkWH) - for each year

* No escalation in capacity and energy charges will be allowed apart from the yearly quotes by the Bidder.

* The ratio of minimum and maximum annual capacity charges over the period of supply should not be less than 0.7.

REQUEST FOR PROPOSAL (RFP)

4.4 Tariff Structure

4.4.1The tariff shall be payable in Indian Rupees only. Bidders shall quote a tariff, Capacity Charge as well as Energy Charge at the Delivery Point

as per Article 4.1.2, for each year of the term of PPA, starting from the date of commencement of supply of power. The payment will be made to

the successful bidder on the basis of these quoted values and no escalation/inflation will be provided during the term of PPA except for

transmission charges and losses as outlined in Article 4.4.2.

5.0 Submissions from the Bidder

5.2 Financial Information (Volume-II)

5.2.1 The following is the information required to be submitted by the Bidder under Volume I - Financial Information

(a) Tariff Quotes for each year of the term of the PPA - Capacity Charges and Energy Charges rounded upto four decimal points.

(b) Transmission Network Path

6.3 Step - III - Financial Evaluation of Bids

6.3.3 The Bidder would submit the different components of tariff in the manner specified in the Article 4.4.

6.3.4 The bid submitted above would be processed in the following manner to arrive at the Levelised Tariff (Rs. per kWH)

(a) Only those Bids which have the ratio of minimum and maximum Capacity Charges quoted is more than 0.7 shall be evaluated further.

(b) Further, the quoted Capacity Charge (Rs/kWH) and Energy Charge (Rs./kWH), for each year shall be added and then converted to a

Levelised Tariff (at delivery point) on the Commercial Operation Date on the Capacity Offered using discount rate as notified by CERC (as

available on the last date of submission of the RFP).

6.4.2 GUVNL shall select Bidder to contract for capacity upto its required capacity or such capacity whose tariff is within its acceptance range,

both of which shall be determined solely on its own discretion. However, there will be no negotiations on tariff with any of the Bidders.

It is also necessary to refer to the following paras in the Statutory Guidelines issued by the Government of India u/s 63 of the Electricity Act,

2003 :-

Para 4.8 of the Guidelines contains the following provision regarding minimum and maximum capacity charges :

4.8 At the bid evaluation stage, ratio of minimum and maximum capacity charge (including both the non-escalable component and the escalable

component incorporating escalation as per index being used for the purpose of evaluation) over the term of the Power Purchase Agreement (PPA)

shall not be less than 0.7 to avoid excessive front loading or back loading during the period of contract.

Para 5.6 reads as under:-

5.6.... The rate for discounting the combination of fixed and variable charges for computing the levellised tariff shall be as notified by CERC

keeping in view prevailing rate for 10 years Government of India securities. This rate is to be specified in the RFP.

DISCUSSION

Having perused the above terms and conditions of the RFQ and the RFP and the Central Government guidelines, the first thing that we need to

notice is that the question of the petitioner company being required to change source of power did not arise until recently. When the respondent

issued Letter of Intent dated 8.12.2006 in favour of the petitioner, the petitioner had made arrangements for supplying 190 MW of power from

Chitrapur Power Ltd. (Corporate Power Ltd.) and 250 MW of power from JSW at Ratnagiri at the rate of Rs. 3.24 per unit from both sources of

power. It was only when the respondent permitted Adanis to reduce the rate from Rs. 3.24 to Rs. 2.89 per unit and when this Court ultimately

allowed the petition on 24.9.2007 directing the respondent to enter into PPA with the petitioner for purchasing power at the levelised rate of Rs.

