KARNATAKA POWER TRANSMISSION CORPORATION LIMITED v. JSW ENERGY LIMITED (EARLIER KNOWN AS JINDAL THERMAL POWER COMPANY LIMITED & JINDAL TRACTABEL POWER COMPANY LIMITED) & ORS.

LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] (a) to (i) xxx xxx xxx A (j) purchase power in an economical manner and under a transparent power purchase procurement process; Explanation. - The contracts concluded by the State Government or the Board with generating companies and transmission companies prior to the date of commencement of the Act shall stand assigned to the B KPTC in terms of section 14 and the KPTC may continue the purchase or transmission of power under such contracts for effecting bulk sales, distribution and supply to other licensees;”

45Copy pinpoint45. Section 20 provides for exemption from the requirement of license. It contemplates that the regulation by the Commission to grant exemption from the requirement to have a supply license subject to conditions to be specified. The other provisions of Part VII deals with amendment of licenses and revoking of licenses apart from the general restrictions on the licensee.

46Copy pinpoint46. Section 27, which contains the proviso which is at the heart of the controversy, inter alia, reads as follows: “27. Tariffs.- (1) The holder of each licence granted under this Act shall observe the methodologies and procedures specified by the Commission from time to time, in calculating the expected revenue from charges which it is permitted to recover pursuant to the terms of its licence and in designing tariffs to collect such revenues. (2) The Commission shall, subject to sub-section (3), have the power to lay down methodology and the terms and conditions for determination of revenue of the licensee under sub section (1) of this section and the determination of tariff, in such other manner as the Commission considers appropriate and for doing so, the Commission shall be guided by the following factors, namely:- (a) the financial principles and their applications provided in sections 7 and 57-A of the Electricity (Supply) Act, 1948 (54 of 1948) and in the sixth schedule thereto; (b) in the case of the Board or its successor entities, the principles under section 59 of the Electricity (Supply) Act, 1948;

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A (c) that the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency; (d) the factors which would encourage efficiency, economical use of the resources, good performance and optimum investments and other matters which the Commission considers appropriate for the purpose of this Act ; and (e) the interest of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy; (f) the electricity generation, transmission, distribution and supply are conducted on commercial principles (g) national and state power plans formulated by the Central or State Government, as the case may be : Provided that the contracts concluded by the Government of D Karnataka and/or the Board with generation and transmission companies prior to commencement of the Act shall be deemed to have been approved by the Commission under the provisions of this Act and shall be given effect by the Commission. (3) Where the Commission departs from factors specified in the sixth schedule to the Electricity (Supply) Act, 1948 (Central Act E 54 of 1948) while determining revenue of the licensee and tariffs, it shall record the reasons therefor in writing. (4) Any methodology or procedure specified by the Commission under sub-sections (1), (2) (3) above shall be to ensure that the objectives and purposes of the Act are duly achieved. F (5) Any tariff implemented under this Act,- (a) shall not show undue preference to any consumer of electricity, but may differentiate according to the consumer’s load factor, power factor, and total consumption of energy during any specified period or the time at which supply is required, or the geographical position of any area , the nature of the supply and the purpose for which the supply is required; or paying capacity of category of consumers and need for cross subsidisation; and (b) shall be just and reasonable and be such as to promote economic efficiency in the supply and consumption of electricity; and

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] (c) shall satisfy all other relevant provisions of the Act, regulations A and conditions of the license. (6) The Commission also shall endeavour to fix tariff in such a manner that, as far as possible, similarly placed consumers in different areas pay similar tariff.” B (Emphasis supplied)

47Copy pinpoint47. Section 5(1) of the Act declares that Members of the Commission shall be persons of ability, integrity and standing, who have adequate knowledge and experience of and have demonstrated capacity in dealing with law or administration. Section 5 further declares that, at all times, one Member shall be a graduate Electrical Engineer with at least 25 years of experience of either generation, transmission or distribution of electricity and have worked in a senior position in the said field. There must always be two Members, who have qualification in the field of law, finance, economics, commerce or administration, with at least 25 years of working experience. Such person should have worked in a senior position in the said field. There are other aspects, which need not detain us. Under Section 10 of the Act, the Commission is endowed with certain powers of a Civil Court. It can enforce attendance of witnesses. It can call for information. It can consult to the extent, it considers appropriate, such persons or group of persons, who may be affected or likely to be affected by its decisions. Section 11 deals with the functions of the Commission. An array of functions vests with it which includes regulating the purchase, distribution and supply and utilisation of electricity, the quality of service, the tariff and charges payable, keeping in view the interest of the consumer as well as the consideration that the charges are adequately levied and duly collected. F There are various other functions. It is to function as an independent Statutory Body Corporate. The Commission has the power to act as an Arbitrator or to nominate Arbitrators to decide disputes between the licensees. The Commission is tasked with the power to grant licences under Section 19 of the Act. More pertinently, the Commission is G empowered under Section 27(2), to lay down the methodology and the terms and conditions for determination of the tariff, inter alia. Section 27(2)(a) to (g) provide for the factors, which are to guide the Commission.

48Copy pinpoint48. On a conspectus of the provisions of the Act, it is self-evident that in keeping with the very name of the Act, viz., Karnataka Electricity H

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A Reforms Act, 1999, the Legislature intended to depart from the earlier regime, under which, the State Electricity Boards, in conjunction with the Government, enjoyed a free run in the matter of fixation of tariff. The Act put in place a mechanism, by which, an independent Body, a Commission, consisting of the Experts, as we saw, were to proceed in the matter, in an independent manner, to determine, inter alia, the tariff. B The determination of the tariff was to be done, bearing in mind, the interest of the consumer. At the same time, the Commission was not to be oblivious to the need to arrive at charges for the service of purchase, distribution and supply of electricity, in such a manner that the tariff is adequate in that the charges for the electricity supply, was duly collected, being adequate, for maintaining the supply and distribution of electricity.

49Copy pinpoint49. Section 14(7) provides, inter alia, that all contracts, entered into with or for the Board or the appellant or the generating company or companies, before a transfer scheme becomes effective, is to be deemed to have been entered into or done by the Board, with the Board or for the State Government or the appellant or the transferee. Section 17 provides that a licensee or the bulk purchaser or any other person, may enter into a contract, with a generating company, for purchase of electricity, in the manner approved by the Commission. Such approval, is accorded the status of a consent given by the State Government under Section 43A of the Electricity (Supply) Act, 1948. Section 18, dealing with the requirement of a licence for transmitting electricity and for supplying electricity, including bulk supply, inter alia, provides in Section 18(6) that all power purchase agreements, transmission services agreements and other contracts, entered into, shall continue, in full force and have effect and will be transferred to the successor entities. Section F 19 deals with actual power to grant licence. The power is vested with the Commission. Section 19(3) provides that the duration, extent to which and the terms and conditions, under which, transmission or supply of energy is to be made, are to be specified in the licence. The licence is also to contain such other conditions as the Commission may consider appropriate for achieving the purpose of the Act. It is thereafter that G Section 19(4) provides that without detracting from the generality of the power with the Commission to impose conditions mentioned in Sub- Section (3), the conditions enumerated expressly in Sub-Section (4), may be imposed. The Explanation relevant to the case, is found sandwiched between Section 19(4)(j) and (k). Section 19(4)(j), the Explanation, which H follows thereafter and Section 19(4)(k) read as follows:

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] “(j) Purchase power in an economical manner and under a A transparent power purchase procurement process; Explanation: The process concluded by the State Government or the Board with generating companies and transmission companies prior to the date of commencement of the Act shall stand assigned to KPTC in terms of section 14 under such contracts for effecting B bulk sales, distribution and supply to other licensees; (k) the purchase of power from KPTC to the extent necessary to enable the KOPTC to perform its obligations under the contracts concluded by the State Government or the Board referred to in a clause.” C

50Copy pinpoint50. Moving on to Section 27, the proviso to Section 27(2), brings up the rear to the said sub-Section. Section 27 deals with the duty of the holder of every licence, to observe the methodologies and procedure to be specified by the Commission from time-to-time, in calculating the expected revenue from what it charges. Section 27 uses the expression D ‘design’. It only means that the Commission is to fix the tariff, which would be a medium to raise revenue. It is thereafter that Section 27(2) clothes the Commission with the power to actually lay down the methodology and the terms and conditions for determination of the revenue and the determination of the tariff. The factors to guide the Commission in this regard are explicitly set-out in Clauses (a) to (g) under Section E 27(2). Since sub-Section (2) limits the power, with reference to sub- Section (3), we may only notice that Section 27(3) obliges the Commission to record reasons, when it departs from the factors specified in the Sixth Schedule to the Electricity (Supply) Act, 1948 in determining the revenue and the tariffs. Section 27(4) declares that the Commission, in formulating the methodology or procedure, is to ensure that the objectives or purpose of the Act, are duly achieved. Section 27(5) further ordains that the tariff is not to reflect any undue preference to any consumer but may discriminate on the basis of the load factor, power factor, inter alia. The paying capacity of the category of the consumers and the need for cross- subsidisation, can form the premise for differentiation. Every licensee is to provide to the Commission, full details of its calculations for the ensuing financial year, of the expected aggregate charges, which it believes to have been permitted to recover, pursuant to the terms of its licence and such further information, as the Commission may reasonably require, to access such calculation [See Section 27(7)]. Section 27(7) further H

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A provided that within 90 days of the receipt of all the information by the licensee that the Commission is to notify either its acceptance or its refusal of the licensee’s revenue calculation and tariff proposals. It is obliged to issue a notice, giving reasons, as to why it does not consider the tariff proposals as compliant with the extant methodology or that it is incorrect. It was to propose a modification or an alternative calculation B of the expected revenue from charges, which a licensee was to accept. Section 27 defined ‘expected revenue from charges’ in the Explanation (a) under Section 27(12) as meaning, ‘the total revenue which the appellant or the licensees are expected to recover from charges for the level of forecast supply used in the determination under sub- C Section (7) in any financial year in respect of goods or services supplied to customers’. Explanation (b) defined ‘tariffs’ as ‘a schedule of standard prices or charges for specified services which are applicable to all such specified services provided to the type of customers specified in the tariff published’.

