2024 (1) TMI 1459 - SC - Indian Laws

Rejection of tariff/bid of the Appellant in terms of Section 63 of the Electricity Act 2003 - existence of sufficient proof to show that the bid of the Appellant was market aligned - argument of Consumer interest be advanced by the Rajasthan DISCOMS in the facts of the present Appeal or not - HELD THAT - The High Court in the impugned judgment relying on the observations of the learned APTEL and the earlier orders of this Court has come to a conclusion that applying the test of filling the bucket the procurers were bound to take supply from the Respondent No. 1-MB Power at the rates quoted by it. On the basis of the judgment of the learned APTEL the High Court held that the Respondent No. 1-MB Power had a right to supply power since there was a gap of 300 MW between the power procured by the procurers and the ceiling of 906 MW determined by this Court. In these premises the High Court issued a mandamus directing the Appellants to take supply of 200 MW electricity/power from the Respondent No. 1-MB Power at the rates quoted by it. It has been held by this Court that unlike Section 62 read with Sections 61 and 64 under the provisions of Section 63 of the Electricity Act the appropriate Commission does not determine tariff but only adopts tariff already determined Under Section 63. It has further been held that such adoption is only if such tariff has been determined through a transparent process of bidding and that this transparent process of bidding must be in accordance with the guidelines issued by the Central Government - Sections 62 and 63 deal with determination of tariff which is part of regulating tariff. It has further been held that in a situation where the guidelines issued by the Central Government Under Section 63 cover the situation the Central Commission is bound by those guidelines and must exercise its regulatory functions albeit Under Section 79(1)(b) only in accordance with those guidelines. It has further been held that it is only in a situation where there are no guidelines framed at all or where the guidelines do not deal with a given situation that the Commission s general regulatory powers Under Section 79(1)(b) can be used. The evaluation committee is empowered to consider as to whether the rates quoted are aligned to the market price or not and that the evaluation committee shall have the right to reject all the price bids if it finds that the rates quoted are not aligned to the prevailing market price. The orders which are relied upon by the learned APTEL specifically the order dated 19th November 2018 of this Court had specifically clarified that the State Commission was to decide the tariff Under Section 63 of the Electricity Act having regard to the law laid down both statutorily and by this Court - The contention that this Court has ordered that the bids quoted by the bidders are to be accepted without going into the question of it being market aligned or not is without substance. The learned APTEL has grossly erred in holding that the State Commission has no power to go into the question as to whether the prices quoted are market aligned or not and also not to take into consideration the aspect of consumers interest. Applying the principle of literal interpretation the evaluation committee/BEC would be entitled to reject only such of the price bids if it finds that the rates quoted by the bidders are not aligned to the prevailing market prices. It does not stipulate rejection of all the bids in the bidding process. For example if in a bidding process which is in accordance with the Bidding Guidelines and is transparent 5 bidders emerged. Out of the said bidders the rates quoted by only 3 bidders are market aligned and the rates quoted by rest of the 2 bidders are not market aligned. In accordance with the Bidding Guidelines the BEC would be entitled to recommend acceptance of the bids of the first 3 bidders and reject the bids of rest of the 2 bidders whose quoted rates/prices are not found to be market aligned. The High Court was not justified in entertaining the petition. The Constitution Bench of this Court in the case of PTC India Limited 2010 (3) TMI 1209 - SUPREME COURT has held that the Electricity Act is an exhaustive code on all matters concerning electricity. Under the Electricity Act all issues dealing with electricity have to be considered by the authorities constituted under the said Act. As held by the Constitution Bench of this Court the State Electricity Commission and the learned APTEL have ample powers to adjudicate in the matters with regard to electricity. Not only that these Tribunals are tribunals consisting of experts having vast experience in the field of electricity. As such we find that the High Court erred in directly entertaining the writ petition when the Respondent No. 1 i.e. the writ Petitioner before the High Court had an adequate alternate remedy of approaching the State Electricity Commission. This Court has clearly held that when a right is created by a statute which itself prescribes the remedy or procedure for enforcing the right or liability resort must be had to that particular statutory remedy before invoking the discretionary remedy Under Article 226 of the Constitution of India. In the present case the decision-making process as adopted by the BEC was totally in conformity with the principles laid down by this Court from time to time. The BEC after considering the competitive rates offered in the bidding process in various States came to a conclusion that the rates quoted by SKS Power (L-5 bidder) were not market aligned. The said decision has been approved by the State Commission. Since the decision-making process adopted by the BEC which has been approved by the State Commission was in accordance with the law laid down by this Court the same ought not to have been interfered with by the learned APTEL. In any case the High Court by the impugned judgment and order could not have issued a mandamus to the instrumentalities of the State to enter into a contract which was totally harmful to the public interest - the impugned judgment and order passed by the High Court is not sustainable in law and deserves to be quashed and set aside. Conclusion - i) The appropriate Commission does not act as a mere post office Under Section 63. It must adopt the tariff which has been determined through a transparent process of bidding but this can only be done in accordance with the guidelines issued by the Central Government. ii) The State Commission and the Bid Evaluation Committee have the power and duty to consider consumer interest and reject bids which are exorbitant and not market aligned. iii) The writ petition was not maintainable before the High Court in presence of efficacious statutory remedies under the Electricity Act. Appeal allowed.