2.89 per unit that the petitioner had to get confirmation from JSW for supplying power at the levelised rate of Rs. 2.89. Since JSW expressed its

inability on 12.10.2007, the petitioner held a meeting with the management of Chitrapur Power Ltd. (it was by then renamed as Corporate Power

Ltd.) and at the meeting held on 23.10.2007, the Corporate Power Ltd. agreed to supply 190 MW plus 250 MW of power to the petitioner at

the levelised tariff rate of Rs. 2.89 per unit. In this set of circumstances, the contention of the respondent that the petitioner cannot be permitted to

change the source of power without undergoing a fresh bidding process cannot at all be accepted. The petitioner had already offered to supply

190 MW + 250 MW = 440 MW. Instead of procuring 190 MW of power from Chitrapur (CPL) and 250 MW of power from JSW, now the

petitioner seeks to supply entire quantity of 440 MW of power from Chitrapur (CPL). The respondent had never objected to the credentials of

Chitrapur (CPL) as a generating company. On the contrary, the petitioner has placed on record a resolution of ISPAT Company assuring

investment in Chitrapur Power Ltd. (CPL) to the tune of Rs. 2600 crores. As recorded in the minutes of the meeting of the Director of Chitrapur

(CPL) held on 23.10.2007 with the representatives of the petitioner Company the Chitrapur (CPL) has given commitment of supplying 440 MW

of power.

When we examine the controversy in the background of the findings given by this Court in Special Civil Application No. 3514 of 2007 and

more particularly when we look at the statement which was made on behalf of the respondent at the time of hearing of interim relief in the above

petition on 22.2.2007, it is clear that when Special Civil Application No. 3514 of 2007 was allowed by this Court on 24.9.2007 the respondent

ought to have gracefully accepted the request made by the petitioner for change of source of power. Instead of abiding by the statement made

before this Court on its behalf by the learned Advocate General on 22.2.2007 that in the event the petitioner finally succeeding in Special Civil

Application No. 3514 of 2007, the petitioner will be accommodated for the purpose of bid No. 1 in respect of offered quantity of 440 MW of

power and instead of complying with the direction of this Court to enter into PPA with the petitioner in respect of supply of 440 MW of power at

the levelised tariff rate of Rs. 2.89 per unit, the respondent raised the objections only in order to avoid its liability to abide by the aforesaid

statement which was solemnly made on 22.2.2007 for the purpose of avoiding grant of any interim relief. The respondent not only spumed the

petitioner''s request for changing the source of 250 MW of power from JSW Energy (Ratnagiri) Ltd. to Chirapur Coal and Power Pvt. Ltd.

(renamed as Corporate Power Ltd.) which company was already approved by the respondent for supply of 190 MW of power as far back as in

December 2006, but the respondent also returned the bank guarantee of Rs. 18.75 crores along with the respondent''s letter dated 7.1.2008.

Under the circumstances, the petitioner was not even given an opportunity to submit die documents in support of its case that the petitioner was in

a position to supply 190 + 250 MW power from Corporate Power Ltd.. Hence it was only after the petitioner filed the present petition and this

Court expected the parties to resolve the issue in light of the findings given in the judgment dated 24.9.2007 that the petitioner had an occasion to

submit the documents along with its letter dated 12.3.2008 in support of its case that Corporate Power Ltd. was in a position to supply 190 + 250

MW power. Therefore, the petitioner supplied all the required documents including the agreement for supply of fuel dated 14.11.2006 between

Chitrapur Coal & Power Pvt. Ltd. and the Corporate Ispat Alloys Ltd. [the agreement indicates that Corporate Ispat Alloys Ltd. has access to

Chitrapur Coal mines allocated to it by the Ministry of Coal having a total geographical reserve of 174.23 Million Tonnes and that Chitrapur Coal

and Power Ltd. (now renamed as Corporate Power Ltd.) intends to operate and maintain the 540 MW power plant, as per the agreement,

Corporate Ispat Alloys Ltd. is to supply coal as fuel for use in the generation of electricity by Chitrapur Coal and Power Ltd.], also the minutes of

the meeting held on 23.10.2007 between the petitioner and Corporate Power Ltd. [as per mis meeting, Corporate Power Ltd. agreed to offer 190

MW as well as additional 250 MW power to the petitioner for onward sale to the respondent under bid No. 1 invited by the respondent], bank

guarantee for Rs. 18.75 crores and certified true copy of resolution of Corporate Power Ltd. (previously known as Chitrapur Coal and Power

Ltd.) at the meeting of its Board of Directors held on 12.10.2006 to implement the 550 MW of power project involving a capital outlay of Rs.