51Copy pinpoint51. On a conspectus of the Act, the Law-Giver has intended that the holder of every licence granted under the Act, is bound by the regime of regulation of the tariff by the Commission. The appellant was incorporated under Section 13 of the Act. The Act came into force with effect from 01.06.1999. The appellant, in other words, was not in existence prior to 01.06.1999. No doubt it succeeded to KEB. In an answer to a query, it is pointed out that initially, the appellant was the holder of a distribution and supply licence. Subsequently, there has been an unbundling. At present, appellant is engaged in supply of electricity. It is further not in dispute that the appellant is a licensee under the Act. It would, therefore, be clear that being a holder of a licence, the appellant was to follow the procedure under Section 27. It came under the embrace of the jurisdiction and power of the Commission in regard to the regulation of the tariff. The power and jurisdiction of the Commission is to be exercised to ensure that the objectives and the purpose of the Act, are duly achieved. In the Statement of Objects of the Act, it is, inter alia, recited that the law was made to ensure the development and management of the electricity industry in the State in an efficient, economic and competitive manner to provide reliable quality power and to protect the interest of the consumer, including, vesting in the Commission, the power to regulate the power sector. The sublime legislative object is further reflected in Section 11A, viz., the declaration of the functions of the Commission is, inter alia, to protect the interest

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] of the consumer, apart from promoting efficiency, economy, safety, in the use of electricity. This is, of course, besides ensuring that the charges for electricity are adequately levied and duly collected. As noticed by us, the Act signalled the demise of the old system, whereunder, fixation of tariff was afflicted with caprice, unilateralism and a tendency to unduly subsidise the State Electricity Boards, thereby preventing a natural free play of market forces, which also did not conduce towards the promotion of the production of electricity in the country. Section 27(2)(e) specifically contemplates that the Commission is to be guided by the interests of the consumers, but at the same time, providing for the return, by ensuring that the consumer pays for the use of electricity in a reasonable manner, based on average cost of supply of energy. Section 27 marked a paradigm shift. An independent Body was to exercise fairly drastic power in the matter of regulating revenue and designing tariff by the licensees. The proviso in Section 27(2) was, indeed, intended to protect cases, where contracts were concluded by either the Government of Karnataka and/ or the KEB with generation and transmission company prior to the commencement of the Act. The proviso freed parties to such contracts, which were concluded from the regulatory regime. If such contracts were concluded, the Law-Giver has made it clear that they would be deemed to have been approved under the provisions of the Act. Furthermore, the Commission is charged with the duty to give effect to such contracts which are concluded before the commencement of the E Act. It is, undoubtedly, true that the proviso to Section 27(2) does not use the words ‘power purchase agreement’. It is equally true that Section 18(6), falling under Part VII and dealing with licensing of transmission and supply, employs, inter alia, the words ‘power purchase agreement’. Section 18(6), in fact, uses also the words ‘transmission service F agreements and other contracts’. The attempt of the first respondent is to highlight the fact that the proviso to Section 27(2) does not use the words ‘power purchase agreement’. The Law-Giver was aware and has used the expression ‘power purchase agreement’ in Section 18(6). In a later provision of the same Act, the same Law-Giver has, by omitting the words ‘power purchase agreement’ in the proviso to Section 27(2), G evinced its intention to be that a contract can be concluded for the purpose of the proviso to Section 27(2) even without there being a power purchase agreement.

52Copy pinpoint52. The further argument is, that the proviso to Section 27(2) must be understood with reference to Section 27 and not based on a H

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A roving expedition, involving survey of other provisions of the Act, which may use similar words such as, Section 14(7) and Sections 18 and 19. The principle that a proviso must receive meaning with reference to the main provision to which it is a proviso, is pressed into service.

53Copy pinpoint53. The first respondent relied upon the decision of this Court in B Dwarka Prasad v. Dwarka Das Saraf10. This Court held, interpreting the proviso in question in the said case as follows: “18. We may mention in fairness to Counsel that the following, among other decisions, were cited at the Bar bearing on the uses of provisos in statutes: CIT v. Indo-Mercantile Bank Ltd, [AIR C 1959 SC 713 : 1959 Supp (2) SCR 256, 266 : (1959) 36 ITR 1] ; Ram Narain Sons Ltd. v. Asstt. CST [AIR 1955 SC 765 : (1955) 2 SCR 483, 493 : (1955) 6 STC 627] ; Thompson v. Dibdin [(1912) AC 533, 541 : 81 LJKB 918 : 28 TLR 490] ; Rex v. Dibdin [1910 Pro Div 57, 119, 125] and Tahsildar Singh v. State of U.P. [AIR 1959 SC 1012 : 1959 Supp (2) SCR 875, 893 : 1959 Cri LJ 1231] D . The law is trite. A proviso must be limited to the subject-matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. “Words are dependent on the principal enacting words to which they are tacked as a proviso. They cannot be read as divorced from their context” (Thompson v. Dibdin, 1912 AC 533). If the rule of construction is that prima facie a proviso should be limited in its operation to the subject-matter of the enacting clause, the stand we have taken is sound. To expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a G harmonious construction. “The proper course is to apply the broad general Rule of construction which is that a section or enactment must be construed as a whole, each portion throwing light if need be on the rest.

10 H (1976) 1 SCC 128

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] The true principle undoubtedly is, that the sound interpretation and meaning of the statute, on a view of the enacting clause, saving clause, and proviso, taken and construed together is to prevail. (Maxwell on Interpretation of Statutes, 10th Edn., p. 162)””

54Copy pinpoint54. In other words, since Section 27 is a provision, which appears to deal with the revenue and tariff, which a licensee can garner/charge, it suffices, if there is a contract, which is concluded, which has, for its subject matter, the most indispensable element, viz., the tariff. It is pointed out that in this case, the three essential components of a contract for the purposes of Section 27, have been concluded well before 01.06.1999. Correspondence and negotiation culminating in the issue of the G.O. C dated 12.05.1999 by the GoK, by which, the Government of Karnataka, gave its approval for the tariff at Rs.2.60 per unit, for the tenure of five years, and what is more, the quantum to be supplied by the first respondent, was also agreed upon cements the case of the first respondent that there was a concluded contract for the purpose of Section 27(2). D

55Copy pinpoint55. Shri Gopal Jain, learned Senior Counsel, would persuade the Court to take a pragmatic and fair view. The Government of Karnataka/ KEB was, indeed, faced with the shortage of power. The proposal of the first respondent was most reasonable. If the parties were agreed on the essential terms, which, in terms of the proviso to Section 27(2), E consisted, primarily of the tariff, and a PPA is conspicuous by its absence in the proviso, as an indispensable requirement, to constitute a concluded contract, then, nothing more is required to support the impugned Judgment, it is contended. THE LAW RELATING TO CONTRACT F

56Copy pinpoint56. Section 2 of the Indian Contract Act, 1872 provides for the interpretation clause. We may set out our understanding of Section 2, so far as it is relevant, to be as follows: It begins with a proposal made by a promisor. A proposal is an offer to do something or an offer to abstain from doing something. G The offer must be made with a view to obtaining the agreement to it from the party to whom it is made. When the person to whom the proposal, as defined, is made, who is treated as the promisee, conveys his unqualified consent, the proposal is treated as having been accepted. The proposal, when it is accepted, becomes a H

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A promise. An agreement is every promise and every set of promises forming the consideration for each other. As to what is consideration, we need not be detained. A contract is an agreement enforceable by law. Section 3 of the Contract Act deals with communication, acceptance and revocation of proposals. The acceptance of a proposal, inter alia, takes place by any act or B omission of the party accepting. It must be an act or omission by which he either intends to communicate his acceptance or which has the effect of communicating his acceptance. These are matters of fact to be decided on the facts of each case. Section 10 of the Contract Act reads as follows: C “10. What agreements are contracts. —All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India D and not hereby expressly repealed by which any contract is required to be made in writing1 or in the presence of witnesses, or any law relating to the registration of documents.” Thus, from the second part of Section 10 of the Contract Act, it is self-evident that it is not essential to form a contract, that it should be in E writing. The second part of Section 10, illustrated by Section 19 of the Copyright Act, 1957 applies where a law stipulates that a contract be in writing in which case a contract must be reduced to writing. THE CORRESPONDENCE AND CONDUCT OF THE PARTIES F

57Copy pinpoint57. It is apposite to refer to order dated 7.3.1994 where it all began. It reads as follows: “PROCEEDINGS OF THE GOVERNMENT OF KARNATAKA Sub: Proposal of M/s. Jindal Iron & Steel Company Limited to set-up a 300 MW . Power plant in two stages of 150 Mw Each near Bellary-Hospet. Consequent on the amendments made by the Government of India to the India Electricity Act 1990, and the Electricity (Supply) sector participation in power generation and to sign MOUs with private or foreign companies to set up Thermal Power Plants at

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] Mysore, Hospet, Raichur, Mangalore and Bangalore and a Hyde! A Power Station at Shivasemudram.

