Case title: 

Jaipur Vidyut Vitran Nigam Ltd & Ors v. MB Power (Madhya Pradesh) Ltd & Ors.

Date of Order: 

8th January, 2024

Bench:

Hon’ble Justice. Mr. B.R. Gavai

Hon’ble Justice Mr. Prashant Kumar Mishra

Parties: Appellant(s): Jaipur Vidyut Vitran Nigam Ltd. & Ors

Respondent(s): MB Power (Madhya Pradesh) Ltd. & Ors

SUBJECT:

In the case of Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. MB Power (Madhya Pradesh) Limited & Ors., the Hon’ble Supreme Court of India (hereinafter referred to as ‘the Supreme Court’ or ‘the Court’) overturned a High Court decision that directed a state entity to enter into a power purchase agreement, emphasizing the importance of the State Electricity Regulatory Commission's powers in regulating electricity procurement. The dispute arose from disagreements over the quantum of power to be purchased, leading to legal battles. The Supreme Court held that the High Court's intervention was not justified, highlighting the State Commission's authority to reject bids misaligned with market prices to protect consumer interests. The judgment sets a precedent, emphasizing transparency, market-aligned tariff adoption, and the regulatory powers of State Commissions in electricity procurement

IMPORTANT PROVISIONS:

The Electricity Act, 2003:

• Section 63
• Section 62
• Section 61
• Section 64
• Section 79(1)(b)
• Section 86

The General Clauses Act, 1977

• Section 13(2)

The Constitution of India, 1950:

• Article 226

OVERVIEW:

• Rajasthan Rajya Vidyut Prasaran Nigam Limited (RVPN) filed a petition before the Rajasthan Electricity Regulatory Commission, seeking approval for the procurement of 1000 MW of power through competitive bidding.
• Qualifying bidders participated, and financial bids were submitted. RVPN decided to negotiate with qualified bidders to potentially reduce tariffs.
• Power Purchase Agreements (PPAs) were signed with the lowest bidders (L-1, L-2, and L-3) for the initially proposed 1000 MW quantum.
• The Government of Rajasthan approved the purchase of only 500 MW, leading the State Commission to approve the reduced quantum based on recommendations from the Expert Appraisal Committee (EAC).
• Dissatisfied with the reduction, L-2 and L-3 bidders appealed to the Appellate Tribunal for Electricity (APTEL), which ruled in their favor, deeming the reduction from 1000 MW to 500 MW incorrect.
• The Supreme Court, upon appeal, upheld the decision, emphasizing that the originally offered quantum in the bidding process should be considered.
• During the proceedings, L-4 and L-5 bidders faced scrutiny from the State Commission regarding tariff alignment with market prices.
• L-5 bidder challenged the Commission's order at APTEL, which held that the State Commission had to adopt the tariffs without assessing alignment with market prices.
• Challenging the APTEL order, the appellants approached the Supreme Court, leading to an interim order allowing L-5 bidder to supply power at Rs.2.88 per unit.
• Subsequently, respondent no.1 filed a writ petition before the High Court seeking a Letter of Intent and a power purchase agreement.
• The High Court granted the petition, instructing the appellants to issue a Letter of Intent and sign a power purchase agreement with respondent no.1.
• Dissatisfied with the High Court's decision, the appellants approached the Supreme Court by filing a civil appeal.

ISSUES RAISED:

• Whether the Respondent Commission could reject the tariff/bid of the Appellant, in terms of Section 63 of the Electricity Act, 2003 and the directions issued by the Hon’ble Supreme Court?
• Whether there was a sufficient proof to show that the bid of the Appellant was market aligned?
• Whether the argument of Consumer interest be advanced by the Rajasthan Discoms in the facts of the present Appeal?”

ARGUMENTS ADVANCED BY THE APPELLANT:

• Appellants argued that it initially sought approval for 1000 MW but faced a reduction to 500 MW, justified by recommendations from the Expert Appraisal Committee (EAC). APTEL later overturned this reduction.
• The State Commission rightfully examined tariffs from L-4 and L-5 bidders, ensuring alignment with market prices.
• Appellants contended APTEL's ruling, suggesting the State Commission lacked power to assess market alignment, was incorrect. Section 86(1)(b) of the Electricity Act grants such authority.
• Emphasizing consumer well-being, the appellant argued that respondent No.1's (L-5 bidder) higher rates would burden consumers, contrasting with SKS Power's (L-5 bidder) lower rates.
• The Appellant questioned the High Court's directive to enter a power purchase agreement with respondent No.1, deeming it against the public interest and detrimental to consumers.
• Appellant highlighted the public interest in rejecting tariffs misaligned with market realities, underscoring the potential financial burden on consumers if higher rates were accepted.

ARGUMENTS ADVANCED BY THE RESPONDENT:

• The State Commission had the authority to scrutinize tariffs for market alignment, ensuring procedural adherence to the Bidding Guidelines.
• Rejecting tariffs misaligned with market prices was crucial for consumer protection, preventing potential financial burdens on consumers.
• APTEL rectified the State Commission’s errors, ensuring a just assessment of tariffs and safeguarding the interests of consumers.
• The respondents endorsed the High Court's issuance of a mandamus, contending that it prioritized public interest by restraining the state entity from actions contrary to consumer welfare and transparent bidding protocols.
• Respondents maintained that the High Court's decision aligned with the principles of a transparent bidding process, averting arbitrary decisions that could adversely impact consumers.
• The High Court rightly balanced the concerns of all stakeholders involved, including consumers, ensuring a just and fair power procurement process.

JUDGEMENT ANALYSIS:

• The Supreme Court emphasized the statutory authority vested in the State Commission under Section 86(1)(b) of the Electricity Act.
• It affirmed that the State Commission has the authority to regulate the electricity procurement process and evaluate bids for alignment with market prices.
• The judgment highlighted the significance of Bidding Guidelines, specifically Clause 5.15, granting the Bid Evaluation Committee (BEC) the authority to reject bids not in line with prevailing market prices.
• The Court endorsed the State Commission's right to assess and reject tariffs based on their alignment with market rates.
• Emphasizing consumer interests, the Court criticized the decision of the Appellate Tribunal for Electricity (APTEL), which, in certain instances, overlooked the importance of consumer welfare.
• The judgment stressed the cautious exercise of discretionary powers under Article 226 of the Constitution.
• It noted that intervention by the High Court through a writ, directing a state entity to enter a contract, should be guided by public interest and a careful consideration of all relevant factors.
• The Supreme Court rejected arguments challenging the interpretation of "all" versus "any" in the Bidding Guidelines.
• It emphasized the need for a balanced approach, considering both consumer and generator interests, in line with the overarching purpose of the Electricity Act.
• The Court held that the High Court's issuance of a mandamus directing the state entity to enter a contract lacked justification.
• It pointed out the potential financial burden on consumers if higher tariff rates were approved, highlighting the larger consumers' interest and public welfare.

CONCLUSION:

The Supreme Court unequivocally asserted that the decision handed down by the High Court was bereft of justification, particularly when scrutinized through the lens of broader consumer interests and the consequential public good. The apex court, wielding its constitutional authority, deemed the judgment and order issued by the High Court as legally unsustainable, prompting their unequivocal quashing and setting aside. This landmark case not only serves as a decisive precedent but also reinforces the foundational principles of judicious discretion within the judicial system. The ruling underscores the imperative to safeguard public interests and welfare, advocating for a balanced and conscientious exercise of judicial powers. The Court's meticulous consideration of the larger ramifications on consumers and the public at large highlights the profound responsibility incumbent upon the judiciary to uphold justice while safeguarding the broader interests of society.