2600 crores in the first phase with a provision to further scale the capacity to 1200 MW at a later point of time, and also the details of the

transmission network path.

Clause 8 of para 5.1 (Technical information Vol. I) under the heading "" Submissions from the Bidder"" provided as under :-

5.0 Submissions from the Bidder

5.1 (Technical Information Vol. I)

5.1.1 The following information/ documents are required to be submitted by the bidder under technical information -

In case the bidder is a trading company, the following needs to be submitted -

(a) documentary proof for identifying the power plants and

(b) project promoters'' commitment for investment in the project or the signed agreement between the trader and the generating company.

The above documents submitted by the petitioner for which the respondent ought to have given the opportunity to the petitioner before rejecting

the petitioner''s request for change in the source of power, do meet with the requirement of the above clause specifying the documents to be

submitted by the bidder where the bidder is a trading company. The respondent even returned these documents to the petitioner by letter dated

14.3.2008.

In view of the above discussion, the respondent will, therefore, have to be directed to accept the documents which were tendered by the petitioner

along with die letter dated 12.3.2008 and also to accept the petitioner''s request to change the source of 250 MW power from JSW Energy

(Ratnagiri) Ltd. to the Corporate Power Ltd..

Coming to the question of tariff stream, we have carefully examined the provisions of RFP and RFQ and also die guidelines contained in the

Central Government Resolution. The only restriction contained in these provisions is that the difference between the minimum and the maximum

capacity charges during the contract period should not exceed 0.7. The respondent is not in a position to show that the tariff stream offered by the

petitioner violates this ratio. There is no other term and condition in these documents which militates against the petitioner submitting the tariff

stream as indicated in its letter dated 23.10.2007.

Even so, considering the argument made on behalf of the respondent that in case of premature termination of contract, a front loaded tariff could

work to the advantage of the supplier and enable it to earn more than the levelised tariff, we record the statement being made by Mr. Mihir Joshi,

learned counsel for the petitioner that the petitioner is ready and willing to supply power at me levelised tariff of Rs. 2.89 per unit with the tariff

stream prepared in such a manner that for the first half of the contract period, the petitioner will not charge anything more than Rs. 2.89 per unit.

This offer was made for the first time on 27.3.2008 and is again reiterated today.

In our view, this statement takes care of the objection raised by the respondent that front loaded tariff may work to the prejudice of the consumers

and that in case of premature termination, a contractor may get an undue advantage. Since, we direct mat while executing the PPA, the petitioner

will submit a year to year tariff with levelised tariff of Rs. 2.89 per unit with the tariff stream prepared in such a manner that for the first half of the

contract period, that is for the first 13 years, the petitioner shall not charge at any rate above Rs. 2.89 per unit (i.e. capacity charges plus energy

charges), there will be no prejudice to the consumers or to the respondent company.

We may also note the submission made on behalf of the petitioner that while entering into the PPA with Adani Power Ltd. under bid No. 1 on

6.2K2007, the respondent accepted the tariff stream prepared by applying 10.60% rate for discounting the combination of capacity charge and

energy charge for computing levelised tariff. Hence while submitting the revised tariff structure with the levelised tariff rate of Rs. 2.89 per unit on

the basis of the above submission where the tariff rate will not exceed Rs. 2.89 per unit (capacity charges plus energy charges) for the first 13

years, die petitioner will also be entitled to apply the above discount rate at 10.60 %.

As regards the contention that determination of tariff is a technical issue and can only be adjudicated by the Gujarat State Electricity Regulatory

Commission, the objection is misconceived. The levelised tariff of Rs. 2.89 per unit is the rate at which the respondent has entered into PPA dated

6.2.2007 with Adani Power Pvt. Ltd. and by our judgment dated 24.9.2007, we had already directed the respondent to enter into a similar PPA

with the petitioner at the levelised rate of Rs. 2.89 per unit. Hence, there is no question of determination of the rate of tariff which can be required

to be adjudicated by the State Electricity Regulatory Commission. We find considerable force in the submission of the learned counsel for the

petitioner that reference was made to the terms and conditions in the agreement dated 6.2.2007 between the respondent and the Adani Power

Ltd., because the respondent had entered into PPAs with the Adani Power Ltd. on different dates under different bids at different rates as

indicated in the chart set out in para 15 hereinabove and, therefore, reference was made to the PPA dated 6.2.2007 which was under Bid No. 1

and at the levelised tariff was Rs. 2.89 per unit, but the Court had no occasion to refer to or discuss the tariff stream, because in their statement

dated 3.9.2007 also, it was clearly indicated that the tariff stream was yet to be submitted by the petitioner.

