In CIVIL APPEAL NO. 6503 OF 2022-SC- Competitive Bidding Guidelines permit Evaluation Committee to reject all price bids if quoted rates are not aligned to prevailing market prices; State Electricity Regulatory Commission can consider question of market aligned tariff: SC
Justices B.R. Gavai & Prashant Kumar Mishra [08-01-2024]

Read Order: JAIPUR VIDYUT VITRAN NIGAM LTD. & ORS v. MB POWER (MADHYA PRADESH) LIMITED & ORS

Tulip Kanth

New Delhi, January 9, 2024: While allowing the appeals of Jaipur Vidyut Vitran Nigam involving procurement of 1000 MW of power by a competitive bidding process, the Supreme Court has opined that APTEL grossly erred in holding that the State Commission had no power to go into the question as to whether the prices quoted were market aligned.

The facts that led to filing of the appeal were that the Government of India notified the Competitive Bidding Guidelines under Section 63 of the Electricity Act, 2003. In the year 2012, RVPN issued an RFP, inviting sellers to participate in the competitive bidding for procurement of 1000 MW under the Bidding Guidelines. Thereafter, in consonance with the LoI, PPAs were signed with the L-1, L-2 and L-3 bidders(M/s PTC India Ltd through developer M/s Maruti Clean Coal and Power Limited;  M/s PTC India Ltd (through their developer M/s DB Power Limited) & M/s Lanco Power Limited (Generation Source – M/s Lanco Babandh Power Limited)

Thereafter, RVPN filed Petition before the State Commission under Section 63 read with clause 5.16 of the Bidding Guidelines for adoption of tariff for purchase of long-term base load power of 1000 MW (±10%) as quoted by the successful bidders (being L-1, L-2 and L-3) under the Case-I bidding process. L-4 and L-5 bidders filed Writ Petitions, seeking to strike down the negotiations process and the higher quantum awarded to L-1, L- 2 and L-3 bidders.

The State Commission had held that the quantum of only 500 MW power was liable to be approved considering the demand in the State as recommended by the EAC. The State Commission also approved the tariff quoted by the L-1 to L-3 bidders.

Aggrieved by the reduction of quantum by the State Commission, the L-2 and L-3 bidders preferred appeals before the Appellate Tribunal for Electricity (APTEL).  On an interlocutory application being filed by L-5 bidder-SKS Power, an interim order came to be passed holding that the L-5 bidder was entitled to supply power to the appellants at the tariff of Rs.2.88 per unit. Subsequently, a writ petition came to be filed by the respondent No.1-MB Power and the same was allowed.

The facts of another civil appeal revealed that RUVNL had proposed the procurement of 294 MW of power on long term basis and for that purpose had filed Petition before the State Commission. The State Commission granted approval to the distribution licensees in the State of Rajasthan for procurement of 160 MW round-the-clock fuel agnostic power on medium term basis by way of a competitive bidding process. Aggrieved thereby, the respondent No.1-MB Power (Madhya Pradesh) Limited filed an Appeal and vide the impugned order, the APTEL stayed operation of the order passed by the State Commission and directed that in the bidding process for procurement of 160 MW of power on medium term basis the bid shall neither be finalized nor shall any Letter of Intent be issued pursuant to the opening of the bids. Aggrieved thereby, the RUVNL had approached the Top Court.

The appeals, before the Top Court, challenged the judgment passed by the Division Bench of the High Court of Judicature for Rajasthan Bench at Jaipur, thereby allowing the said writ petition filed by MB Power (Madhya Pradesh) Limited (MB Power)- respondent No.1 herein. By the impugned judgment, the High Court held that the respondent Nos. 1 to 5 therein (appellants herein and the State of Rajasthan) were bound to purchase a total of 906 MW electricity from the successful bidders.

Referring to Clause 5.15 of the Bidding Guidelines, the Division Bench, comprising Justice B.R. Gavai and Justice Prashant Kumar Mishra observed that the State Commission was justified in considering clause 5.15 of the Bidding Guidelines, which specifically permits to reject all price bids if the rates quoted are not aligned to the prevailing market prices.

The Bench opined that Section 86(1)(b) of the Electricity Act gives ample power on the State Commission to regulate electricity purchase and procurement process of distribution licensees. It also empowers the State Commission to regulate the matters including the price at which electricity shall be procured from the generating companies, etc.

The Bench also rejected the contention that the Court had ordered that the bids quoted by the bidders are to be accepted without going into the question of it being market aligned or not. “We are, therefore, of the considered view that 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”, it said.

As per the Bench, when the Bidding Guidelines itself permit the BEC to reject all price bids if the rates quoted are not aligned to the prevailing market prices, there is no question of the State Commission being not in a position to go into the question, as to whether the rates quoted are market aligned or not, specifically, in the light of ample powers vested with the State Commission under Section 86(1)(b) of the Electricity Act, which also includes the power to regulate the prices at which electricity shall be procured from the generating companies, etc. The finding of the APTEL was held to be totally erroneous.

The Bench also noted that it couldn’t be read from the orders of the Court that the State Commission was bound to accept the bids as quoted by the bidders till the bucket was filled. “Firstly, no such direction can be issued by this Court de hors the provisions of Section 63 and 86(1)(b) of the Electricity Act and the Bidding Guidelines”, the Bench held.

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, the Bench stated.

On the issue of interpretation of provision, the Bench observed that an interpretation which advances the purpose of the Act and which ensures its smooth and harmonious working must be chosen and the other which leads to absurdity, or confusion, or friction, or contradiction and conflict between its various provisions, or undermines, or tends to defeat or destroy the basic scheme and purpose of the enactment must be eschewed. The Bench also observed 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.

The Bench, further observed that 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 had 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 APTEL, the Bench clarified.

“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. Inasmuch as, if the power/electricity is to be procured by the procurers at the rates quoted by the respondent No.1-MB Power, which is even higher than the rates quoted by the SKS Power (L-5 bidder), then the State would have been required to bear financial burden in thousands of crore rupees, which would have, in turn, passed on to the consumers”, the Bench held.

The Bench quashed the impugned judgment of the High Court. Allowing the appeals, the Bench also directed the respondent No.1-M.B. Power (Madhya Pradesh) Limited to pay costs, quantified at Rs 5 lakh in each case to the appellants.