The dispute centred around a Power Purchase Agreement(‘PPA’) signed between Punjab State Power Corporation Limited (‘PSPCL’) and Chadha Sugars and Industries Pvt. Ltd (‘Chadha Sugar’) for the supply of surplus power from Chadha Sugar’s 23 MW non-fossil fuel-based co-generation power project.
Supreme Court Upholds Cancellation of Industrial Land Allotment to Kamla Nehru Memorial Trust: A Landmark Ruling Reinforcing Public Trust Doctrine
In a significant ruling dated May 30, 2025, the Hon’ble Supreme Court of India in Kamla Nehru Memorial Trust & Anr. v. U.P. State Industrial Development Corporation Ltd. & Ors. (2025 INSC 791) upheld the cancellation of a 125-acre industrial land allotment to Kamla Nehru Memorial Trust (KNMT) by the Uttar Pradesh State Industrial Development Corporation (UPSIDC). The case marks a critical development in Indian jurisprudence surrounding public land allotment, reciprocal contractual obligations, and the overarching principle of the Public Trust Doctrine.
Factual Background
The dispute arose from an industrial land allotment made by UPSIDC to KNMT in 2003 for floriculture development. KNMT, a charitable trust established in 1975, applied for land in Utelwa Industrial Area, Jagdishpur, District Sultanpur, and was allotted the same via an Allotment Letter dated 18.09.2003. The terms required KNMT to pay ₹12,02,187.50 as reservation money and the balance in eight half-yearly instalments, with interest at 15% per annum.
KNMT initially defaulted in payment and was granted an extension, subject to interest. While they eventually paid the reservation amount, they raised objections to the interest and continuously sought demarcation and possession of the land, citing encroachments and the absence of clear boundaries. UPSIDC rejected these claims, noting that as per the allotment terms, demarcation was not a prerequisite for interest waiver or deferment in payment obligations.
Despite rescheduling the payment in 2005—allowing KNMT to clear dues of ₹1.44 crores in ten instalments—KNMT defaulted again. UPSIDC issued a final legal notice on 13.11.2006, warning of cancellation unless full dues and documentation for lease execution were submitted. KNMT did neither.
Consequently, UPSIDC cancelled the allotment on 15.01.2007. KNMT challenged this before the Allahabad High Court, which initially directed restoration, but this decision was overturned by the Supreme Court in 2009 for lack of discussion on the cancellation’s legality. On remand, the High Court upheld the cancellation, leading to the present appeal before the Supreme Court.
Arguments Advanced
By KNMT:
Senior Advocate Mr. Maninder Singh contended that UPSIDC failed to fulfil reciprocal obligations under the contract—specifically, demarcation and handing over of physical possession. According to KNMT, this amounted to frustration of contract. Additionally, they challenged the cancellation on procedural grounds, citing non-compliance with Clause 3.04(vii) of UPSIDC’s Manual, which mandates issuance of three legal notices before cancellation.
By UPSIDC:
Represented by Senior Advocates Mr. K.K. Venugopal and Mr. Atmaram Nadkarni, UPSIDC asserted that KNMT failed to adhere to the payment schedule despite multiple extensions. The Corporation emphasized that possession could only be handed over after lease registration, which KNMT failed to complete. UPSIDC claimed to have issued multiple legal notices, satisfying the Manual’s requirements.
Supreme Court’s Findings
The Court, led by Justice Surya Kant and Justice N.K. Singh, meticulously examined two central issues:
- Whether UPSIDC frustrated the contract by not fulfilling reciprocal obligations?
- Whether the cancellation of allotment was legally and procedurally sound?
On Issue 1: Frustration of Contract
The Court held that the contract was not frustrated. Demarcation had already been conducted on 03.03.2005 and acknowledged by KNMT in their letter dated 11.03.2005. Furthermore, as per Clause 2.15 of the Manual, possession was only to be granted post-execution of the lease deed—something KNMT failed to pursue by not submitting requisite documents or paying dues. The land had already been acquired, compensation paid, and there was no credible evidence of encroachment that could be legally sustained.
On Issue 2: Procedural Legality of Cancellation
The Court upheld the validity of the cancellation. Although KNMT challenged that only one legal notice had been issued, the Court clarified that notices dated 14.12.2004, 01.07.2005, 14.12.2005, and 13.11.2006 collectively satisfied the mandate under Clause 3.04(vii) of the Manual. The Court elaborated that a “legal notice” need not be explicitly labeled as such but must fulfil criteria such as conveying the legal consequence of default and seeking rectification within a specific timeline.
KNMT’s persistent non-payment, attempts to seek waiver of interest, and avoidance of lease formalities portrayed a deliberate pattern of non-compliance. The Court refused to entertain arguments for leniency in face of such consistent defaults.
Public Trust Doctrine and Accountability in Land Allocation
A notable and far-reaching aspect of the judgment lies in the Court’s invocation of the Public Trust Doctrine—a constitutional and legal principle mandating that the State holds public resources in trust for the benefit of the public and must allocate them in a transparent, fair, and equitable manner.
Hasty Allotment and Administrative Gaps
The Court strongly criticized the hasty allotment process, noting that UPSIDC allotted 125 acres of land to KNMT within just two months of receiving their application. There was a lack of due diligence, competitive bidding, or any transparent public process to evaluate whether KNMT’s project served public interest or generated economic value. No inquiry appeared to have been made regarding KNMT’s technical capability, financial robustness, or prior record in industrial development.
This superficial approach to resource allocation, the Court held, violated the spirit of Article 14 of the Constitution, which mandates non-arbitrary State action, and also undermined the Public Trust Doctrine. The judgment observed:
“Allocation of 125 acres of industrial land to KNMT without a competitive process fundamentally violated the Doctrine… The failure to adopt transparent mechanisms not only deprived the public exchequer of potential revenue…but also created a system where privileged access supersedes equal opportunity.”
In citing M.C. Mehta v. Kamal Nath [(1997) 1 SCC 388] and Centre for Public Interest Litigation v. Union of India [(2012) 3 SCC 1]*, the Court emphasized that any allocation of State-owned land must be preceded by clear parameters of evaluation and public advertisement to invite potential beneficiaries.