As regards the contention that this is a technical matter and one cannot sit in appeal, obviously we are not going into the question of re-

determination of the tariff rate which was already indicated in our judgment dated 24.9.2007 being levelised tariff at the rate of Rs. 2.89 per unit

because that was the levelised rate at which PPA was entered into between Adani Power Ltd. and the respondent. The only dispute was about the

front loading of the tariff, which objection has now been taken care of by the statement made on behalf of the petitioner Company that there will be

no front loading in as much as in the first half of the contract period, that is for the first 13 years, the petitioner will not charge any tariff in excess of

Rs. 2.89 per unit.

As regards the objection based on para 3.7.1 of RFP that a dispute arising out of or in connection with the process shall be submitted to

adjudication by the Appropriate Commission, it is pertinent to note that the question of invoking this clause would arise when an agreement is

already entered into between the parties and thereafter one of the parties raises a dispute about the tariff stream or the tariff structure. It is at that

stage that the dispute will have to be adjudicated by the Appropriate Commission. In the facts of the instant case, there is no dispute about the

determination of tariff which is already indicated as Rs. 2.89 per unit.

So also the contention based on Section 86(1 )(f) does not come in the way of maintainability of the petition because it only provides that the State

Commission shall adjudicate upon disputes between the licensees and the generating companies and to refer any dispute for arbitration. Neither the

petitioner nor the respondent is a generating company. Section 2(28) of the Act defines ""generating company"" as any company which owns or

operates or maintains a generation station. There is no dispute between the petitioner (which is a licensee to undertake trading in electricity as an

electricity trader) and the generating company with which it has entered into an agreement being Corporate Power Ltd. Under the circumstances,

there is no question of applicability of Section 86(1 )(f) of the Act. Moreover, the dispute in the present petition is required to be decided in the

context of the findings in the previous petition that the respondent did not act bonafide in keeping the petitioner away from the Power Purchase

Agreement, although the petitioner is ready to supply power at the levelised tariff rate of Rs. 2.89 per unit, at which rate the respondent entered

into PPA with Adani Power Pvt. Ltd. after the respondent permitted the RFQ/ RFP bidder - Adani Enterprises Ltd. to reduce the tariff rate from

Rs. 3.24 per unit to Rs. 2.89 per unit without giving a similar opportunity to the petitioner.

We may also note that the competitive bidding process contemplates a situation where there are more suppliers than the power required by the

respondent Company. As already pointed out in our judgment dated 24.9.2007, the respondent had invited bids in three categories. As far as bid

No. 1 is concerned, bids were invited for upto 2000 MW of power of the aggregate of power to be supplied by Adani Power Pvt. Ltd. and by

the petitioner under bid No. 1 works out to only 1440 MW of power. In this view of the matter, it cannot be said that the respondent would be

justified in refusing to enter into PPA with the petitioner on any of the grounds on which the petition is sought to be defended.

1.4.2008

Several decisions have been cited in support of the respondent''s contention that judicial review is concerned with reviewing not the merits of

the decision but the decision-making process itself and thus it is different from an appeal. The Court, therefore, cannot substitute its own decision.

We would refer to the leading decision in Tata Cellular Vs. Union of India, .

It is true that judicial review is not an appeal from the decision. However, the Apex Court has laid down the following principles in the Tata

Cellular case (supra) :-

The duty of the Court is to confine itself to the question of legality. Its concern should be;

whether a decision-making authority exceeded its powers?

committed an error of law.

committed a breach of the rules of natural justice.

reached a decision which no reasonable Tribunal would have reached or.

abused its powers.