Summary

Issues Presented and Considered

1. Whether the writ petition filed by the bidder challenging the procurement process and seeking a mandamus for issuance of Letter of Intent and execution of Power Purchase Agreement was maintainable before the High Court under Article 226 of the Constitution, given the existence of alternate remedies under the Electricity Act, 2003.

2. Whether the State Commission and the Bid Evaluation Committee (BEC) have the power to reject bids or refuse to adopt tariffs that are not aligned with prevailing market prices, notwithstanding that the tariff was determined through a transparent competitive bidding process under Section 63 of the Electricity Act.

3. Whether the procurers (distribution licensees) are obligated to purchase electricity from all "successful bidders" down the ranking order ("filling the bucket") up to the total required quantum, irrespective of the tariffs quoted by the bidders.

4. The scope and interpretation of Section 63 of the Electricity Act, 2003, particularly the power of the Appropriate Commission to "adopt" tariffs determined through competitive bidding and the extent of regulatory oversight over such tariffs.

5. The legal effect and interpretation of the term "successful bidder" as defined in the Request for Proposal (RFP) and whether a bidder who was not issued a Letter of Intent (LoI) can be considered a successful bidder entitled to supply power.

6. The applicability and interpretation of clauses in the RFP and the Central Government's Competitive Bidding Guidelines, especially Clause 5.15 which empowers the evaluation committee to reject all price bids if tariffs are not market aligned.

7. Whether the High Court erred in issuing a mandamus directing the State instrumentalities to purchase power from the bidder at the quoted tariff, without regard to consumer interest and the regulatory framework.

8. The impact of delay and laches by the bidder in asserting its claim.

Issue-wise Detailed Analysis

1. Maintainability of Writ Petition under Article 226

Legal Framework and Precedents: The Electricity Act, 2003 is a complete code governing electricity matters, with designated forums such as the State Electricity Regulatory Commission (SERC) and the Appellate Tribunal for Electricity (APTEL) for adjudication of disputes. The Supreme Court in PTC India Limited v. CERC held that the Act provides exhaustive remedies and the High Courts should not entertain writ petitions where efficacious statutory remedies exist.

Court's Reasoning: The Court held that the writ petition was not maintainable as the petitioner had alternate remedies before the State Commission and APTEL. The petitioner had delayed for years before approaching the High Court, and the High Court erred in exercising writ jurisdiction in the presence of adequate alternate remedies.

Conclusion: The writ petition was barred on grounds of maintainability and delay. The High Court should have declined jurisdiction.

2. Power of State Commission and BEC to Reject Non-Market Aligned Tariffs

Legal Framework and Precedents: Section 63 of the Electricity Act mandates the Appropriate Commission to adopt tariffs determined through a transparent bidding process in accordance with Central Government guidelines. The Competitive Bidding Guidelines (2005) Clause 5.15 empowers the evaluation committee to reject all price bids if rates are not aligned to prevailing market prices. The Court in Energy Watchdog v. CERC and Tata Power Transmission v. MERC clarified that the Commission's power to adopt tariff is not mechanical and it can scrutinize compliance with guidelines and market alignment.

Court's Reasoning: The Court emphasized that the State Commission is not a mere post office. It has regulatory powers under Section 86(1)(b) to regulate electricity purchase and prices. The BEC, comprising technical and financial experts, found the tariffs of certain bidders (including the petitioner) exorbitant and not market aligned, which was upheld by the State Commission. The APTEL erred in reversing this well-reasoned decision.

Application of Law to Facts: The petitioner's tariff was higher than other bidders and recent market bids. Accepting such tariffs would impose an undue financial burden on consumers, violating consumer interest and public policy.

Conclusion: The State Commission and BEC have the power and duty to reject bids not aligned with market prices, and the adoption of tariffs must consider consumer interest.

3. Obligation to Purchase from All Successful Bidders ("Filling the Bucket")

Legal Framework: The RFP clauses 3.5.3 to 3.5.6 describe the selection of successful bidders in ascending order of tariff until the requisitioned capacity is met. Clause 3.5.12 allows rejection of bids if tariffs are not market aligned. "Successful bidder" is defined as one to whom a LoI has been issued.