Critical Institutional Oversight
The ruling laid bare systemic deficiencies in UPSIDC’s procedures. Not only did it raise questions about the Trust’s initial selection, but also about the Corporation’s inefficiency in recovering dues or reallocating land promptly during the long pendency of litigation. While the Corporation eventually allotted the land to Jagdishpur Paper Mills Ltd. (Respondent No. 3), that too was done without judicial clearance while the dispute was sub judice.
The Supreme Court took a firm stance and held such subsequent allotment to be “illegal, contrary to public policy and annulled”, even though Jagdishpur Paper Mills Ltd. was not at fault. If any payments had been collected from them, UPSIDC was directed to refund the same with interest at rates applicable in nationalised banks.
Directions Issued by the Supreme Court
Recognizing the broader policy implications and the need for administrative reform, the Hon’ble Court issued comprehensive directions:
1.Future Land Allotments:
The State Government of Uttar Pradesh and UPSIDC were directed to ensure that any industrial land allotments in future be conducted in a transparent, fair and non-discriminatory manner. Competitive procedures that maximise public revenue and achieve goals of industrial development and environmental sustainability must be followed.
2.Specific Direction for Subject Land:
The Subject Land, now released from both KNMT and Jagdishpur Paper Mills, shall be re-allotted strictly in accordance with the procedure outlined above, ensuring it aligns with broader public interest and policy goals.
3.Strengthening Institutional Protocols:
Although not explicitly worded as policy mandates, the ruling strongly implies that public sector undertakings such as UPSIDC must reassess their internal guidelines, vetting procedures, and documentation standards before undertaking such large-scale resource commitments in the future.
Legal and Administrative Significance
This decision reinforces judicial scrutiny over State-led allocations of public resources and reiterates the non-negotiable role of the Public Trust Doctrine in land allotment cases. It clarifies that even charitable or non-profit entities are not exempt from strict scrutiny when public assets are involved.
Furthermore, by acknowledging the procedural importance of statutory manuals (like the UPSIDC Manual) and simultaneously ensuring that substance prevails over form (as seen in the interpretation of “legal notices”), the judgment balances administrative efficiency with procedural compliance.
The Court’s recognition of long-pending litigation as a burden on public interest adds urgency to the need for reform in both land policy and judicial case management in such matters. It calls for stronger initial screening by development authorities, prompt enforcement of payment terms, and strict compliance with statutory conditions.
Final Observations
The Supreme Court’s verdict in Kamla Nehru Memorial Trust v. UPSIDC presents an instructive balance of equity, legality, and governance. While it unequivocally upheld the rights of a statutory body (UPSIDC) to cancel an allotment due to persistent default, it also took the opportunity to underscore the systemic shortcomings in the manner public land is allotted and managed.
Key Takeaways:
1. No Equitable Relief in the Face of Contractual Default
KNMT’s plea for equitable relief was decisively rejected. Despite the charitable nature of the Trust and the passage of over 15 years, the Court emphasized that contractual obligations must be honoured, especially when public resources are involved. The Trust’s repeated attempts to seek rescheduling, interest waiver, and payment deferrals were seen as evasive and symptomatic of a defaulter, not a bona fide allottee.
2. UPSIDC’s Cancellation Procedure Upheld
The Court upheld UPSIDC’s procedure, finding that the Corporation had issued multiple notices that met the standard of ‘legal notices’ as per Clause 3.04 of its Marketing Manual. These notices clearly communicated the default, provided a remedy window, and threatened legal consequences—all of which satisfied due process.
3. Possession Linked to Lease Execution
Rebutting KNMT’s argument that possession was wrongly withheld, the Court clarified that as per Clause 2.15 of the Manual, possession can only be handed over after the execution of the lease deed. KNMT’s failure to execute the lease thus disentitled it to possession.
4. Public Trust Doctrine Reinforced
Perhaps the most notable legal reinforcement came in the form of the Court’s commentary on the Public Trust Doctrine. It ruled that public land must be allocated with transparency, objectivity, and accountability. The swift allotment to KNMT and its continued holding of the land without development or payment undermined this principle.
5. Subsequent Allotment Annulled
The subsequent offer of the same land to M/s Jagdishpur Paper Mills Ltd. was annulled for being contrary to public policy. This underlines that public authorities cannot conduct fresh allotments while earlier ones are under judicial scrutiny.
This judgment is expected to have a ripple effect on how industrial development corporations and public sector undertakings in India manage and allocate land. It sets a precedent that mere allotment—whether to charitable trusts or corporations—does not guarantee an enforceable right unless the allottee strictly complies with all contractual and statutory obligations.
Moreover, it stresses that authorities must maintain rigorous compliance with their own manuals and policies and that failure to do so could render even justified actions vulnerable to judicial scrutiny. It also sends a strong message that the allocation of public land is not just a bureaucratic function, but a constitutional trust involving accountability to the people.
Conclusion
The Kamla Nehru Memorial Trust judgment is more than a routine contract enforcement case—it is a judicial reaffirmation that State actions must be rooted in fairness, accountability, and public interest. It places fiduciary duties upon public bodies and warns against the opaque or preferential allocation of valuable public assets.
The ruling thus strengthens the administrative rule of law, elevates the Public Trust Doctrine as a guiding light in land and resource allocation, and serves as a cautionary tale for both allocators and allottees in the industrial ecosystem.
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Supreme Court rules in favour of the Powergrid Corporation of India Limited reinforcing regulatory role of the Central Commission Under Electricity Act, 2003
The Supreme Court today (May 15) ruled that the Central Electricity Regulatory Commission (CERC) is not precluded from exercising its functions under Section 79 of the Electricity Act, 2003 in the absence of regulations framed under Section 178 of the Electricity Act, 2003.
The Judgment arises out of the SLPs filed by Powergrid Corporation of India Limited (PGCIL) against the Order dated 25.02.2021 passed by the High Court of Madhya Pradesh admitting the writ petitions filed by the Madhya Pradesh Power Transmission Company Limited (MPPTCL).
MPPTCL had filed the Writ Petition before the High Court on the ground that the CERC had exercised powers beyond its jurisdiction as per the regulations notified under Section 178 of the Electricity Act, 2003 while passing the orders dated 21.01.2020 and 27.01.2020 in Petition No. 311/TT/2018 and Petition No. 266/TT/2018 filed by PGCIL seeking transmission tariff for its assets.