Therefore, it is not for the Court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only

concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put,

the grounds upon which an administrative action is subject to control by judicial review can be classified as under:

(i) Illegality : This means the decision maker must understand correctly the law that regulates his decision-making power and must give effect to it.

(ii) Irrationality, namely, Wednesbury unreasonableness.

(iii) Procedural impropriety.

The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary

of State for the Home Department ex parte Brind, (1991) 1 AC 696, Lord Diplock refers specifically to one development namely, the possible

recognition of the principle of proportionality. In all these cases the test to be adopted is that the Court should, ''consider whether something has

gone wrong of a, nature and degree which requires its intervention.

What is this charming principle of Wednesbury unreasonableness-- Is it a magical formula? In R. v. Askew, (1786) 4 Burr 2186, Lord

Mansfield considered the question whether mandamus should be granted against the College of Physicians. He expressed the relevant principles in

two eloquent sentences. They gained greater value two centuries later :

It is true, that the judgment and discretion of determining upon this skill, ability, learning and sufficiency to exercise and practise this profession is

trusted to the College of Physicians; and this Court will not take it from them, nor interrupt them in the due and proper exercise of it. But their

conduct in the exercise of this trust thus committed to them ought to be fair, candid and unprejudiced; not arbitrary, capricious, or biased, much

less, warped by resentment, or personal dislike.

(emphasis supplied)

A perusal of the above principles would show that even though the Court does not sit in appeal over the merits of the decision, it is still open to

the Court in judicial review to consider whether the impugned decision is irrational or is such which no reasonable person would have reached. It is

also open to the Court to consider whether the authority has abused its power.

A three Judge Bench of the Apex Court has made the following pertinent observations in State of U.P. and Another Vs. Johri Mal, :-

It is well settled that while exercising the power of judicial review the court is more concerned with the decision-making process than the merit

of the decision itself. In doing so, it is often argued by the defender of an impugned decision that the court is not competent to exercise its power

when there are serious disputed questions of facts; when the decision of the Tribunal or the decision of the fact-finding body or the arbitrator is

given finality by the statute which governs a given situation or which, by nature of the activity, the decision-maker''s opinion on facts is final. But

while examining and scrutinising the decision-making process it becomes inevitable to also appreciate the facts of a given case as otherwise the

decision cannot be tested under the grounds of illegality, irrationality or procedural impropriety. How far the court of judicial review can

reappreciate the findings of facts depends on the ground of judicial review. For example, if a decision is challenged as irrational, it would be well-

nigh impossible to record a finding whether a decision is rational or irrational without first evaluating the facts of the case and coming to a plausible

conclusion and then testing the decision of the authority on the touchstone of the tests laid down by the court with special reference to a given case.

This position is well settled in the Indian administrative law. Therefore, to a limited extent of scrutinising the decision-making process, it is always

open to the court to review the evaluation of facts by the decision-maker.

(emphasis supplied)

The controversy in the present petition is not required to be considered in isolation but in the backdrop of the previous litigation being Special

Civil Application No. 3514 of 2007 wherein the Court was constrained to hold that the decision of the respondent excluding the petitioner from

the arena was not bonafide. This Court had found that while permitting Adani Enterprise Ltd./ Adani Power Ltd. to reduce its tariff from Rs. 3.24

per unit to Rs. 2.89 levelised tariff, the petitioner was not given a similar opportunity. Hence, this Court had directed the respondent to enter into

the PPA with the petitioner for supplying 440 MW of power at the levelised tariff of Rs. 2.89 per unit. When the respondent was refusing to

accept the tariff stream offered by the petitioner on the ground that it was front loaded tariff, at least the respondent was also required to consider

the deviation from the levelised tariff that in the first five years, the tariff was going to be only around Rs. 3 (Rs.3.0500 tapering down to Rs.

2.9897), Rs. 2.9279 and Rs. 2.9023 for the sixth and seventh years respectively and thereafter for the remaining eighteen years below Rs2.89 per

unit (from Rs. 2.8516 tapering down to Rs. 2.6444). Any reasonable authority in place of the respondent would have, therefore, entered into

negotiation with the petitioner especially when the respondent is procuring power on temporary basis at the rate of more than Rs. 5 per unit.

