Apex Court declares amendment made by Rajasthan Electricity Commission effecting tariff for inadvertent drawal from temporary supply rate to regular supply rate, to be prospective in nature

Read Judgment: Ajmer Vidyut Vitran Nigam Limited V. Hindustan Zinc Ltd. And Another 

Pankaj Bajpai

New Delhi, February 18, 2022: While deciding on the aspect of the operational applicability of amendments made by Rajasthan Electricity Regulatory Commission effecting the tariff for inadvertent drawal from temporary supply rate to regular supply rate, the Supreme Court has clarified that a substantial alteration with retrospective effect made under a commercial agreement executed between the parties at a later stage even by the statutory authority in the garb of correction or mistake or any typographical error, if prejudicial to the interest of the parties inter se in law, is not permissible. 

A Division Bench of Justice Ajay Rastogi and Justice Abhay S. Oka therefore observed that the modification which has been given effect to by the Rajasthan Electricity Regulatory Commission under Clause 29(1)(f) of the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2004 effecting the tariff for inadvertent drawal from temporary supply rate to regular supply rate is indeed a substantial change in the condition of the agreement and prejudicial to the interest of the parties, and hence, cannot be read to apply retrospectively from the date of agreement executed between the parties.

Going by the background of the case, Hindustan Zinc Limited (HZL – Respondent) has captive generating plant set up at State of Rajasthan where it generates electricity primarily for its own consumption and uses the electricity generated at its units situated at Udaipur, Bhilwara and Rajsamand. For wheeling of electricity, HZL uses the distribution system of AVVNL to the drawal which is called “open access facility” and the user of such facility is called “open access consumer”. For the said purposes, regulations were framed by the Rajasthan Electricity Regulatory Commission by way of notification under the Rajasthan Electricity Regulatory Commission Regulations, 2004 which came to be further amended by 3rd amendment vide notification dated December 27, 2006 u/s 42 r/w/s 181 of the Electricity Act, 2003 called the Rajasthan Electricity Regulatory Commission, 2006. 

In terms of the provisions of Regulations 2004, the agreement for short term open access of distribution system and supply of regular and standby HT supply came to be executed between the parties i.e. Ajmer Vidyut Vitran Nigam (Appellant) and the respondent, and draft format of the open access agreement became effective. Consequently, the Commission in terms of open access regulations specified a standard format of agreement for short term open access for distribution system and for HT supply. Pursuant to the release of standard format agreement, the appellant (AVVNL) sought certain clarifications pertaining to alleged contradiction in Clauses 29(1)(f) and 32(4) of the standard format agreement from the Commission. In furtherance thereof, the appellant issued a revised demand for access drawal of electricity on the basis of tariff for regular supply on June 30, 2007.

The reference to the changes in the standard agreement for HT supply and short term open access in distribution came to be examined and after deliberation, the Commission made substantial changes and altered Clauses 29(1)(e) and 29(1)(f) and 32(4) of the standard format agreement and observed that the inadvertent drawal will be billed at the same rate as regular supply irrespective of whether such inadvertent drawal was done during a period of outage of generating unit affecting open access supply or during the period of shortage of supply. However, no clarification was made by the Commission as to whether the substantial changes which have been made under the open access agreement will apply retrospectively from the date of agreement when executed or prospectively from the date the Commission has given effect to.

When the bills were raised by the appellant for the period from June, 2006 to February, 2008 by demand notice, aggrieved with the same, the respondents approached the Appellate Tribunal questioning the order of the Commission with the grievance that the substantial modification will apply only prospectively. The Appellate Tribunal held that the Commission has altered the position substantially and changed the tariff from temporary supply to regular supply in cases of inadvertent drawal and such substantial changes cannot be read as mere clarification but a substantial alteration in the standard format agreement, therefore, the same can be given effect to only from the date, the Commission has introduced those amendments under the agreement. 

After considering the submissions, the Top Court found that initial standard format agreement executed between the parties on September 22, 2006 effective from May 1, 2006 undisputedly, refer to inadvertent drawal of electricity in sub-clause 29(1)(f) as and that such drawal in excess of regular and standby supply was to be charged as per sub-clause (e). 

“Clause 32(4) under the heading “unscheduled interchange pricing” mentions excess drawal at the drawal end beyond the permissible limit in case of reduced supply or outage of suppliers generating station. The situation contemplated in Clauses 29(f) and 32(4) deals in different context and if they are overlapping, it will always be open for clarification but the Order of the Commission dated 15^th September, 2007, in our view, cannot be considered to be as such a clarification since it has virtually amended the original Clause 29(1)(f) thereby changing the tariff for inadvertent drawal from temporary supply rate to the regular supply rate which indeed is a substantial alteration in the conditions of the agreement”, added the Court. 

The Apex Court therefore dismissed the appeal and directed the appellant to file an undertaking in the format of an affidavit that in case the appeal fails, the money which has been deposited by the respondents will be refunded subject to adjustment, if any.