While setting aside the judgment dated 25.02.2021 passed by the High Court of Madhya Pradesh, the Supreme Court answered the following questions in favour of PGCIL:
i. Whether the CERC, while exercising its functions under Section 79(1) of the Act, 2003, is circumscribed by statutory regulations enacted under Section 178 of the Act, 2003?
ii. Whether the CERC exercises regulatory or adjudicatory functions under Section 79 of the Act, 2003? In other words, what is the scope of the CERC’s power to regulate inter-state transmission of electricity and determine tariff for the same under clauses (c) and (d) of Section 79(1)?
iii. Whether the grant of compensation by the CERC for the delay vide the orders dated 21.01.2020 and 27.01.2020 respectively, is a regulatory or adjudicatory function and to what extent are the principles of natural justice applicable to the exercise of such functions?
iv. Whether the High Court was justified in admitting the writ petition filed by the respondent no. 1 herein challenging the order dated 21.01.2020 of the CERC when there existed an alternative remedy under Section 111 of the Act, 2003?
While dealing with the above questions, the Supreme Court has held as under:
a. CERC functions as both – decision-making and regulation-making authority under Section 79 and 178 of the Act, 2003 respectively.
b. While noting the Constitution Bench judgment in PTC India Limited v. Central Electricity Regulatory Commission (2010) 4 SCC 603, the Supreme Court has held that the Regulations under Section 178 has the effect of interfering with and overriding contractual relationships between the regulated entities, however, on the other hand the orders under Section 79 have to be confined to the existing statutory regulations and do not have the effect of altering the terms of contract between the specific parties before the CERC
c. In view of the law laid down by the Supreme Court in PTC and Energy Watchdog v. CERC reported in (2017) 14 SCC 80, it has been held that the absence of a regulation under Section 178 does not preclude the CERC from exercising its powers under Section 79(1) to make specific regulations or pass orders between the parties before it.
d. In the present case, the Supreme Court held that there is no contractual clause between the parties for establishing the risks of delay in commissioning of a transmission asset. There is also no uniform settled position as regards the liability of transmission charges payable before a particular transmission element is put in operation, in the form of regulations under Section 178. These circumstances, considered together with the prohibition on imposing liability of delayed payments on beneficiaries, leave a regulatory gap. The Supreme Court then proceeded to hold that in light of the dictum in the case of Energy Watchdog case, in the situation of an absence in Regulation, Guidelines or Contractual clauses, the Act, 2003 mandates that the CERC may strike a judicious balance keeping in mind commercial principles and consumers interest in exercise of its general regulatory powers under Section 79.
e. The Supreme Court further held that sources of power for enactment of a regulation under Section 178 and regulatory order under Section 79(1) are different. The former emanates from the power of delegated legislation whereas the latter is an ad hoc power which is limited to the specific parties and situation in context of which the order is given. Since the regulatory powers under Section 79(1) are of an ad hoc nature and are not of general application, the orders thereunder are made appealable under Section 111.
In light of the above findings, the Supreme Court held that CERC is empowered to order for imposition of transmission charges on the party to whom delay is attributable and there was no occasion for High Court to admit the Writ Petitions and CERC . The Supreme Court has concluded that APTEL is the appropriate authority to look into the merits of the matter should MPPTCL choose to prefer an appeal before APTEL under Section 111 of the Act, 2003.
The copy of the judgment has been directed to be circulated to all High Courts.
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Supreme Court Rules on Cross-Subsidy Surcharge Determination – Not mandatory for determining Tariff as well Cross Subsidy Surcharge simultaneously as long as the CSS is based on the prevailing tariff
The Hon’ble Supreme Court of India, delivered a significant judgment on 29th April 2025 (Civil Appeal Nos. 8862-8868 of 2022), addressing the issue of determining Cross-Subsidy Surcharges (‘CSS’) for open access electricity consumers in Rajasthan. The said case, involved statutory appeals filed by the Distribution Companies of Rajasthan against the judgment dated 15.09.2022 passed by the Appellate Tribunal for Electricity (‘APTEL’).
The core dispute revolved around the Order dated 01.12.2016 passed by the Rajasthan Electricity Regulatory Commission (State Commission) which determined the CSS applicable from 01.12.2016. The Appellants before the Hon’ble Supreme Court were the distribution licensees in Rajasthan, while the Respondents were industrial units who had opted for open access to procure electricity from sources other than the distribution licensees.
Understanding Open Access and Cross-Subsidy Surcharge
The Electricity Act, 2003 introduced the concept of open access, allowing consumers to buy electricity from sources other than the traditional distribution licensee in their area. Previously, electricity was typically sourced only from the local distribution licensee.
However, the electricity sector has historically involved cross-subsidisation, where certain categories of consumers (like industrial or commercial users) pay higher tariffs to subsidise the cost of supply for others (like agricultural or low-end domestic consumers). These higher-paying customers are often referred to as ‘subsidising consumers‘.
The introduction of open access meant that these subsidising consumers could potentially bypass the local distribution licensee, thereby reducing the licensee’s revenue used for cross-subsidies. To compensate distribution licensees for this loss and the fixed costs arising from their obligation to supply, the Electricity Act, 2003 mandated the levy of CSS on consumers who choose open access. CSS is described as a “statutory charge payable by the consumers who decide to source electricity through open access from sources other than the distribution licensee of the area”. It is meant to meet the requirements of the current level of cross-subsidy within the distribution licensee’s supply area. The Act also stipulates that such surcharges and cross-subsidies should be progressively reduced. (Section 42 (2) of the Electricity Act, 2003)
The dispute in Rajasthan
In Rajasthan, the State Commission notified the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2014, which include provisions for cross-subsidy (Regulation 89) and a formula for determining CSS (Regulation 90). The distribution licensees petitioned the State Commission in July 2016 for determination of the CSS under Section 42(2). At this time, the tariff for FY 2015-2016, determined by an Order dated 22.09.2016, was in force. This tariff order made it clear that it would remain effective until the next tariff order.
On 01.12.2016, the State Commission passed an Order determining the CSS rates based entirely on the tariff fixed for FY 2015-2016 by Order dated 22.09.2016. The CSS rates were fixed per unit for various voltage levels for large industrial service open access consumers. The State Commission clarified that the CSS would be levied from 01.12.2016 and remain in force until re-determined .