Instead of doing so, the respondent flatly refused to enter into any PPA with the petitioner and, therefore, in light of the findings already given in the

previous petition and the discussion in this judgment, we are of the view that the impugned decision of the respondent not to enter into PPA with

the petitioner was arbitrary and was so unreasonable as no other reasonable person would have taken such decision. We are, however, not

required to pursue this discussion any further because before we started dictating the judgment, the learned counsel for the petitioner made a

statement on behalf of the petitioner that the petitioner is ready to supply electricity under bid No. 1 at the levelised tariff rate of Rs. 2.89 per unit in

such a manner that for the first half of the contract period i.e. for years 1 to 13, the petitioner will not charge any rate higher than Rs. 2.89 per unit.

Thus the objection against the front loaded tariff stream quoted by the petitioner on 23.10.2007 also would not survive. We may also note that for

preparing the detailed year to year tariff stream of Adani Power Pvt. Ltd. they were allowed discounting rate of 10.6. Hence the same rate will

have to be allowed to the petitioner also.

A number of decisions were cited by Mr. Vakil in support of the contention that even if the decision of the respondent is quashed, the

consequential relief to be granted by this Court is to send the matter back to the respondent for deciding the matter in accordance with law and this

Court should not direct the respondent to execute the PPA in favour of the petitioner. However, actual moulding of reliefs has to be done

depending on the facts and circumstances of each individual case. In the facts of the present case, the controversy arising in this petition has to be

decided in the background of the judgment dated 24.9.2007 in Special Civil Application No. 3514 of 2007 between the same parties.

While rendering the judgment on 24.9.2007, we had already held that the respondent was bound to enter into PPA with the petitioner under

bid No. 1 for supplying power at the levelised tariff of Rs. 2.89 per unit. In the said judgment, we have also held that the decision of the

respondent to exclude the petitioner from the arena was not bonafide because there was no competition in fact because even the aggregate of the

power offered to be supplied by Adani Power Pvt. Ltd. and the petitioner i.e. 1440 MW was less than the power supply of 2000 MWs for which

bids were invited by the respondent. The decision was challenged by the respondent herein before the Hon''ble Supreme Court. That SLP was

dismissed. In this view of the matter, the respondent could not have raised unreasonable and untenable objections for the purpose of refusing to

enter into PPA with the petitioner. Hence, when the petition came up for preliminary hearing on 5.2.2008 after hearing the learned Advocate

General for the respondent, we had specifically observed that in view of the findings given in the previous judgment, the parties were expected to

arrive at an amicable settlement. However, the respondent still insisted that the petitioner was required to offer tariff stream identical with the tariff

stream of Adani Power Ltd. which was not warranted by any terms and conditions of the RFQ, RFP or any guidelines. When the Court had put a

specific query to the learned counsel for the respondent -whether the respondent would enter into the PPA with the petitioner if the tariff stream of

Adani was to be matched, the reply was-

(i) since the petitioner had already refused to match such tariff, such a hypothetical question was not required to be considered.

(ii) accepting such condition or offer would mean mat the respondent is deviating from the bidding process.

(iii) on 23.10.2007, the petitioner had offered front loaded tariff stream, the respondent does not propose to accept the same and the petitioner

cannot subsequently change tariff stream.

(iv) the respondent does not take responsibility of making any statement and the respondent invites the Court''s decision ad-invitum.

Such stand on the part of the respondent since 8.1.2007 onwards clearly shows that the respondent''s decisions are not guided by public

interest but taken so as not to offend the business strategy of the Adani group to stop any other party from supplying electricity under long term

power purchase agreement under bid No. 1 at the levelised tariff of Rs. 2.89 per unit and the respondent continues to purchase electricity from the

Adani group on temporary basis at the rate of above Rs. 5 per unit from the Adanis. Hence sending the matter back to the respondent is bound to

meet with the same fate, that is, refused to enter into PPA with the petitioner.