1. M/s. Jindal Iron & Steel Company Limited are setting up a combined gas cycle plant of 300 MW (2XI50 MW) power plant at Bellary-Hospet within the site allotted for a Steel Plant of 1.25 million ton capacity per annum, for which the Government of B Karnataka has already accorded approval.

2. The estimated cost of the power plant is approximately Rs.900 Crores. The debt equity ratio shall be 2.1. The equity of around Rs.225/- crores will be met 50% each by ‘ .. the participants - M/ s. JISCO and M/s. TRACT ABEL. The loans shall be arranged both from Indian financial institutions and foreign banka for which discussions are under progress.

3. The advantage in setting up of the power plant at Bellary- Hospet is that the excess power generated will be fed to the KEB grid which will make the system more stable and can supply power to other industrial units in and around the Bellary-Hospet region. Besides. it would also help to generate additional employment. The fact that the Lingapur 220 KV Sub-station is nearer to the site of the proposed Thermal Power Plant, will help in inter- connection with the Sub-station. E

4. The Karnataka Electricity Board has agreed to the proposal of M/s. Jindal Tractebel Power Company for setting up of the generating plant at Bellary - Hospet subject to the toll owing conditions:

1. The above firm should send a detailed project report duly F indicating the cost of the project with all relevant details like, mode of execution fixation of tariff etc;

2. For evacuation of power from the above, the present KEB transmission and distribution system may have to be strengthened thus necessitating substantial funds for the above. G Board is examining the possibility of obtaining funds from various organizations either from Government or other sources;

3. The sale of power should be exclusively to KEB and not to any other entrepreneurs. In case power is contemplated to be sold to third parties directly, the sales shall be at the rates to be H

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A fixed by Government of Karnataka/KEB and with the prior approval of Government of Karnataka/KEB;

4. The firm has to enter into power purchase agreement with KEB and the rate at which power is to be purchased by KEB is to be separately worked out;

B 5. The firm has to indicate the cost of the generation to take a definite decision for I purchase of power from them. ORDER NO. DE 221 PPC 93 BANGALORE. DATED 7TH MARCH 1994.

C After examining the matter in detail Government are pleased to accord; approval to the proposal of M/s. Jindal Iron & Steel Company Limited a follows: [1] Ms. Jindal Tractabel Power Company (JTPCL) is permitted to set up this plant in two phases of 300 MW (each phase D consisting of !50 MW each) subject to obtaining the approval of the Government of India in respect of foreign investment by M/s. Tractabel, Belgium in Karnataka and also subject to obtaining other statutory clearances under the relevant Acts; [2] M/s. JTPCL is permitted to sell power directly to industrial units of the area at the mutually negotiated rates between M/ E s. JTPCL and the industrial Units, subject to approval by the State Government [3] To permit KEB to evacuate power produced by M/s. JTPCL through its grid system subject to the capacity of the grid system and subject to payment of Wheeling and Banking charges F payable to KEB by M/s. JTPCL after evacuating power produced by KPCL; [4] The company has to sell the balance power to KEB at a tariff to be fixed according to the norms laid down by the Government of India vide Notification dated 31.3 .1992; G [5] KEB will make wheeling and banking arrangements for M/s. JTPCL on payment of wheeling charges; [6] KEB is permitted to enter into an agreement with M/s. JTPCL regarding power purchase subject to approval by the H State Government.”

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.]

58Copy pinpoint58. A perusal of proceeding dated 07.03.1994 would reveal that though the KEB put forth the condition, inter alia, that the power to be generated by the thermal plant sought to be set up by JISCL, was to be sold exclusively to KEB and not to any other entrepreneur and that the firm has to enter into a power purchase agreement with KEB, and the rate at which power to be purchased by the KEB, is to be separately worked out, in the Order, the GoK permitted the first respondent to sell power directly to industrial units of the area at mutually negotiated rates between the first respondent and the industrial units subject to approval by the State Government. Further, it was decided, inter alia, that the first respondent had to sell the balance power to KEB at a tariff fixed according to the norms laid down by the Government of India vide C Notification dated 31.03.1992.

59Copy pinpoint59. Finally, KEB was permitted to enter into an agreement with the first respondent regarding power purchase, subject to approval by the State Government. What is noteworthy is that the KEB took the stand that the first respondent would have to enter into a power purchase D agreement with the KEB, and the rate at which power was to be purchased, was to be separately worked out. In keeping with the decision, apparently, that the first respondent was to sell the balance power to the KEB, the Clause relating to sale of excess power to KEB was first indicated in the Heads of Terms and later on in the Wheeling Banking E and Grid Support Agreement. It will be noticed that in the clause, what was agreed upon, was that there was to be agreement as regards price and other terms which were to be negotiated at the time of sale. This may be contrasted with the terms of the proceedings dated 07.03.1994, which contemplated sale according to norms dated 31.03.1992. On 20.10.1998, referring to an earlier letter dated 28.09.1998, the first F respondent wrote to the KEB that tariff at which they would sell power was in accordance with the Government of India Notification dated 30.03.1992. A statement was forwarded, containing the tariff calculation and also indicating certain assumptions. On 21.11.1998, the first respondent wrote to the KEB and we need notice the following: G First respondent claimed that it has completed 100% construction, erection and testing activities of Unit No.1 (130 MW). It was scheduled to synchronise the Unit No.1 by last week of December 1998. For Unit No.2, the first respondent claimed, it had completed 100% construction, 90% erection of equipment, H

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A the boiler light up was scheduled in January 1999 and the commissioning was scheduled in July 1999. Thereafter, first respondent refers to the PPA signed with JVSL and JPOSCL. It was further stated that by proceeding dated 02.03.1996, Government of Karnataka had given approval for the same. The first respondent further makes reference to Clause 2.4 of the B Wheeling and Banking Agreement for sale of power to KEB at mutually agreed rates. The communication reveals that thereafter, the first respondent proceeded to make an offer to KEB for sale of power. It offered 50MW from the commissioning date of Unit No.1. Further, it offered 100 MW (base load basis of commissioning date of Unit No.2). A further offer was made of maximum of 200 MW during the period when JVSL, JPOCL, which were the dedicated consumers were under shut down (major break down or during their maintenance period). Penalty was offered if supply was less than 75 MW from the commissioning date of Unit No.2. The price offered was Rs.2.90/KWHR. It is thereafter that it was indicated that the price was to be exclusive of the electricity tax, adjustment towards inflation, compensation towards foreign exchange variations, provision for fuel escalation charges, maintenance of power plant, for force majeure conditions. The proposal was to supply power for an initial period of five years from the date of commissioning of the second 130 MW Unit. There is reference made to utilisation of power during the stabilisation period and we are not referring to the contents of the same except to point out that this represented the second proposal. Finally, the letter ended with a request to the KEB to accord approval for the above two proposals. The KEB, in response, pointed out that the Board was, in principle, willing to purchase power from the first respondents and the proposal of the first respondent, regarding tariff, was stated to be under evaluation by the Board. It can be safely concluded that as on 15.12.1998, quite clearly, apart from the KEB indicating that it was, agreeable in principle, to purchase surplus power from the first respondent, there is no other effect in law produced.

60Copy pinpoint60. Under the proviso to Section 27 of the Act relied upon by the respondent, a contract could be concluded with the Government or with the Electricity Board. In either case undoubtedly the regime under section H 27 would cease to apply and the Commission would not have any power.

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.]

61Copy pinpoint61. In the notes submitted by first respondent, it was seen contended that the contract was concluded between the first respondent and GoK/KEB. To proceed with clarity, the court specifically asked whether the case of the first respondent was that the contract was concluded between the GoK and the first respondent or with KEB with the first respondent. The submission which was made by the first respondent was that the contract was concluded between the KEB and the first respondent. Therefore, we must proceed on the basis that contention of the first respondent is that the contract was concluded between the first respondent and the KEB. The significance of this finding is that it obviates any adjudication as to whether the contract in question complies with the mandate of Article 299 of the Constitution. The appellant asserts that there can be no implied contract with the Government under Article 299 and enlists support of case laws in this regard. In view of the stand of the first respondent which we have indicated it would be an unnecessary digression to explore the contours of Article 299.

62Copy pinpoint62. The main question which arises for consideration is whether there is contract concluded between the first respondent and the KEB and if so, whether such a contract was concluded before 01.06.1999? 01.06.1999 admittedly marks the commencement of the Act. If as on 01.06.1999, no contract was concluded between the KEB and the first respondent within the meaning of proviso to Section 27(2), and such a E contract was concluded thereafter, it will not advance the case of the first respondent.