APTEL set asides the State Commission’s Order
The industrial units (Respondents before the Supreme Court) challenged the 01.12.2016 Order before APTEL. APTEL allowed the appeal and set aside the Order dated 01.12.2016 on the follows basis –
- The absence of a tariff petition for FY 2016-2017 should not have been overlooked .
- CSS determination requires authenticated/audited data used for tariff fixation, which was allegedly not available .
- The order resulted in a “quantum jump” in CSS rates, which went against the policy of progressive reduction.
- The distribution licensees failed to explain the delay in filing tariff petitions.
- Since the tariff order of 22.09.2016 was to remain in force until the next order (passed only on 02.11.2017), the CSS rates should not have been altered before that date.
Supreme Court Overturns APTEL Decision
The Rajasthan Distribution licensees appealed before Supreme Court. The Supreme Court examined Section 42(2) of the Electricity Act, 2003 and the Rajasthan Tariff Regulations, 2014, particularly Regulation 90, which provides the formula for CSS determination, which explicitly states that the CSS is determined based on the “Tariff payable by the relevant category of consumers”. This means the CSS calculation depends on the prevailing tariff rates.
Crucially, the Supreme Court found nothing in either the Electricity Act, 2003 or the Rajasthan Tariff Regulations, 2014, that makes the determination of CSS simultaneous with the determination of tariff, mandatory. While it can be determined along with the tariff, it can also be determined separately based on the prevailing tariff rate.
The Supreme Court observed that the State Commission’s order dated 01.12.2016 determined the CSS entirely based on the prevalent tariff i.e. Tariff Order dated 22.09.2016.
The Supreme Court held that the APTEL committed an error by concluding that tariff and CSS determinations must always coincide. Since CSS is in the nature of compensation related to the tariff that the distribution licensee would have received from open access consumers, it must be based on the applicable retail tariff recoverable during the relevant period. The State Commission’s determination did precisely this, basing the CSS on the data and financials from the prevailing 22.09.2016 Order.
Conclusion
Finding the APTEL’s view erroneous, the Supreme Court set aside the judgment of the APTEL and restored the State Commission’s order dated 01.12.2016.
This judgment clarifies that while CSS determination can occur alongside tariff fixation, it is not legally mandated to do so. The CSS can be determined separately, provided it is correctly based on the prevailing tariff rates applicable to the relevant consumer category. The case highlights the interplay between open access, cross-subsidies, tariff determination, and the regulatory framework governing the electricity sector in India.
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Supreme Court Upholds State Regulatory Oversight Over Inter-State Power Procurement Affecting Local Grid
The Supreme Court affirms that State Commissions can regulate inter-state electricity procurement affecting local grids. A landmark interpretation under the Electricity Act, 2003.
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Tribunal Upholds Defaulter Pays Principle: Powergrid Wins TANTRANSCO Appeal
On 11.12.2024, the Appellate Tribunal for Electricity ruled in favor of Powergrid, upholding the Defaulter Pays Principle and TANTRANSCO’s liability for 50% transmission charges due to delays in the KPFBR Project. The judgment reaffirms that true-up proceedings cannot revisit settled tariff principles and underscores the Central Commission’s regulatory authority.
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Appellate Tribunal of Electricity in the case of Punjab State Power Corporation Limited vs. Chadha Sugars & Industries Pvt. Ltd& Ors.
APTEL's Decision on Tariff Reduction in PSPCL vs. Chadha Sugars
Background
PSPCL issued a Demand Notice to Chadha Sugar stating that Chadha Sugar had availed Accelerated Depreciation under the Income Tax Act, 1961. According to the PPA and the applicable tariff order, availing Accelerated Depreciation necessitated a reduction in the tariff payable to Chadha Sugar by Rs. 0.18 per unit.
Chadha Sugar contested the demand notice, arguing that they had not benefited from the accelerated depreciation due to sustained losses. They also contended that PSPCL required confirmation from the Punjab Energy Development Agency (‘PEDA’) before revising the tariff, as stipulated in the PPA.
The State Commission on the issue of reduction of tariff on account of availing Accelerated Depreciation held that the demand notice is not in accordance with the PPA as Article 2.1 specifies ‘Section 80(1)(A) of the Income Tax Act’, whereas, Chadha Sugar had availed Accelerated Depreciation under Section 32 of the Income Tax Act and directed PSPCL to refund the amount along with the applicable late payment surcharge.
Issues Framed by the Hon’ble Appellate Tribunal
- Whether a lower tariff was payable by PSPCL considering Chadha Sugar had availed Accelerated Depreciation.
- Whether confirmation from PEDA was required for the application of a reduced tariff upon Chadha Sugar exercising the option of availing Accelerated Depreciation.
Analysis
Issue 1: Benefit of Accelerated Depreciation
The Appellate Tribunal noted that Section 32 of the Income Tax Act, 1961, governs depreciation, with companies having the option to choose between normal depreciation (straight-line method) and accelerated depreciation (written-down value method). This choice, once exercised, is irreversible and applies to all subsequent years.
The generic tariff order issued by the State Commission in 2010 had established a specific reduction in tariff (Rs. 0.18/kWh) for generating companies opting for accelerated depreciation. This reduction applied irrespective of the actual profit or loss incurred by the company.
The Appellate Tribunal emphasised that Chadha Sugar was aware of this provision, as evidenced by their undertaking, where they agreed to inform PSPCL and comply with the reduced tariff if they chose to avail accelerated depreciation in the future. Furthermore, the PPA itself stipulated a reduced tariff of Rs. 4.39/kWh in case Chadha Sugar availed Accelerated Depreciation.
The Appellate Tribunal rejected Chadha Sugar’s argument that the tariff reduction was inapplicable because they had not realised any actual benefits from the accelerated depreciation. The Tribunal clarified that the “benefit” in this context referred to the pre-defined, quantifiable reduction in tariff (Rs. 0.18/kWh), not the company’s overall financial performance.
The Appellate Tribunal concluded that allowing a generating company to switch between normal and reduced tariffs based on their profit or loss would create an absurd situation.
Issue 2: PEDA Confirmation
Chadha Sugar had argued that PSPCL required confirmation from PEDA before revising the tariff. The PPA stated that if a company was found to have availed benefits like Accelerated Depreciation or subsidies despite providing an undertaking to the contrary, PSPCL, after confirmation from PEDA, would revise the tariff.