As regards change of source of power for 250 MW, all that the petitioner has done is to point out that since at the time of earlier LOI dated

8.12.2006 power was to be sourced from Chitrapur (190 MW) and JSW (250 MW) at the rate of Rs. 3.24 per unit and subsequently, the tariff

rate is required to be reduced on account of such opportunity granted to the Adanis in January 2007, after Special Civil Application No. 3514 of

2007 was allowed on 24.9.2007, the petitioner had ascertained from JSW for supplying 250 MW of power at the rate of Rs. 2.89 per unit and on

account of the refusal of that party to supply power at Rs. 2.89 per unit, the petitioner had to go back to Corporate Power Ltd., for purchasing

power at the rate of Rs. 2.89 per unit. Hence, the documents thereafter obtained from Corporate Power ltd. for supplying additional power of 250

MW over and above the previously agreed power of 190 MW can neither be said to be deviation from the bidding process, nor can it be

considered as delayed as contended by the respondent. In view of such unreasonable and arbitrary stand taken by the respondent, this Court finds

that the petitioner''s entering into PPA with the respondent cannot be left at the mercy of the respondent which had already given clear indication

right from 8.1.2007 onwards that the respondent somehow does not want to enter into PPA with the petitioner even when the petitioner has been

showing willingness to supply power at the levelised tariff of Rs. 2.89 per unit.

In Noble Resources Ltd. Vs. State of Orissa and Another, , the Hon''ble Supreme Court has laid down the following principles :-

The Respondent No. 2 is a ''State'' within the meaning of Article 12 of the Constitution of India. Its conduct in all fields including a contract is

expected to be fair and reasonable. It was not supposed to act arbitrarily, capriciously or whimsically.

It is trite that if an action on the part of the State is violative the equality clause contained in Article 14 of the Constitution of India, a writ

petition would be maintainable even in the contractual field. A distinction indisputably must be made between a matter which is at the threshold of a

contract and a breach of contract; whereas in the former the court''s scrutiny would be more intrusive, in the latter the court may not ordinarily

exercise its discretionary jurisdiction of judicial review, unless it is found to be violative of Article 14 of the Constitution. While exercising

contractual powers also, the government bodies may be subjected to judicial review in order to prevent arbitrariness or favouritism on its part.

Indisputably, inherent limitations exist, but it would not be correct to opine that under no circumstances a writ will lie only because it involves a

contractual matter.

(emphasis supplied)

We also find that the subject matter of the present petition relates to entering into a contract under the provisions of Section 63 of the

Electricity Act. As already held by the Apex Court in Radhakrishna Agarwal and Others Vs. State of Bihar and Others, and in Noble Resources

Ltd. v. State of Orissa (supra), where the matter is at the threshold of a contract, the Court''s scrutiny would be more intrusive. It is also held by

the Apex Court that in matters of contract also government bodies may be subjected to judicial review in order to prevent arbitrariness or

favouritism on is part. The findings given by this Court in the judgment dated 24.9.2007 in Special Civil Application No. 3514 of 2007 that

respondent had not acted bonafide in keeping the petitioner away from the Power Purchase Agreement further justifies the Court''s scrutiny to be

more intrusive.

Mahabir Auto Stores and others Vs. Indian Oil Corporation and others, was a case of termination of contract even there the Apex court laid

down as under :-

It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law

applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the

citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are

subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and nondiscrimination in the type of

the transactions and nature of the dealing as in the present case.

(emphasis supplied)

In Management of Coimbatore District Central Co-operative Bank Vs. Secretary, Coimbatore District Central Co-operative Bank Employees

Association and Another, , the Apex Court has held that so far the doctrine of proportionality is concerned, there is no gainsaying that the said

doctrine has not only arrived in our legal system but has come to stay. With the rapid growth of administrative law and the need and necessity to

control possible abuse of discretionary powers by various administrative authorities, certain principles have been evolved by courts. If an action

taken by any authority is contrary to law, improper, irrational or otherwise unreasonable, a court of law can interfere with such action by exercising

power of judicial review. One of such modes of exercising power, known to law is the ""doctrine of proportionality"". ""Proportionality"" is a principle

where the court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or

arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the

case. The doctrine of proportionality thus steps in focus true nature of exercise - the elaboration of a rule of permissible priorities.