63Copy pinpoint63. We must at this juncture deal with an appeal made by the learned Senior Counsel for the first respondent. It is contended that this Court may adopt a pragmatic view. The first respondent had excess power. The KEB stood in dire need of power. Thereafter, negotiations ensued based on Clause 2.4 of the wheeling and Banking and Grid Agreement. Apart from oral negotiation, correspondence evidence the respective positions adopted by the parties. The KEB took up the matter with the GoK and GoK finally gave approval on 12.05.1999. The terms approved by the GoK stand incorporated in the subsequent PPA though the PPA was executed after 01.06.1999 but the significance of all this is that as regards the essential terms, the parties were agreed. A practical view is therefore pressed upon as a just view also, namely, substantially for all practical purposes the parties were ad idem. Repeatedly our attention is alerted to the fact that acting upon the GO dated 12.05.1999 H

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A and making it the sheet anchor, first respondent even supplied power. Though there was some prevarication as regards the rate being 2.60 per KWH, the GoK sought to honour the contract as embodied in the G.O. dated 12.05.1999 by issuing G.O. dated 17.07.2000.

64Copy pinpoint64. We are dealing with a statutory dictate. What is required to be established is that the contract stood concluded and furthermore it was so done before 01.06.1999. Dr. Abhishek Manu Singhvi and Shri Gopal Jain, learned Senior Counsels are right in pointing out that the purport of proviso is to provide against retrospectivity of the law. In other words, the lawgiver contemplated that when a contract stands concluded between the Government or the KEB and a party before the Act came into force, the regulatory regime should not be allowed to unsettle a solemn contract.

65Copy pinpoint65. In this regard, we must bear in mind that the Act envisages the setting up of an independent Commission. The Commission stood endowed with various functions. One of the important functions is to fix the tariff. One of the vital objects of the Act is to protect the interest of the consumer. The Electricity Board which was set up under the Electricity (Supply) Act, 1948 was clothed with the power for fixing the rate. The undesirable results it produced and the need for locating the power in an independent body which would fairly and on preordained principles which involves striking a balance between the interest of the consumer and at the same time promoting efficiency in the power sector leading to enhancement in power generation led to the new regime. While a reasonable view must indeed be taken it cannot be half baked or a legally untenable approach. Flying on the wings of pragmatism, the Court cannot gloss over a statutory injunction. We would think that the first respondent must anchor its case on surer foundations.

66Copy pinpoint66. In this case, we proceed on the basis that it all began with the communication dated 20.10.1998 sent by the first respondent. However, for reasons which will be clear, we need not harp upon its contents in greater detail. On 21.11.1998, after referring to the fact that the first respondent was recognised as an independent power producer and it has achieved financial closure and further that it was the only company in Karnataka which could be set up as an independent power producer and still further having completed 100% construction, erection and testing ability in regard to Unit I, it was stated that the synchronising of Unit I H will take place by the last week of December 1998. Regarding Unit II,

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] commissioning was projected in July, 1999. Thereafter, the formal offer was made for sale of power. The rate was Rs.2.90/Kwhr. Even the said rate was to exclude electricity tax, inflation, foreign exchange, fuel escalation charges, maintenance of power plant. The rate was also to be exclusive of force majeure. This meant that if there is grid failure or transmission line failure leading to no supply, there would be no penalty on the minimum guaranteed power. There is also another aspect in the offer under the caption “utilisation of power during stabilizing period” that is from the date of synchronisation till commercial operation. There are certain details thereunder and the letter concluded by the first respondent requesting approval to the two proposals at the earliest. By communication dated 15.12.1998, the Board conveyed that the proposal of the first respondent is under evaluation. The Board (KEB) also expressed its willingness to purchase power as already discussed. On 19.01.1998, the KEB wrote to the GOK. Therein, it is, inter alia, stated that the plant of the first respondent which was set up as a captive power plant was given IPP status later on by GO dated 01.02.1996 as the shareholders of the power plant (the first respondent) and the steel plant (the sister concern of the first respondent) were different. After referring to the wheeling and Banking agreement, it is, inter alia, stated that the first respondent during discussion revealed that there was a decline in the demand for power due to the reduction in the demand of the steel, leading to the proposal by first respondent, KEB further wrote about PPAs entered into with various IPPs and the fact that the progress under the said agreements was not satisfactory. Some other plants may not come up was a concern voiced by the KEB. Other issues relating to them find reflection. Shortfall in generation in the state and the steady demand for power are seen articulated. KEB was purchasing power from Maharashtra State Electricity Board in addition to central generating stations. After dealing with Wheeling and Banking agreement and clause 2.4 which contemplated sale of excess power to the KEB, it was stated that the clause, however, contemplated purchase at a negotiated rate. This, it is further stated was because at that stage details regarding the capital cost were not looked into as the project was contemplated as a G captive power plant. It is also for the same reason stated that it would not be possible to negotiate tariff based on two-part tariff notification of the Government of India. After providing certain other details including the variation in the exchange rate qua the US $ and the decrease in consumer price index, interest rate and the need for annual increase in H

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A the fixed price, negotiations were undertaken it is mentioned. After detailed discussion, it was decided that a price of Rs.2.60 per unit could be offered. This comprised of Rs.1.70 as fixed charge and Rs.0.90 as variable charge. Variable cost was to depend on the cost of coal. Its cost would determine the variable price. Suffice it to further notice that the KEB suggested that “We” can purchase power from the first respondent at Rs.2.60 per unit (FC Rs.1.70) plus (VC Rs.0.70). The fixed charge was to be escalated from the second year with the conditions of penalty to be paid by the firm for short supply of power and assured off take which has been referred in the letter earlier. We may finally notice the final paragraph of the said communication “Approval of the government is sought to the above proposal. Subsequent to the approval, negotiations will be held with M/s JTPCL for finalizing the PPA.”

67Copy pinpoint67. The GOK wrote to the KEB. It is stated inter alia that the proposal was examined in detail. The efforts of KEB to bridge the gap on power availability by entering into short term agreement with the first respondent was appreciated. The wide gap between demand and supply was noted. The prospect of the demand going up further was echoed. It is finally stated as follows: “The present proposal of the KEB keeps the tariff open ended and possible revision. The PPA being for a period of 5 years, E KEB is advised to negotiate with the Jindal Tractebel for a fixed tariff for the next 5 years. This may kindly be got examined by KEB and the revised proposal may be sent to the government”

68Copy pinpoint68. We must not be led astray by the use of the word “the present proposal of the KEB” as meaning that the proposal is one made by the KEB. In law, it would be the first respondent which has made the proposal as contained in its communication dated 21.11.1998 and thereafter following negotiations, the first respondent came up with the price of Rs.2.60. It is this proposal of the first respondent which was suggested by the KEB. The GoK found that the said suggestion about the proposal made by the first respondent kept the tariff open ended with possible revision. The GoK contemplated a PPA being entered into limited to a period of 5 years. Therefore, the GoK wanted KEB to further negotiate a fixed rate for the next 5 years. A revised proposal was to be sent to the Government. It is not the case of the either party that a concluded contract emerged at this stage. Without

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] the parties apparently being aware, the next communication brought them even more perilously close to the date of the commencement of the Act. On 31.03.1999, the first respondent wrote about its first proposal on 21.11.1998. The fact that the discussions followed is further mentioned. Specifically, there is reference to meeting held on 26.03.1999. The readiness of the KEB to purchase power was made subject to the following terms and conditions:

1. The term of the agreement could be 5 years.

2. The tariff should be a single part tariff. Escalation at a fixed percentage could be applied on the total price on an annual basis. KEB will not consider any request either for two-part tariff based on CEA guidelines or for payment of fuel cost at actuals.

3. KEB will open irrevocable revolving letter of credit under which JTPC can get payments. It will also be supported by Escrow mechanism.

4. There can be penalty clause both for short supplies and short drawals.

5. The PPA should be a simple document.”

69Copy pinpoint69. A formal proposal being demanded by the KEB subject to the approval of the Board of Directors and also the approval of its lender, the first respondent made the proposal. “Accordingly, subject to approval of our Board and also subject to approval of our lenders, we make the following proposal for sale of power to KEB.

1. JTPC offers 50 MW (Energy 36 MU per month) of power from the commissioning date of Unit 1 and 100 MW (Energy 72 MU per Month)of power from the commissioning date of Unit 2. The first Unit of 130MW is expected to be commissioned in June 1999 and the second unit of 130 MW is expected to be commissioned in August 1999. G

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A 3. The tariff will be as follows: I year (Upto 31" March 2000) Rs.2.60/kwhr. II Year (Financial Year 2000-2001) Rs.2.73/kwhr. III Year (Financial Year 2001-2002) Rs.2.87/kwhr. B IV Year (Financial Yea; 2002-2003) Rs.3.01/kwhr. V Year (Financial Year 2003-2004) Rs.3.16/kwhr.

4. There will be no Wheeling charges or Electricity Tax on supplies to KEB.

5. To maintain uniformity in penalty on either side, JTPC proposes C as follows as from COD of Unit 2: (a) JTPC guarantees minimum supply of the Threshold Power Value after commissioning of JTPC Unit 2. If the supply is less than the Threshold Power Value, JTPC will pay penalty at l0% of the tariff, for supplies below the Threshold Power Value. D (b) KEB shall guarantee that it will consume the Threshold Power Value. In case the consumption is less than the Threshold Pow~r Value, KEB shall pay to JTPC the full value of Threshold Power at the applicable tariff as above.

E (c) The Threshold Power Value is 75 MW (Energy 54 MU per month).

6. The minimum supply and the minimum consumption as per para 5(a) and 5(b) above are applicable on a monthly basis.

7. If there is escalation in fuel cost beyond 5% at any time, JTPC F reserves the right to terminate the contract with 3 months’ notice, if KEB does not agree to compensate for such escalation.