The Appellate Tribunal concluded that the above-mentioned clause has to be read in conjunction with other relevant clauses in the PPA. Article 2.1.1(i) and (ii) of the PPA defined the applicable tariffs payable by PSPCL to Chadha Sugar, with no mention of any prerequisite PEDA certification. The financial impact of opting for accelerated depreciation was pre-determined and agreed upon by both parties, negating the need for further financial impact assessment.
Article 2.1.1(iii) of the PPA specifically addressed grants and subsidies, mandating PEDA confirmation regarding the amount claimed by the company and the financial impact to be incorporated into the tariff. The Appellate Tribunal noted that this distinction stemmed from PEDA’s role as the nodal agency for renewable energy, making them privy to information about subsidies and grants.
Conclusion
The Appellate Tribunal judgment emphasised that the quantifiable benefits associated with specific provisions, such as Accelerated Depreciation, are pre-defined and not contingent on the company’s overall financial performance.
The judgment also underscored the importance of reading contractual clauses in harmony with each other to arrive at a coherent and consistent interpretation.
Unjust Levy Of Poc Charges: The Appellate Tribunal For Electricity Secures Refunds And Interest For Haryana Consumers
Uttar Haryana Bijli Vitran Nigam Limited & Ors. V. Central Electricity Regulatory Commission and Ors. – Review Petition No. 3 Of 2024
In a significant ruling on 18.11.2024 in Review Petition No. 3 of 2024, the Appellate Tribunal for Electricity has upheld the rights of Haryana Discoms in their prolonged legal battle over unjustly levied Point of Connection (‘POC’) charges. The Tribunal directed a refund of these charges, along with applicable interest, to be passed on to consumers through tariff adjustments. This judgment not only rectifies the financial burden on Haryana Discoms but also sets a precedent for equitable resolution in disputes involving transmission charges. By emphasizing practical and consumer-centric methodologies, the Tribunal’s decision ensures fairness while addressing logistical challenges in refund disbursements.
Facts Of The Case:
Haryana Discoms has been paying the Transmission Charges for the 400 kV Transmission Line from Aravali Power Station to Daulatabad (‘Transmission Line’) as decided by the Haryana Electricity Regulatory Commission since the commissioning of the transmission line in March 2011. Thereafter, the Central Electricity Regulatory Commission (‘Central Commission’) notified the Central Electricity Regulatory Commission (Sharing of Inter State Transmission Charges and Losses) Regulations, 2010 (‘Sharing Regulations’), which came into effect from 01.07.2011.
The aforementioned Regulations are applicable to Inter-State Transmission system (‘ISTS’) customers who use the ISTS or are connected to the ISTS only. Power System Operation Corporation Limited (‘POSOCO’) and Central Transmission Utility (‘CTU’) (then forming part of POWERGRID) started including the above Transmission Line in the bills raised on Haryana Discoms for payment of transmission charges, under the Sharing Regulations notified by the Central Commission.
Haryana Discoms after being made aware that the Transmission Line was being treated as an ISTS Line, approached the Central Commission by way of Petition No. 126/MP/2017. The Central Commission, after examining the provisions of Section 2(36) of the Electricity Act, 2003; Connectivity Regulations; Sharing Regulations as well as the Grid Code unequivocally vide its Order dated 04.05.2008 held that no inter-state transmission charges are payable by Haryana Discoms for the use of the Transmission Line as the same is an Intra State Line and not an ISTS, as claimed by POSOCO/CTU. However, the Central Commission only granted prospective relief with effect from the date of passing of the Order 04.05.2018.
Aggrieved by the restrictive prospective application of the Order dated 04.05.2018, Haryana Discoms filed an Appeal being No. 240 of 2018 before this Hon’ble Appellate Tribunal claiming a refund from July 2011 onwards along with carrying cost. The Hon’ble Appellate Tribunal passed an Order dated 04.02.2020 remanding the matter to the Central Commission for re-consideration. Thereafter the Central Commission passed the Order dated 30.07.2022 in Petition 126/MP/2017 upholding the stand taken in its earlier Order dated 04.05.2018.
Aggrieved by the decision of the Central Commission, Haryana Discoms filed Appeal 383 of 2023 before the Hon’ble Appellate Tribunal seeking the setting aside of the Order dated 30.07.2022 and the refund of POC charges along with carrying cost.
The Hon’ble Appellate Tribunal vide Order dated 02.02.204, set aside the Order of the Central Commission dated 30.07.2022 and remanded the matter to the Central Commission for the refund to be initiated after quantification while granting the relief to Haryana Discoms until 3 years prior to the filing of the Petition. While passing the aforesaid Order, the Appellate Tribunal had further directed the Central Commission to refund the POC charges to the identified individual consumers in the State of Haryana and no finding on the claim for interest/carrying cost as prayed for by the Appellants was rendered.
Aggrieved of the aforesaid, the Haryana Discomsfiled a Review Petition before the Hon’ble Appellate Tribunal on the following two aspects:
Methodology For Refund Adjustment
Haryana Discoms highlighted the difficulty in identifying and refunding individual consumers from past years due to the large and dynamic consumer base, which has grown from approximately 53.81 lakh in 2014 to 78.57 lakh in 2024. Many past consumers may no longer be part of the current consumer body, making direct refunds impractical. Reference was made to Regulation 67 of the HERC Tariff Regulations, which provides a methodology for adjusting prior period income. Given this, they proposed that the quantified refund amount be incorporated into the revenue requirements of the current year. Haryana Discoms emphasized that this approach ensures that the refund benefits are automatically passed on to the existing consumer base through a reduction in retail tariffs. Haryana Discoms argued that this established methodology is consistent with regulatory practices and addresses the logistical challenges of tracing individual past consumers while ensuring fairness to all current consumers in the State of Haryana.
Interest on Refunds
Haryana Discoms contended that they should be restored to their original economic position and emphasized that any amount realized, including interest, would not be retained but adjusted in favour of Haryana’s consumers. Haryana Discoms argued that several judgments have established that interest is a natural consequence of granting relief.
Decision Of The Hon’ble Tribunal
In light of the above-challenged aspects, the Hon’ble Appellate Tribunal has been pleased to allow the Review Petition filed by Haryana Discoms to make the following determinations regarding the refund of POC charges to Haryana Discoms:
- Refund to Consumers via Tariff Adjustment: The Hon’ble Appellate Tribunal has held that, since Haryana Discoms were required to pass on both the costs and benefits of the POC charges to their consumers, the Central Commission should not attempt to refund individual customers. Instead, the benefits of the refund should be passed on to consumers via a lower tariff through the ARR to be determined by the HERC, post receipt of the monies from POSOCO.