In Star Enterprises and Others Vs. City and Industrial Development Corporation of Maharashtra Ltd. and Others, , the Apex Court has held

that in recent times, judicial review of administrative action has become expansive and is becoming wider day by day. The traditional limitations

have been vanishing and the sphere of judicial scrutiny is being expanded. State activity too is becoming fast pervasive. As the State has descended

into the commercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social

audit, judicial control and review by opening of the public gaze.

In M.I. Builders Pvt. Ltd. Vs. Radhey Shyam Sahu and Others, , the Apex Court has held that every decision of the authority except the

judicial decision is amenable to judicial review and reviewability of such a decision cannot now be questioned. A judicial review is permissible if the

impugned action is against law or in violation of the prescribed procedure or is unreasonable, irrational or malafide. In Reliance Energy Limited and

Another Vs. Maharashtra State Road Development Corporation Ltd. and Others, , the Apex Court has against held that the principle of judicial

review cannot be denied even in contractual matters or matters in which the Government exercises its contractual powers, but judicial review is

intended to prevent arbitrariness and it must be exercised in larger public interest. Applying the aforesaid principles to the facts of the present case,

we have no manner of doubt in holding the impugned decision to refuse to enter into PPA with the petitioner in spite of the findings given in the

previous decision that keeping the petitioner out of the field was not bonafide and was done only to benefit the Adani Group from whom the

respondent has been purchasing power on temporary basis at the rate of Rs. 5.21 to Rs. 5.41 per unit and even though the petitioner is ready to

supply power at the levelised tariff of Rs. 2.89 per unit is not only unreasonable but also irrational, not only irrational, but also arbitrary and in

disregard of public interest. Larger public interest demands that this Court should not only quash the decision of the respondent refusing to enter

into the PPA with the petitioner but also to issue a mandamus to the respondent when it is exercising its statutory powers u/s 63 of the Electricity

Act, 2003 read with the Government of India guidelines as contained in the Resolution dated 19.1.2005.

ORDER

In view of the above discussion, the following order is passed:

(i) The petition is allowed. The impugned decision of the respondent as contained in the respondent''s letters dated 18.12.2007, 2.2.2008,

12.2.2008 and 14.3.2008 is quashed and set aside. The respondent is directed to enter into Power Purchase Agreement with the petitioner for

440 MW of power under the terms and conditions of bid No. 1 for supplying power at the levelised tariff of Rs. 2.89 per unit. The petitioner''s

offer to supply 190 MW of power from Chitrapur Coal and Power Ltd. (now called Corporate Power Ltd) and also additional 250 MW of

power from the same source is held to be not contrary to the RFQ and the RFP and the petitioner shall accordingly be permitted to supply 440

MW of power from Corporate Power Ltd. (formerly Chitrapur Coal and Power Ltd.).

(ii) Within one week from the date of receipt of this judgment, the petitioner shall resubmit the documents earlier supplied to the respondent with

their letter dated 12.3.2008 and shall supply the revised tariff stream as per the statement made before this Court, namely, that the levelised tariff

shall be Rs. 2.89 per unit and that for the first half of the contract period, that is for first 13 years, the petitioner shall not claim any rate in excess of

Rs. 2.89 per unit (i.e. capacity charges plus energy charges) and the discounting rate shall be 10.60% as applied in the tariff stream of the Adani

Power Ltd.. The respondent shall accept the said documents and the tariff stream as aforesaid. Within one month from the date of receiving such

revised tariff stream from the petitioner, the respondent shall execute PPA in favour of the petitioner for purchasing 440MW of power to be

sourced by the petitioner from Corporate Power Ltd.. The Power Purchase Agreement shall clearly indicate that the petitioner is a bidder and.

therefore, all the terms and conditions applicable to a trader shall apply. As far as application of the Force Majeure clause is concerned, it is

clarified that the protection of the Force Majeure clause available to the generator shall also be available to the generating company from which the

petitioner will be sourcing the power.

The petition is accordingly allowed in the aforesaid terms.