8. KEB shall open irrevocable revolving letter of credit corresponding to 100 MW (Energy 72 MU per month) power sales under which JTPC can get payment for its monthly bills. It G shall also be supported by Escrow mechanism.

9. The initial term of the agreement should be 5 years till March 31, 2004, with a provision for renewal on terms mutually acceptable. We request you to agree to the above terms and conditions and convey your acceptance at the earliest. We will approach our H Board and the lenders on getting your acceptance.

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] We also request you to let us have drafts of the PPA, Escrow A agreement and the Letter of Credit at the earliest. We propose to have one more meeting with your officials, after studying these drafts. Looking forward for your early favorable response, Thanking you, B Yours faithfully For JINDAL TRACTEBEL POWER CO., LTD. Sd/- S.S. Rao C Dy, Managing Director & CEO CC: Superintending Engineer El. Projects. KEB”

70Copy pinpoint70. 23.04.1999 is the next milestone. After referring to the previous development leading up to the proposal dated 31.03.1999, KEB wrote that there were two options available. The fall in the rupee was noted. D Thereafter, it is stated as under: “The firm in its letter No.JTPC/KEB dated 31-3-1999 has confirmed that the tariff payable by KEB for power purchased will be Rs.2.60/unit in the first year with an annual escalation of 5% every year. They have stated that they will be offering 50 E MWs (equivalent to 36 MU per month) from the date of commissioning of the first unit and 100 MW (equivalent to 72 MU per month) with the commissioning of the second unit The first unit is expected to be commissioned in June 1999 and the second unit in August 1999. They have also indicated that in case they F have any surplus power beyond 50 MWs and 100 MWs after commissioning of unit I and unit 2, with the approval of KEB, they will sell power in excess of 50 MWs and 100 MWs. The firm has also proposed the following after commissioning of Unit 2: G

1. They will supply power with a threshold value of 75 MWs equivalent to 54 MU per month.

2. If supply is less than the threshold power value, then JTPC will pay penalty of 10% of the tariff for supplies below the threshold power value. H

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A 3. KEB shall guarantee that it will consume the threshold power value. In case the consumption is less than the threshold value, KEB shall pay to JTPC the full value of threshold at the applicable tariff as above.

4. The minimum supply and minimum consumption as above are on monthly basis.

5. If there is a escalation in fuel cost beyond 5% at any time, JTPC reserves the right to terminate the contract with 3 months notice, if KEB does not agree to compensate for such escalation.

6. KEB shall open irrevocable revolving letter of credit corresponding to 100 MW (energy 72 MU per month) power sales under which JTPC can get payment for its monthly bills. It shall also be supported by Escrow mechanism.

7. The initial term of the Agreement should be 5 years till March 31, 2004 with a provision for renewal on terms mutually acceptable. D These are issues to be negotiated with the firm while finalising the PPA and will be taken up later on. This is for information of the government and it is requested that orders may please be obtained and communicated to us. With regards, E Yours sincerely, Sd/- (K.P. SINGH) Shri Arvind Jadav, F Secretary to Government, Department of Energy, Government of Karnataka, Bangalore.”

71Copy pinpoint71. Thereafter, on 12.05.1999 emerges the Government Order which reads as under:

1. KEB is permitted to finalize a Power Purchase Agreement with M/s Jindal Tractebel Power Company Limited (JTPCL) for the purchase of surplus power and submit the same to the H Government for approval.

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.]

2. The rate per unit being Rs. 2.60 including variable charges with A an annual increase of 5% every year.

3. The term of the PPA shall be for a period of five years.

4. To adopt the same principle of negotiated tariff for captive generating power project who intend to sell power to KEB. B By Order and in the name of the Governor of Karnataka (K.T. VUAYARAJ URS) Under Secretary to Government Energy Department” C DEVELOPMENTS POST 01.06.1999

72Copy pinpoint72. Nearly, six months after 01.06.1999, i.e., on 04.01.2000, the Superintending Engineer of KEB wrote to the first respondent stating that the communication related to the tariff of Rs.2.60 per kw/hr negotiated for purchase by the appellant. The first respondent was requested to furnish details of the break-up of the tariff so as to enable KEB to take further action in the matter. It may at once be noticed that appellant could not have negotiated prior to 01.06.1999. This is for the reason that the appellant was only an offspring of the Act, which came into force with effect from 01.06.1999. The first respondent wrote letter dated 06.04.2000 to the chairman of the appellant. It refers to the agreement between the first respondent and the appellant and that thereunder first respondent was to return 215.810 MU to the appellant. It is indicated that as on 06.04.2000, the first respondent had returned 199.80 MU to the appellant. Referring to order dated 12.05.1999, it was stated that it permitted the appellant to purchase power from it at Rs. F 2.60 inter alia. It was also stated that it permitted appellant to finalise the PPA with the first respondent. It was also stated that the first respondent had finalised the PPA with the appellant and the final draft as accepted was submitted to the appellant in September-October, 1999.

73Copy pinpoint73. It may be noticed that the aforesaid statement indicates that the final draft which was accepted between the parties was submitted G only in September/October 1999. This is significant as it fortifies us in our view that the parties did contemplate the PPA and the relevant terms were to be embodied in the PPA. The final draft was clearly ready only after 01.06.1999. Thereafter, referring to G.O. dated 7 th July 1999, the first respondent goes on to state that the said order directs the appellant H

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A to operate the PPA as per the order dated 12.05.1999 only after complying with the obligations of GoK under order dated 07.07.1999. This is with reference to serial no.8 of order dated 7th July 1999. The first respondent goes on to state in the letter dated 06.04.2000 that it was continuously pursuing the appellant and GoK for signing of the PPA. It is further stated that even though the PPA was not yet signed, being pending with appellant, the absence of the PPA should not come in the way of supplying power by the first respondent to the appellant from 12.04.2000 as the order dated 12.05.1999 along with the details of the tariff does exist. Significantly thereafter, the first respondent indicated that pending finalisation and signing of the PPA between the parties, appellant was requested to accept power despatched by the first respondent from 12.04.2000. Invoices would be generated by the first respondent in terms of letter dated 12.05.1999. It was indicated by the first respondent that it was to be again subject to any changes required to be done subsequently as per the terms and conditions of the PPA, to be agreed and signed between the parties. The contents of the communication have been emphasised by Shri Raghavendra S. Srivatsa, learned counsel for the appellant as clearly indicating that matters were in a state of flux and uncertainty and still furthermore articulation was to await the finalisation of the PPA. On 12.04.2000 the appellant responded to the communication dated 06.04.2000. The appellant communicated its approval for the continued supply pending finalisation of the PPA but subject to certain conditions. We may notice those conditions:

1. The Grid support charges envisaged in the Wheeling & Banking and Grid support Agreement i.e., Rs. 1.73 Crores Annum will be provisionally deducted from the tariff invoices when the amount is paid. This will be subject to change and has to be paid as per the terms of PPA to be signed.

2. The 115% energy imported will be deducted from the energy exported, provisionally pending finalization.

3. The energy will be accounted only after signing of PPA.

G 4. The energy banked prior to signing of PPA will be treated as energy banked with the Corporation and will be accounted as per the Corporations rules.

5. This order is only for facilitating continued operations of the Power Plant and Corporation makes no commitments with respect H to terms of PPA which is being finalized separately.

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.]

6. The metering arrangements should be as per the Article No. 4 A of the Wheeling, Banking Agreement and Grid Support Agreement already signed copy of the same is enclosed. [Emphasis supplied]

74Copy pinpoint74. Pertinently, it is noteworthy that the appellant appointed a B professional body CRISIL to re-examine the matter relating to tariff. CRISIL submitted report to the appellant that the rate should be Rs. 2.10 per KWH in the first year. The appellant found the figure indicative and recommended that Rs. 2.45 per KWH should not be exceeded. GoK issued corrigendum dated 08.05.2000 fixing the rate at Rs. 2.52 per KWH. A perusal of the letter dated 24.05.2000 sent by the Additional C secretary of the appellant to the Chief Engineer Electricity, KTPCL indicates that Corporation gave its approval for the energy supplied to the Grid from 15.04.2000 onwards at Rs.2.52 per unit pending signing of PPA. It also contains certain terms. They are as follows:

1. The procedure for payments should be as per the standard D procedure followed in case of IPP Projects.

2. 115% of imported energy should be deducted form the exported energy and payments will be made for net exported energy so arrived. E

3. The metering should be as per the terms of Wheeling & Banking Grid support Agreement between KEB and JTPCL signed on 23- 01-96, till such time PPA is finalized.

4. The firm has to submit an undertaking that the terms and conditions of PPA between KPTCL and JTPCL will be applicable for the payments made by KPTCL for the energy supplied by JTPCL from the date as approved by government till the PPA is signed.

5. This is only an order to facilitate payment of energy charges to M/s. JTPCL and Corporation makes no commitments in this regard and the terms of PPS will be finalized separately.

6. The energy transaction prior to 15-04-2000 will be finalized separately.” (Emphasis supplied) H

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75Copy pinpoint75. Therefore, the said communication would not indicate conduct which matches action in accordance with the concluded contract allegedly under the GO dated 12.05.1999, as the rate stood reduced from Rs.2.60 to Rs.2.52. Various conditions as noticed by us are incorporated. Importantly, condition no.5 indicates that it is only an order to facilitate payments. It was unambiguously indicated that the appellant did not make any commitment in this regard and clinchingly it was indicated that the terms of the PPA will be finalised separately.