- Admissibility of Interest/Carrying Costs: The Hon’ble Appellate Tribunal was pleased to hold that since there was both a plea and a prayer for interest/carrying costs in all of the proceedings after the initial Petition and the same was nowhere disputed by CTU/POSCO, the relief towards the same was admissible to Haryana Discoms. The Hon’ble Tribunal also concluded that having illegally levied charges, POSOCO/CTU have to refund the amount with applicable interest
- Entitlement to Interest: The Hon’ble Appellate Tribunal then discussed whether the Haryana Discoms were entitled to interest/carrying costs. It further held that Haryana Discoms were indeed entitled to interest on the amount to be refunded because they had been deprived of the use of that money while the case proceeded.
- Determination of Principal and Interest: The Hon’ble Appellate Tribunal has now remanded the case to the Central Commission to determine the principal amount to be refunded along with the appropriate rate of interest on a simple or compound basis within a stipulated time period of four months.
- Directives to CTU and POSOCO: In addition to determining the interest rate, the Hon’ble Appellate Tribunal directed the Central Commission to issue appropriate directions to CTU and POSOCO to pay the refund along with interest to Haryana Discoms.
- Tariff Adjustment: Finally, the Hon’ble Appellate Tribunal ordered Haryana Discoms to adjust their tariff in the next tariff determination to pass on the benefits of the refund and interest to consumers.
Conclusion
The Hon’ble Appellate Tribunal for Electricity has held that POSOCO/CTU acted unlawfully in raising and collecting Inter-State Transmission Charges from Haryana Discoms in relation to an Intra-State Transmission Line. Furthermore, the Tribunal prescribed a methodology for adjusting past refunds in the forthcoming ARR, noting that it is impractical to allocate the costs and benefits of POC charges to individual consumers. This approach is not only time- and cost-efficient but also more pragmatic and conclusive.
Why Section 9 of IBC Isn’t Your Solution for Debt Recovery?
In India, the Insolvency and Bankruptcy Code (IBC) is designed to aid the resolution of insolvency, not debt recovery. Under Section 9 of IBC, an operational creditor can initiate the corporate insolvency resolution process (CIRP) if they meet specific criteria.
However, recent legal interpretations have made it clear that applications under Section 9 of IBC cannot be filed solely for the recovery of dues. The focus is on insolvency resolution, not as a tool for creditors looking to recover money, which falls under a different judicial framework.
Purpose and Scope of Section 9 of IBC
The IBC was enacted to provide a systematic approach to insolvency and bankruptcy in India, aiming to assist creditors by ensuring timely resolution of insolvency cases. Section 9 of IBC is primarily directed at the initiation of the Corporate Insolvency Resolution Process (CIRP) by operational creditors against a corporate debtor for non-payment of “operational debts” like those for goods or services. Its role is thus confined to insolvency resolution, not as a mechanism for simple debt recovery.
In several landmark cases, such as Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the adjudicating authority clarified that Section 9 of IBC is not meant to serve as a “recovery forum” for unpaid dues. Instead, it is intended for situations where the corporate debtor is genuinely insolvent and incapable of paying its operational debts.
The authority underscored that the objective of IBC is to safeguard the overall financial stability of corporations rather than allow creditors to employ it as a tool to extract payments, often described as “debt collection” attempts, which could disrupt corporate stability.
Case Analysis: M/s Agarwal Foundries Pvt. Ltd. v. POSCO E&C India Pvt. Ltd.
On September 10, 2024, the National Company Law Appellate Tribunal (NCLAT) in M/s Agarwal Foundries Pvt. Ltd. v. POSCO E&C India Pvt. Ltd. reaffirmed that applications under Section 9 of IBC cannot be utilized for recovery actions. This case reiterates the intention of Section 9 of IBC to address insolvency, not as a method for operational creditors to recover dues.
Facts of the Case
In this case, the appellant, M/s Agarwal Foundries Pvt. Ltd., supplied TMT bars to a contractor on the instruction of POSCO E&C India Pvt. Ltd. However, the payment remained unpaid, and M/s Agarwal sought to recover these dues by filing an application under Section 9 of IBC against POSCO, arguing that POSCO acted as a guarantor for the contractor.
The National Company Law Tribunal (NCLT) initially rejected the application, which led the appellant to file an appeal before the NCLAT.
Key Issues Considered by NCLAT
The NCLAT examined the following issues:
- Operational Creditor Status: The appellant claimed it was an operational creditor due to POSCO’s alleged guarantee. However, NCLAT found no direct privity of contract or acknowledgment of such a guarantee from POSCO’s side.
- Nature of Debt: The tribunal reiterated that an operational debt must be connected directly to the provision of goods or services. The invoices supporting the appellant’s claim were raised by third parties, weakening the argument that it was an operational debt owed by POSCO.
- Limitation Period: NCLAT clarified that the limitation period begins from the date of default, not from the demand notice date, rendering the appellant’s claim time-barred.
- Abuse of IBC Provisions: NCLAT criticized the appellant for misusing Section 9 of IBC provisions, noting a pattern of withdrawn applications filed under the guise of recovery rather than insolvency resolution.
The case serves as a strong example of how Section 9 of IBC is intended solely for genuine insolvency issues, not as an alternative to debt recovery and clarifies the boundaries of operational debt under IBC provisions.
Key Takeaways: Section 9 of IBC as a Non-Recovery Mechanism
The Section 9 of IBC framework remains a crucial tool for operational creditors genuinely seeking resolution to insolvency issues. However, recent rulings have firmly set boundaries to ensure it is not misused for mere debt recovery:
IBC's Purpose is Resolution, Not Recovery
Courts and tribunals have consistently held that Section 9 of IBC is intended to facilitate insolvency resolution rather than to serve as a substitute for civil remedies or debt recovery actions. Applications with recovery as the sole objective misuse the IBC framework, as underscored in the recent M/s Agarwal Foundries Pvt. Ltd. v. POSCO E&C India Pvt. Ltd. ruling.