Court's Reasoning: The Court rejected the theory that procurers must compulsorily purchase power from all bidders down the ladder irrespective of tariff. The "filling the bucket" theory lacks basis in the RFP and guidelines. The procurer has discretion to reject bids with exorbitant tariffs to protect consumer interest. The Court cautioned against forcing procurers to accept bids with tariffs far above market rates, which would be detrimental to consumers and public interest.

Conclusion: Procurers are not bound to accept all bids merely to meet quantum; bids must be market aligned, and procurers have discretion to reject exorbitant bids.

4. Interpretation of Section 63 of the Electricity Act

Legal Framework and Precedents: Section 63 mandates adoption, not determination, of tariff by the Appropriate Commission if determined through transparent bidding per Central Government guidelines. The Commission's power to regulate tariff under Section 79(1)(b) and Section 86(1)(b) remains intact and must be harmonized with Section 63.

Court's Reasoning: The Court emphasized a holistic reading of the Act, holding that the Commission's regulatory powers include scrutiny of tariff alignment with guidelines and market conditions. The Commission cannot abdicate its regulatory role by blindly adopting tariffs without scrutiny.

Conclusion: The Commission must adopt tariffs only if bidding is transparent and tariffs are market aligned, exercising regulatory powers consistent with the Act.

5. Definition and Legal Status of "Successful Bidder"

Legal Framework: The RFP defines "successful bidder" as one selected by the procurer and issued a LoI. No LoI means no successful bidder status.

Court's Reasoning: Since the petitioner was not issued a LoI and its bid was returned, it cannot be considered a successful bidder entitled to supply power or claim contractual rights.

Conclusion: The petitioner is not a successful bidder under the RFP and has no vested right to contract or supply power.

6. Interpretation of Clauses in RFP and Bidding Guidelines

Legal Framework: Clauses 2.15.1 and 3.5.12 of the RFP and Clause 5.15 of the Bidding Guidelines empower the procurer/BEC to reject bids not aligned to market prices without liability.

Court's Reasoning: The Court held that these clauses confer discretion to reject bids individually or collectively if tariffs are exorbitant. The power is not limited to rejecting all bids only if the entire bidding process is flawed but extends to selective rejection of bids to protect consumer interest.

Conclusion: The procurer and BEC have the discretion to reject bids with non-market aligned tariffs, consistent with the guidelines and RFP.

7. Legality of High Court's Mandamus to Procure Power at Quoted Tariff

Legal Framework and Precedents: The Court in Air India Ltd. v. Cochin International Airport Ltd. held that contract awards are commercial decisions subject to adherence to norms but not judicial scrutiny of commercial merits unless mala fide or arbitrary.

Court's Reasoning: The mandamus directing procurement at petitioner's tariff ignored consumer interest and regulatory framework. The decision-making process by BEC and State Commission was lawful and rational. The High Court's interference was unwarranted and contrary to public interest.

Conclusion: The High Court erred in issuing mandamus compelling procurement at disputed tariff, and such interference is not justified absent arbitrariness or mala fides.

8. Delay and Laches

Court's Reasoning: The petitioner delayed for years before asserting its claim, acquiescing in the rejection of its bid and non-renewal of bid bond. Delay and laches are relevant in discretionary relief. The petitioner failed to justify the delay adequately.

Conclusion: Delay and laches further disentitled the petitioner from relief.

Significant Holdings

"The appropriate Commission does not act as a mere post office Under Section 63. It must adopt the tariff which has been determined through a transparent process of bidding, but this can only be done in accordance with the guidelines issued by the Central Government."

"The evaluation committee shall have the right to reject all price bids if the rates quoted are not aligned to the prevailing market prices."

"The State Commission and the Bid Evaluation Committee have the power and duty to consider consumer interest and reject bids which are exorbitant and not market aligned."

"The procurer is not bound to accept bids from all bidders merely to fill the requisitioned capacity if such bids are exorbitant and not aligned to market prices."

"The writ petition was not maintainable before the High Court in presence of efficacious statutory remedies under the Electricity Act."

"The High Court erred in issuing mandamus directing procurement at disputed tariff, ignoring the regulatory framework and consumer interest."

"Delay and laches in asserting rights under the bidding process disentitle the petitioner from relief."

"The word 'any' in statutory provisions must be construed in context and can mean 'all' depending on the scheme and object of the legislation."

"The State Commission's power to regulate electricity purchase and prices under Section 86(1)(b) includes scrutiny of tariffs adopted under Section 63."