76Copy pinpoint76. The last communication after 1.6.1999, to bear in mind, is the Order dated 17.07.2000. Therein, in the Preamble, it is, inter alia, stated that KEB was permitted to finalise the PPA for purchase of the surplus power, as provided therein. Reference is made further to the Government Corrigendum dated 08.05.2000, whereunder, the rate was reduced to Rs.2.52 per unit. Next, it is stated that, on examination, it was found that, continuing with earlier rate of Rs.2.60 per unit, would result in honouring the commitment of the Government. There would be advantage of procuring the better price every year. The formal Order was passed by the GoK, permitting the appellant to purchase power at the rate of Rs.2.60, with an annual increase of five percent every year, as indicated in the Preamble to the Order. The Order was to be implemented from the date of issue of the Order. The other conditions of the Government Order dated 12.05.1999 were to remain unaltered. It is thereafter that the draft E PPA was prepared dated 07.11.2000. We may observe, that as far as the rate is concerned, the rate indicated in G.O. dated 12.05.1999, being restored and bearing in mind the contents of G.O. dated 07.07.2000, it could be found, that the ‘rate’ as such was concluded under G.O. dated 12.05.1999.

77Copy pinpoint77. However, a golden thread, which runs through the correspondence is that, both the KEB, GoK and the appellant and the first respondent, did contemplate the execution of the PPA. The correspondence after 01.06.2000 also, unerringly, points to the fact that parties did not view the PPA as a mere desire. They have clearly G proceeded on the footing that the terms of the agreement must be evidenced in writing. Quite clearly, the High Court has erred in not bearing in mind the contents of the communications and their true purport.

78Copy pinpoint78. It is true that there is no express provision in the proviso to Section 27(2) of the Act within the meaning of second part of Section 10 H of the Indian Contract Act, that the contract, which is concluded, must

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] be in writing. However, the question would arise, as to whether there is A a contract, which was concluded within the meaning of proviso to Section 27(2). It is further true that Section 27(2) does not use the words ‘Power Purchase Agreement’. Section 19(4)(j) of the Act refers to ‘contracts concluded’. Placing the said words side-by-side with the words used in the proviso to Section 27(2), we find that they are identical. The said words, viz., ‘contracts concluded’ must bear the same meaning, both in Section 19 and in Section 27. It is true that there is no format prescribed for a PPA. The format came in 2005. Section 27(2) and Section 19(4)(j), do not expressly refer to a PPA. However, the search must continue to ascertain the purport of the words ‘contracts concluded’. In order that there must be a contract concluded, undoubtedly, there must be a proposal made, which must be accepted. There must be consideration for the promise. The proposal must be accepted, which must be communicated, as already explained. The acceptance must be unqualified. This is an over simplification of a complex process. We say this, as the parties can be said to have entered into a contract or a contract would be said to be concluded only when they are ad idem on all the essential terms of the contract. In other words, if the proposals containing the essential terms have been accepted, and the acceptance is communicated and, if the other conditions in Section 2 of the Indian Contract Act are complied with, viz., that is there is consideration and the contract is enforceable in law, within the meaning of Section 10 of the Act, it would lead to the creation of a concluded contract. Here, as we have noticed, the KEB, the GoK and, what is more, the first respondent, clearly contemplated that there should be a PPA.

79Copy pinpoint79. We may further notice that there was a Banking, wheeling and grid agreement, executed in the year 1996 between the KEB and the first respondent. It is with the execution of the draft PPA, that it was decided that the earlier agreement of 1996, was to remain in abeyance during the period of the PPA. In the proposal dated 21.11.1998, the rate was initially shown as Rs.2.90/KWH but even this rate was exclusive of certain six elements, which meant that the rate would be even more. Thereafter, communication dated 19.01.1999, addressed by KEB to the G GoK would indicate that negotiations were held, and what is more, detailed discussions were held, whereunder, it was decided that a price of Rs.2.60 per unit can be offered, comprising of Rs.1.70 as fixed charges and Rs.0.90 as variable charges. Fixed charges were to be escalated by five per cent every year beginning from the second year. Conditions of penalty H

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A to be paid by the firm for short supply of power and assured offtake was also indicated. The KEB sought approval from GoK. The GoK responded to this recommendation by KEB by letter dated 05.03.1999. It was indicated that the present proposal kept the tariff open-ended and possible revision. The PPA being for a period five years, KEB was advised to negotiate with the first respondent for fixed tariff for five years. Revised B proposal was called for, which led to further discussions. In the said communication, KEB expressed its willingness to buy power subject to certain terms and conditions. They included a penalty clause, both for short supply and short drawal and that the PPA was to be a simple document. A two-part tariff was ruled out. Equally, was payment of fuel cost, at actual. Therefore, on 31.03.1999, it is that, what has been described as the proposal, as such, was made by the first respondent. KEB was asked to convey its acceptance at the earliest. This is as first respondent was to approach its Board and its lenders on getting its acceptance. We will proceed on the basis that it was a matter of internal arrangement. On 23.04.1999, KEB wrote to the GoK. KEB mentioned about two options. Further, the KEB also, indicated it must be noted that the first respondent had made an offer as detailed in letter after the commissioning of Unit 2. They are seven aspects. They included obligation to supply power with a threshold value of 75MW equivalent to 54MU per month, penalty to be paid by the first respondent in case of supply being less than threshold value, payment by KEB of full value of threshold in case consumption is less than the threshold value and minimum supply and minimum consumption being on monthly basis, right of first respondent to terminate the contract, if there is escalation in fuel cost beyond five per cent at any time unless KEB agreed to compensate for such escalation. What is most important is, with regard to these matters, it was expressly indicated in the letter dated 23.04.1999 that ‘these are issues’ to be negotiated with the firm while finalising the PPA and will be taken up later on. These issues were not negotiated between the KEB and the first respondent before 01.06.1999. There is no dispute about this aspect. The fact that the appellant did not mention in communication after 01.06.1999 about the need for approval by the Commission is clearly insufficient to oust the jurisdiction of the Commission. The Commission cannot be prevented from exercising the power based on the conduct of the appellant in this regard which included preparation of the draft PPA. Equally, the act of the GoK in issuing corrigendum dated 08.05.2000 H or the order dated 07.07.2000, cannot also detract from the power of

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] Commission or lead us to hold that there was a concluded contract under A Section 27(2). The fact that issues in letter dated 23.04.1999 have been included in terms of the PPA is clearly besides the point as the question is whether the parties were agreed on them as on 01.06.1999. They were clearly not. In this regard we may notice the sheet anchor of the first respondent, viz., the G.O. dated 12.05.1999. GoK in the said G.O., B undoubtedly, agreed for the rate per unit to be Rs. 2.60, including variable charges. It also agreed for an annual increase of five per cent every year. The term of the PPA was to be five years. The other two aspects must, however, are not be lost sight of. By G.O. dated 12.05.1999, actually KEB was permitted to ‘finalise a Power Purchase Agreement’ and to submit the same to the Government for approval. What could be said to C be approved by the Government was the rate, as indicated, and the term. The G.O. clearly indicated that all the parties, including the GoK contemplated a PPA with the execution of which alone, they were to be bound. The Principle of Negotiated Tariff for captive generating power project, who intend to sell power to KEB, was to be adopted. Several D matters remained unsettled. It is not in the region of dispute that the issues, which KEB, in its letter dated 23.04.1999, had indicated, as issues to be negotiated while finalising the PPA and to be taken up later on, never came to be negotiated pursuant to the GO dated 12.05.1999 before 01.06.1999. This is crucially fatal to the case of the first respondent. We conclude that the parties contemplated a written PPA containing various E details apart from the tariff rate and the tenure. There was no concluded contract with respect to several aspects, at least, as on 01.06.1999, which is the date on which the Act came into force. The fact that power was supplied after the Act came into force, must be understood in the context of the correspondence, which we have elaborately referred to. Even F here, we may notice that there were doubts about the rates itself. An Expert Body was appointed. It recommended Rs.2.10 per KWH. The appellant, which, in the meantime, came upon the scene, as a result of the Act, and succeeded to the KEB, recommended that supply of power may be made by the first respondent subject to the finalisation of the PPA at a rate not exceeding Rs.2.45 per unit. GoK issued a Corrigendum G providing for the rate of Rs.2.52 per unit. Supply was made and payments made at Rs.2.52 per unit. Government issued Order dated 07.07.2000 reinstating the rate of Rs.2.60 per unit. There may be merit in the contention of the first respondent that as far as the rate is concerned, there is consistency in that, GoK restored the rate at Rs.2.60 by way of H

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A honouring its contractual commitment. It is here that we must unravel the true scope of the words ‘contracts concluded’ in Section 27(2) of the Act. The proviso when it uses the words ‘contracts concluded’, does not use the words ‘contracts concluded as regards tariffs’. A contract of the nature, we are concerned with, cannot be said to consist only of a rate and the term or even the quantum included. In a contract of this nature, there are obviously various other aspects about which the parties must be ad idem. The rate, the term and quantum are integrally interconnected with other terms. There cannot be concluded contract without parties being ad idem about those terms. We found that the parties were not ad idem as regards the issues which were expressly left open for negotiations in the communication dated 23.04.1999. GoK also contemplated ‘finalising’ a PPA. The word ‘finalising’ and the word ‘PPA’, both of which did not take place before 01.06.1999, in our view, has resulted in a situation where a contract could not be said to be concluded even within the meaning of the proviso to Section 27(2) of the Act. In other words, even proceeding on the basis that even in a given case, a contract could be concluded within the meaning of the proviso, even in absence of a written PPA, bearing in mind also the absence of the word ‘PPA’ in the said provision and contrasting it with Section 18 where the same Law-Giver has used the word ‘PPA’, if the parties were not ad idem about the necessary terms and if the parties equally contemplated a PPA to bring it into existence a contract within the meaning of Section 27(2), then, clearly a PPA would be indispensable to attract the proviso to Section 27(2). This is not even a case where, in other words, parties were ad idem on all the essential aspects, which go into the formation of a complex contract as is involved in the facts of this case. Therefore, the supply of power, in our view, by the first respondent, after 01.06.1999, cannot be relied upon, in view of the facts revealed by the correspondence, which itself makes it a stop gap arrangement, and what is more subject to conditions which included execution of a PPA, to conclude that the subsequent conduct, unerringly pointed to the fact that a contract within the meaning of Section 27(2) stood concluded before 01.06.1999.