Operational Debt Must Reflect Direct Transactions
For a creditor to qualify as an operational creditor under Section 9 of IBC, the debt must arise directly from transactions between the creditor and the debtor, such as the direct supply of goods or services, as reiterated in NCLAT’s observations. Attempts to leverage indirect transactions or unverifiable guarantees do not satisfy this requirement.
Strict Adherence to Limitation Periods
The limitation period under the Limitation Act, counted from the default date, is strictly applied in IBC cases. Applications falling outside this period are generally dismissed, barring any exceptions sanctioned by the court.
Discouraging Abuse of Insolvency Proceedings
The judiciary’s strict interpretation helps prevent operational creditors from filing multiple applications solely to exert pressure on corporate debtors. This approach ensures that the IBC mechanism remains true to its primary goal: aiding in the resolution of genuine insolvency situations rather than facilitating recoveries.
By reinforcing these principles, the judiciary safeguards the purpose of the IBC and maintains the integrity of the insolvency framework. For creditors seeking recovery, the proper avenue lies in civil courts or other specified legal channels, rather than attempting to bend the scope of Section 9 of IBC.
Central Electricity Regulatory Commission Has The Power To Execute Its Own Orders Under The Garb Of Section 79 Of The Electricity Act, 2003
A Legal Analysis of Wage Inequality and the Quest for Equal Remuneration
On 17.10.2024, the Central Electricity Regulatory Commission (‘Central Commission’)directed Tamil Nadu Transmission Corporation Limited (‘TANTRANSCO’) to pay its outstanding transmission charges along with applicable Late Payment Surcharge to Power Grid Corporation of India Limited (‘POWERGRID’).
Factual Background
POWERGRID had been entrusted with the responsibility of setting up certain elements that are part of the transmission system associated with the Kalpakkam PFBR 500 MW project. Consequently, POWERGRID approached the Central Commission seeking approval of the transmission tariff for three assets associated with the said system that was being set up by it.
The Central Commission vide its Tariff Order dated 04.03.2021, approved the date of commercial operation of the said asset as 01.04.2014. It was further directed that the Transmission Charges from the said date would be borne by the generating company – BHAVINI and the transmission licensee – TANTRANSCO in equal proportion until either the generation by BHAVINI or the transmission system set up by TANTRANSCO is commissioned.
Pursuant to the above-mentioned Order dated 04.03.2021, bilateral invoices were raised on TANTRANSCO.
Thereafter, POWERGRID approached the Central Commission for truing up of the transmission tariff for the 2014-19 period and determination of the transmission tariff for the 2019-24 period. The Central Commission vide its order dated 05.12.2021 trued up the transmission tariff for the 2014-19 period. Subsequent to the passing of the aforementioned True-UpOrder, the final invoice was raised on TANTRANSCO.
As TANTRANSCO failed to make the payment within the stipulated time in terms of the final invoice raised, POWERGRID filed a Petition before the Central Commission under Section 79 of the Electricity Act, 2003 for the execution of the Tariff Order dated 04.03.2021.
Submissions Of Powergrid
- TANTRANSCO has continuously defaulted in complying with the Tariff Order. Subsequent to the Tariff Order, bilateral invoices were raised on TANTRANSCO. However, even after several notices, TANTRANSCO has not paid the outstanding dues.
- No Appeal or Review has been preferred against the Tariff Order by TANTRANSCO.
- POWERGRID has no contractual mechanism to enforce the recoveries against TANTRANSCO. There is no bank guarantee or Letter of Credit available with PGCIL for encashment to recover the outstanding dues.
- The Central Commission is vested with the powers of civil courts and therefore, it can execute its own orders under Regulation 119 of the Conduct of Business Regulations, 1999.
- The Central Commission exercises regulatory powers under Section 79 of the Act which includes within its scope the power to enforce and implement its orders and can initiate suo-moto action under Section 142 of the Electricity Act, 2003 in the event of any non-compliance of regulation or the orders of Commission.
Analysis And Conclusion
The Central Commission observed in its Order that although Section 79 of the Electricity Act, 2003 does not specifically elaborate on the execution of orders passed by the Commission, it nevertheless enables the Commission to regulate the Inter-State Transmission of Electricity, to determine its tariff and also to adjudicate upon the disputes in connection therewith.
Relying upon the judgement of the Hon’ble Supreme Court in Central Power Distribution Co. & Ors. v. Central Electricity Regulatory Commission &Ors., (2007) 8 SCC 197the Central Commission observed that the power to regulate also includes within it the power to enforce.
Reliance was also placed upon the decision of the Hon’ble Supreme Court in Maharashtra State Electricity Distribution Company Ltd. v. Maharashtra State Electricity Regulation Commission & Ors. (2022) 4 SCC 657wherein it was observed that the Electricity Regulatory Commissions constituted under the Electricity Act, 2003 are to be seen as substitutes for civil courts in relation to disputes between the licensees and the generating companies. Therefore, the Commissions would have the power to execute their own orders.
The Central Commission rejected the contention of TANTRANSCO that POWERGRID failed to avail appropriate remedies under Section 142 of the Electricity Act, 2003. The Central Commission observed that invoking the provisions of Section 142 for non-compliance of an order is not the sine qua non in enforcement proceedings and is simply one of the means of ensuring compliance.
Further, the Central Commission has also observed that the truing-up exercise is not an independent exercise but is in furtherance to the determination of tariff under the tariff order. Merely because the applicable transmission charges for the said asset have undergone revision due to the truing-up exercise, it does not render the tariff order, especially the directions issued thereunder, non-executable or unenforceable.
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Addressing Gender Pay Disparities in India’s Construction Sector
A Legal Analysis of Wage Inequality and the Quest for Equal Remuneration
Gender pay disparity remains one of the most persistent issues plaguing India’s construction sector. Although the construction industry is one of the largest employers of labour in India, it continues to display significant gender-based wage inequalities. Women working in construction often earn much less than their male counterparts for the same or similar roles, with some estimates suggesting that women earn between 30-40% less than men in this industry[1].
This inequality persists despite a robust legal framework designed to ensure equal pay for equal work. The wage gap is rooted in deep-seated societal norms, lack of awareness, and insufficient enforcement of existing laws. Understanding the extent of this disparity, the legal framework surrounding it, and the challenges involved in implementing equitable solutions are vital in addressing the gender pay gap in India’s construction industry.