80Copy pinpoint80. In Alexander Brogden(supra), from which considerable support is sought to be drawn by Dr. Abhishek Singhvi, learned Senior Counsel, the appellants who were defendants claimed that there was no binding contract between them and the plaintiffs. The appellants had supplied coal for some time to the plaintiffs. The appellants suggested

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] after some time that there should be a contract entered into between the parties. After the agents met, the terms of the agreement came to be drawn up by the agent of the plaintiff and sent to the defendants. The defendants filled up certain parts which had been left in blank, and what is more, the name of a person was shown as an arbitrator. The word ‘approved’ was written at the end of the paper. The chief partner in the defendant’s firm signed. Though the usual form of the signature of the partnership was “B & Sons”, it was the chief partner who signed. The defendant sent the paper to the agent of the plaintiff who put it in his desk. Nothing towards the execution of the formal agreement took place. Both parties acted upon the same. Coals were supplied. Payments were made. In fact, when there were some complaints in regard to the correctness of the supply in accordance with the paper containing the approval of the appellant through its chief partner, explanation and excuses were given, ‘the contract’ came to be alluded to in the correspondence. Further supplies resumed. However thereafter arose disputes. The appellants refused to honour the agreement to supply. In much of the correspondence which followed again the word ‘contract’ made its appearance. The plaintiff brought an action for damages for breach of contract. It was on these facts that Lord Hatherley inter alia held: “Now, my Lords, I apprehend that if it had stopped here, this is a course of action from which the inference would fairly be drawn which becomes quite conclusive afterwards. Up to the present stage to which I have brought it the case stands thus: Agreement proposed first of all by the coal company, sent as a proposition to the railway company, converted by the railway company into a definite agreement with some very slight alterations, sent back again with these few alterations and then adopted and approved by the coal company with only one important farther alteration, namely, the insertion of Mr. Armstrong’s name as the arbitrator — a letter written with it by the person engaged in the whole negotiation on the one side, saying that he could not see the person who was negotiating on the other side until the time when the agreement was to come into effect — that immediately followed by an order for coals to the extent of 250 tons — an inquiry sent by telegram, and an anxious inquiry by letter also saying:— “Let us know whether we can rely upon your supplying us with 220 tons of coal per week, because, upon your answer whether you can or cannot supply us with that quantity will depend the H

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A arrangements I am to make with other coal companies in the North. It was said that this was inconsistent with the Plaintiffs having an agreement by which the Defendants had bound themselves to supply that quantity of coal. I do not see any such inconsistency whatever. It might possibly bear on the question of whether the agreement was actually clenched at that moment or not. It might indicate this: If you cannot answer definitely that you can supply us with the 250 tons of coal, we may feel ourselves at liberty then to deal with the other coal companies — that might possibly be the true view of it, in which case it struck me it might be said that it was not eo instanti that the agreement was clenched. However, what followed did clench it most distinctly, because there not only comes the answer,… XXX XXX XXX D My Lords, I will not go through the whole of these transactions, If you ask me, when in my judgment the agreement was complete, I answer that the agreement was complete when the first coals, the 300 tons of coal supplied in January, were invoiced at the differing price, and when that differing price was accepted and paid. I think that did bring the case up to what Mr. Herschell very fairly admitted, as he was bound to admit it, would be a sufficient case to make out on the part of the Plaintiffs. It does establish a course of action on the part of the Plaintiffs of such a character as necessarily to lead to the inference on the part of the Defendants that the agreement had been accepted on the part of the Plaintiffs, and was to be acted upon by them; and they did act upon it accordingly.”

81Copy pinpoint81. We have noticed the facts. It was a contract for sale of coal. There was a long course of dealing between the parties. The defendant wanted, however, to have a written contract. The agents met. The terms of the draft agreement were prepared by the agent of the buyer and sent to the seller. The chief partner of the Seller firm, in fact, filled up certain parts of the terms which had been left in blank. What is more, the name of the arbitrator to decide in the case of a dispute was also written. Most importantly, the word ‘approved’ was written. It was signed by the chief partner. It was sent to the agent of the buyer. Though the matter did not culminate in the drawing up of a formal written agreement

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] as such, the evidence revealed that the coal was supplied and paid for. It A is pertinent to notice the context in which the question arose. It did not involve the aspect about a statute like the Act in question, with its ramifications both qua the alleged contracting parties and the impact on the object of the Act bearing in mind the interests of the consumers as well. At any rate, the view taken in the said case cannot be safely applied even otherwise to the facts of the case before us. It is not a case where the parties were not ad idem on all the essential terms of the contract. It is not a case where the correspondence revealed that a concluded contract did not exist. The conduct of the parties in the supply of the goods in question, and the acceptance of the same and the payment made therefor and the not infrequent reference to the terms of ‘the contract’ as approved by the chief partner of the Seller firm “as contract” fortified the Court in the facts in concluding that there was a concluded contract. On the other hand, the correspondence in this case establish a completely different factual matrix. Both before 01.06.1999 and thereafter, the parties clearly contemplated the execution of the PPA. They were not ‘ad idem’ on seven matters which are expressely left open for negotiations as indicated in letter dated 23.04.1999. We are unable to brush aside these as not constituting essential terms. To conflate ‘concluded contract’ even in the context of the proviso to Section 27, as one merely agreeing to the tariff, tenure and the quantum overlooks the complex nature of the working of such a contract. We cannot be oblivious to the impact of provisions relating to penalty, threshold value, consumption and other terms. Before 01.06.1999, it is not in dispute that no negotiation as was contemplated in regard to the same took place. Even negotiations after 01.06.1999, and the preparation of a draft PPA on 07.11.2000, cannot clearly suffice. This is a case of a contract involving a public body. This is also a case where the implications of the contract are not confined to the parties alone. The contract impinges on interest such as interest of the consumer and other relevant aspects. We, therefore, are of the view that we cannot permit the first respondent to draw support from the said judgment.

82Copy pinpoint82. In Kollipara Sriramulu (Dead) by His Legal Representative (supra), the Court was dealing with a question, whether there was an oral agreement for the sale of shares by the partners of the firm. One of the contentions of the appellant therein was that there was no contract because the sale was conditional upon a regular agreement being executed and there was none. It is apposite that we notice the following discussion: H

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A “3. … We do not accept this argument as correct. It is well established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, B cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) C in Ridgway v. Wharton [6 HLC 238, 63], the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von Hatzfeldt-Wildenburg v. Alexander D [(1912) 1 CH 284, 288] it was stated by Parker, J. as follows: “It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution E of the further contact is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. F In the latter case there is a binding contract and the reference to the more formal document may be ignored.”

4. In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rossiter v. Miller [3 AC 1124] Lord Cairns said: “If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract.”

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] In Currimbhoy and Company Ltd. v. Creet [60 IA 297] the A Judicial Committee expressed the view that the principle of the English law which is summarised in the judgment of Parker, J. In Von Hatzfeldt-Wildenburg v. Alexander [(1912) 1 CH 284, 288] was applicable in India. The question in the present appeals is whether the execution of a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of Respondent 1 does not show that the drawing up of a written agreement was a pre-requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. We accordingly hold that Mr Gokhale is unable to make good his argument on this aspect of the case.” E The principle is unexceptionable. But we are of the view that the facts are distinguishable and, on the facts, herein, there was no concluded contract and what is more, a PPA was not a mere desire but an indispensable requirement to conclude the terms.

83Copy pinpoint83. It is clear as day light that all through the parties undoubtedly contemplated entering into a power purchase agreement. The subject matter of the contract, the position of the parties, the implications of the working of the contract and more importantly, the intention of the parties do not persuade us to safely gather that there was a concluded contract upon negotiations and correspondence, culminating in the Government Order 12.05.1999. It is clear that even the GO dated 12.05.1999 expressly contemplated only a permission by the Gok to the KEB to finalise “a PPA” for the purchase of surplus power. The word “finalise” in the context of the PPA cannot be played down in the context of the previous correspondence at any rate. It was, in fact, also contemplated that the PPA which was to be finalised must after finalisation be submitted again H

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A to the government. GoK was thereafter to grant its approval. This cannot be overlooked. C.A. @ S.L.P. (C) NO. 23793 OF 2004

84Copy pinpoint84. The contention of the appellant-Commission is that it was not a party originally in the appeal. The Court, on 17.08.2002, directed the B Commission to be ready with the written submission on the question of interim relief. On 19.11.2002, the High Court directed the appellant in the other case to add the Commission as a party. On this basis, it is contended that the findings in the impugned Order, that at no stage, the High Court had directed the Commission to be impleaded, is not correct.

85Copy pinpoint85. Next, it is contended that the finding that Commission filed extensive pleadings and contested the appeal, exhibiting an abnormal interest, is not correct. The Order dated 17.08.2002, hereinbefore referred to, is relied upon. The finding, therefore, that the Commission exhibited an abnormal interest in contesting the appeal or filed extensive pleadings, is impugned. As regards the decision of the Court to not allow the impleadment of the Commission, it is contended that the appellant does not seek to challenge the same. All that the learned Counsel submits is that the observations made against the appellant-Commission may be set aside.

86Copy pinpoint86. Shri Gopal Jain, learned Senior Counsel for the first respondent has no objection to the same. Therefore, the appeal filed by the Commission is to be disposed of, setting aside the observations made against it and the appeal is to be allowed on the said basis. THE CONTOURS OF SECTION 41 OF THE ACT

87Copy pinpoint87. Section 41 of the Act reads as follows: F “41. Appeals against the order of the Commission. - Any person aggrieved by any decision or order of the Commission passed under this Act may file an appeal to the High Court of Karnataka within sixty days from the date of communication of the decision or order of the Commission to him, on questions of law arising out G of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding thirty days.” H (Emphasis supplied)

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.]

88Copy pinpoint88. A Right of Appeal is a creature of a Statute. The right can be A qualified or conditioned. The ambit of the appellate power is to be discerned from the terms of the Statute. A ‘question of law’ is not the same as a ‘substantial question of law’. However, when the Statute insists on a ‘question of law’ to maintain an appeal, the Appellate Body stands constrained to that extent. B

89Copy pinpoint89. Interpreting Section 15Z of the Securities and Exchange Board of India Act, 1992, which also conditions the Right of Appeal, ‘on any question arising out of such Order’, this Court, speaking through P.S. Narasimha J., in Securities and Exchange Board of India v. Mega Corporation Limited11 held, inter alia, as follows: C “14. On a ‘textual’ interpretation, the expression ‘question of law’ is defined in the Black’s Law Dictionary as follows: “1. An issue to be decided by the judge, concerning the application or interpretation of the law;

2. A question that the law itself has authoritatively answered, so D that the Court may not answer it as a matter of discretion;

3. An issue about what the law is on a particular point; an issue in which parties argue about, and the court must decide what the true rule of law is; E

4. An issue that, although it may turn on a factual point, is reserved for the court and excluded from the jury; an issue that is exclusively within the province of the judge and not the jury”

17. The jurisdiction of the Supreme Court under Section 15Z to consider any question of law arising from the orders of the Tribunal F should therefore be seen in the ‘context’ of the powers and jurisdiction of the Tribunal under Sections 15K, 15L, 15M, 15T, 15U and 15Y of the Act. It is in the functioning of the Tribunal to re-examine all questions of fact at the appellate stage while exercising jurisdiction under Section 15T of the Act. In Clariant18 and National Securities Depository19, this Court had an occasion G to examine the jurisdiction of the Tribunal and explain that the Tribunal has wide powers. Being a permanent body, apart from acting as an appellate Tribunal on fact, the Tribunal routinely

11 MANU/SC/0362/2022 H

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A interprets the Act, Rules and Regulations made thereunder and evolves a legal regime, systematically developed over a period of time. The advantage and benefit of this process is consistency and structural evolution of the sectorial laws.

19. It is in this very context that the UK Supreme Court in the case of Jones v. First Tier Tribunal,20 formulated certain principles for appellate courts to interfere against the orders of Tribunals on the ground of existence of questions of law. The Court held as under: “16 … It is primarily for the tribunals, not the appellate courts, to develop a consistent approach to these issues [of law and fact], bearing in mind that they are peculiarly well fitted to determine them. A pragmatic approach should be taken to the dividing line between law and fact, so that the expertise of tribunals at the first tier and that of the Upper Tribunal can be used to best effect. An D appeal court should not venture too readily into this area by classifying issues as issues of law which are really best left for determination by the specialist appellate tribunals.”

20. The scope of appeal under Section 15Z may be formulated as under: E 20.1 The Supreme Court will exercise jurisdiction only when there is a question of law arising for consideration from the decision of the Tribunal. A question of law may arise when there is an erroneous construction of the legal provisions of the statute or the general principles of law. In such cases, the Supreme Court in F exercise of its jurisdiction of Section 15Z may substitute its decision on any question of law that it considers appropriate. 20.2 However, not every interpretation of the law would amount to a question of law warranting exercise of jurisdiction under Section 15Z. The Tribunal while exercising jurisdiction under G Section 15T, apart from acting as an appellate authority on fact, also interprets the Act, Rules and Regulations made thereunder and systematically evolves a legal regime. These very principles are applied consistently for structural evolution of the sectorial laws. This freedom to evolve and interpret laws must belong to the Tribunal to subserve the Regulatory regime for clarity and H

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LTD. (EARLIER KNOWN AS JINDAL THERMAL POWER CO. LTD. & JINDAL TRACTABEL POWER CO. LTD.) & ORS. [K. M. JOSEPH, J.] consistency. These are policy and functional considerations which the Supreme Court will keep in mind while exercising its jurisdiction under Section 15Z.” The Commission is an Expert Body. Interference with its findings cannot be sustained, to begin with, if it is bereft of reasons. Findings of such a body must receive due deference. Perversity in the sense of findings, which are wholly without basis or material or which no person with the professed skills would arrive at, may merit interference. A finding, which ill squares with a clear statutory injunction, would leave the door ajar for overturning the finding. THE OTHER FINDINGS OF THE HIGH COURT C

90Copy pinpoint90. We must deal with the three other findings. The High Court has found that there is merit in the argument based on principles of promissory estoppel and legitimate expectation. We would have explored the matter and rendered our findings qua the approach of the High Court in regard to this matter which at least at first blush looks ‘wholly untenable’ D but since the first respondent has taken the stand before this Court that it may not seek to draw support from the said principles and rightfully so, we desist from further enquiry. WHETHER THE FINDINGS OF THE COMMISSION ARE PERVERSE, ARBITRARY AND WITHOUT APPLICATION OF E MIND (POINT NO.4)?

91Copy pinpoint91. As regards the finding by the High Court answering point no. 4, namely, whether the impugned orders are perverse, arbitrary and passed without application of mind, our attention is drawn by the appellant to the limited nature of jurisdiction exercised by the High Court under F Section 41 of the Act.

92Copy pinpoint92. It has been the endeavour of the appellant to point out that contrary to the point which was raised, namely, whether the orders were perverse, arbitrary and passed without application of mind at any rate, the point has been answered in a manner which cannot be sustained. G The High Court opens the discussion under point no. 4 by referring to the contention of the first respondent that the impugned order suffers from certain errors apparent on its face. Reliance is placed on a decision of this Court dealing with power of this court under Article 136 of the Constitution. H

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93Copy pinpoint93. The High Court has proceeded to find that patent errors have been committed by the Commission. It is found that the Commission has wrongly calculated the fixed charges for 487MUs while fixing the tariff. This is after finding that the fixed charges should be for 657Mus. The second error, it is found, lay in the Commission finding that the incentive payment charges should be Rs.0.952, in arriving at the tariff rate whereas B incentive payment charges were taken as Rs.0.924 per unit. The tariff would stand raised to Rs.2.54 per unit, if the aforesaid errors were corrected. Next, it is observed that these errors were not disputed by the appellants in the pleadings before the High Court or in the course of argument. The learned Senior Counsel for the appellant Shri S.S. C Naganand, who submits that he had appeared in the High Court, pointed out that, in the first place, being a Statutory Appeal, there is no provision for pleadings, as such, in the High Court. Further, the Commission has given a basis for what it has done. A detailed note is also made available, in this regard, to this Court. The learned Counsel has further said that the matter was argued threadbare before the Court. We find that the High Court has not given any independent reasoning except as we have referred to. Next, the High Court has found that, having agreed to a negotiated single part tariff, the Commission could not have unilaterally ignored the well-established parameters and applied norms, which were, undoubtedly, valid for a two-part tariff and super impose the same in calculating tariff on a single part tariff basis. The two-part tariff applied uniformly, it is found would have resulted in a tariff rate of Rs.3.16 per unit, which was much higher than Rs.2.60 under the draft PPA. Here again, these findings appear to be based on there being a concluded contract and, secondly, are bereft of any reasons and material. The High F Court proceeds to note the case of the first respondent that tariff of the first respondent was one of the cheapest as it was based on least cost tariff basis unlike other companies. No attempt is made to deal with the findings of the Commission or the power and duty of the Commission. This part of the finding is summed-up by finding that there is ‘some substance’ in the contention of the first respondent that it was at the G receiving end of ‘invidious discrimination and arbitrariness’. We take exception to this approach by the High Court in a Statutory Appeal conditioned by the requirement that a question of law must arise. A finding that there is ‘some substance’ cannot be the approach, when it is finally disposing of an appeal and finding fault with the Order of an H Expert Body, in particular. Equally, we are mystified by the invocation of

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