Legal Framework Surrounding Gender Pay Disparities in the Construction Sector
India’s legal framework provides clear directives regarding gender pay equality. The Constitution of India lays the groundwork for wage parity by promoting gender equality in all spheres of life. Article 39(d) of the Constitution specifically mandates the State to ensure that men and women receive equal pay for equal work. This constitutional principle aims to eliminate any discrimination based on gender in the workplace, particularly with regard to remuneration.
To operationalize this constitutional directive, the Equal Remuneration Act of 1976 was enacted. The Act aims to prevent gender-based discrimination in matters relating to wages and recruitment. It provides a legal basis for ensuring that employers pay equal remuneration to men and women performing the same work or work of a similar nature.
However, despite these provisions, the Act has faced criticism for its weak implementation and limited scope. Employers often bypass the law by categorizing jobs in a way that undervalues roles typically filled by women.
Recognizing these limitations, the Indian government introduced the Code on Wages in 2019, which consolidated four labour laws, including the Equal Remuneration Act. This Code extends the principle of equal remuneration to all genders and emphasizes “equal pay for equal work”. However, critics argue that while this may appear to be a step forward, it doesn’t fully address the complexities of wage disparities, particularly those stemming from occupational segregation and the undervaluation of roles traditionally held by women.
Challenges in Addressing Gender Pay Disparities
Despite the existence of a legal framework aimed at ensuring equal pay, several challenges hinder the realization of wage parity between men and women in India’s construction industry. These challenges are multifaceted and range from deep-rooted societal norms to structural issues within the industry itself. Below are some key challenges:
- Occupational Segregation:
One of the most significant barriers to wage equality is occupational segregation. Women in the construction sector are often confined to lower-paying jobs such as manual labour, while men dominate higher-paying skilled positions such as masons or carpenters. This segregation is both a cause and effect of societal norms, which often assign specific roles to women based on perceived physical or intellectual limitations. As a result, women are paid less even when performing the same type of work.
According to the World Bank’s report on Women’s Work and Employment (2021), women’s participation in lower-skilled, lower-paid jobs is a global issue, with India’s construction sector reflecting this trend. Women are generally underrepresented in higher-paying technical roles, contributing to the persistent wage gap.
- Weak Enforcement of Existing Laws:
Although India’s Equal Remuneration Act and the Code on Wages 2019 provide legal safeguards, enforcement remains a significant challenge. Many employers are either unaware of or deliberately ignore these laws, exploiting loopholes or categorizing jobs in ways that allow them to justify pay disparities.
A study by the International Labour Organization (ILO) in 2020 pointed out that while India has made progress in enacting gender equality laws, enforcement mechanisms are often under-resourced and ineffective, particularly in informal and unregulated sectors like construction.
- Prevalence of Informal Employment:
A large portion of women in India’s construction sector are employed informally, with little to no access to legal protections or benefits. Informal employment allows for significant wage flexibility, which often results in lower wages for women. Furthermore, without formal contracts, it becomes difficult for women to claim equal pay or challenge discriminatory practices.
The National Sample Survey Office (NSSO) 2019 report on the informal workforce in India highlighted that women in informal employment, particularly in construction, are often paid less than men, with the wage gap being exacerbated by the lack of formal employment contracts.
Way Forward: Addressing Gender Pay Disparities in India's Construction Sector
To reduce and eventually eliminate the gender-based pay gap in India’s construction sector, a multifaceted approach is required. This approach should involve legislative reforms, better enforcement of existing laws, and societal changes in how women’s labour is valued. Below are some strategies that can be adopted:
Reevaluating Legal Definitions and Broadening "Equal Work"
One key step is to reevaluate how “equal work” is legally defined. The current focus on “same or similar work” often fails to address the fact that jobs traditionally held by women may be undervalued, despite their equivalent contribution to productivity. A broader definition that focuses on “work of equal value” could help address wage disparities more effectively.
International standards, such as those set by the International Labour Organization (ILO), advocate for the principle of “equal pay for work of equal value.” This approach has been successful in several countries in closing the wage gap by recognizing that even if the tasks performed by men and women are different, they may contribute equally to the workplace. India could adopt similar legal reforms to better address wage disparities.
Strengthening Enforcement Mechanisms
Enforcement of wage equality laws needs to be strengthened. Government agencies should conduct more frequent inspections, especially in industries like construction where wage discrimination is rampant. Employers who violate the law should face stricter penalties, including fines or other sanctions.
According to the ILO’s Global Wage Report 2020-2021, countries that have implemented stronger enforcement mechanisms for wage equality laws have seen a marked decrease in gender wage gaps. Strengthening India’s enforcement capacity, particularly in the informal sector, could lead to better compliance with existing laws.
Addressing Wage Disparities in the Informal Sector
Since a large number of women in construction are informally employed, extending legal protections to the informal workforce is crucial. This could involve introducing stricter regulations around informal labour, providing social security benefits, and ensuring that wage parity laws apply to both formal and informal employment.
The National Commission for Enterprises in the Unorganised Sector (NCEUS) Report 2020 highlights the need for better protections for informal workers, particularly women, to address gender-based wage discrimination in sectors like construction.
Frequently Asked Questions on Gender Pay Disparities in India
What is the gender pay disparity in India’s construction sector?
Women in India’s construction sector earn 30-40% less than their male counterparts. This gap is largely due to occupational segregation, societal norms, and informal employment, which lead to women being confined to lower-paying jobs.
What legal frameworks address gender pay disparities in India’s in construction?
India’s legal framework includes the Constitution’s Article 39(d), the Equal Remuneration Act of 1976, and the Code on Wages, 2019. These laws mandate equal pay for equal work, but enforcement remains weak in the construction sector.
Why is the gender pay gap so persistent in the construction industry?
The persistence of the gender pay gap is due to several factors: weak enforcement of wage equality laws, deep-rooted societal biases, and the high prevalence of informal employment, which offers little legal protection to women.
How does occupational segregation affect the gender pay gap in construction?
Women are often relegated to lower-paying, labour-intensive roles such as bricklaying or carrying materials, while men dominate higher-paying skilled jobs like masonry and carpentry. This segregation reinforces the pay disparity.
What steps can be taken to address gender pay inequality in the construction sector?
Effective solutions include stronger enforcement of existing laws, broader definitions of equal work to include the value of women’s contributions, and formalizing employment for women in the construction industry to ensure they receive proper wages and legal protections.