HIMACHAL PRADESH STATE Vs. JAI PRAKASH POWER VENTURES

JUDGEMENT

(1.) HIMACHAL Pradesh State Electricity Board Limited (Electricity Board) is the Appellant. M/S. Jai Prakash Power Venture Limited (Jai Prakash Power) the generating Company is the First Respondent. The State government and its officers are the 2nd and 3rd Respondent. Himachal Pradesh Electricity Regulatory Commission (State Commission) is the fourth Respondent.

(2.) AGGRIEVED by the order dated 24.01.2011 passed by the State Commission allowing the Additional Capitalisation of Rs.95.88 Crores for Baspa II HEP of the Jai Prakash Power (R -1) towards the cost of Protection Works of Pothead Yard due to the Force Majeure event, the Himachal Pradesh State Electricity Board Limited has filed this Appeal.

(3.) THE short facts of the case are as follows: (a) M/S. Jai Prakash Power Ventures Limited (Jai Prakash Power) a generating Company (R -1) entered into an Implementation Agreement on 1.10.1992 with the Government of Himachal Pradesh (R -2) for setting up Baspa -II Hydro Electric Project on river Baspa, a tributary of river Sutlej in Himachal Pradesh. (b) Pursuant to the said Implementation Agreement dated 1.10.1992, a Power Purchase Agreement (PPA) was executed between the Jai Prakash Power (R -1) and Himachal Pradesh State Electricity Board, the predecessor of the Appellant on 4.6.1997. (c) Accordingly, the first unit of Baspa -II Hydro Electric Project was commissioned on 24.5.2003. The second unit was commissioned on 29.5.2003. The third unit was commissioned on 8.6.2003. (d) In the year 2005, Jai Prakash Power (R -1) filed petition before the State Commission(R -4) for determination of capital cost and tariff for sale of electricity generated from its Baspa -II Project for the Financial Year 2007 -08. During the pendency of the said petition, i.e. on 19.1.2006, a major Rock Fall from the adjoining hill had occurred in Baspa -II Pothead Yard. As a result of this Rock Fall, there was an extensive damage caused to the Pothead Yard resulting in the closure of the power house for a few months. (e) In accordance with Article 17.3 (a) of the PPA, the Jai Prakash Power (R -1) informed the Appellant Electricity Board on 20.1.2006, about this Force Majeure event resulting in extensive damage to equipment and civil works. On 1.2.2006 the Appellant Electricity Board directed its Chief Engineer (Projects) for site inspection and to verify the Force Majeure event. (f) On 2.3.2006 the Jai Prakash Power (R -1) informed the Appellant Electricity Board that the estimated cost of the replacement of damaged equipment and restoration of damaged civil works would be about Rs.21 Crores. (g) On 19.4.2006 The Jai Prakash Power (R -1) submitted to the Appellant Electricity Board a Scheme Report for carrying out protection of the hill to avoid occurrence of any rock fall in future at an estimated cost of Rs 66.30 Crores) (h) On 23.5.2006, Jai Prakash Power (R -1) sent another letter informing Electricity Board, the Appellant that the estimated cost of the Protection works as per the revised scheme would come to Rs.75.25 Crores. (i) On receipt of these letters, on 22.12.2006, the Electricity Board (the Appellant) constituted an internal Committee to ascertain and report on the actual position with regard to the alleged Force Majeure event. This internal Committee was comprised of 4 members i.e. 3 Chief Engineers of the Appellant Board viz., Chief Engineer (Project), Chief Engineer (Design), Chief Engineer (Generation) and a Geologist. (j) On 21.7.2007, the said Internal Committee after thorough examination and numerous visits to the site submitted its Report to the Appellant Board confirming that the said Rock Fall was due to Force Majeure Event despite sufficient protection measures taken by the Jai Prakash Power (R -1) earlier. (k) On 16.6.2008, the above finding given in the Report submitted by the said Committee was accepted by the Electricity Board (Appellant) as recorded in the minutes of the 360th meeting of the Whole Time members of the erstwhile Electricity Board. (l) In pursuance of the acceptance of the said finding, on 22.7.2008 the Appellant Board, in accordance with Article 17.7.1 of the PPA, constituted a three member Committee (Aggarwal Committee) having one Representative each from the Appellant Electricity Board and the Jai Prakash Power (R -1) and an External Expert, to assess the quantum of the damage for finalising the settlement of the claim of the R -1. (m) On 20.3.2009, the Aggarwal Committee, after detailed enquiry submitted its detailed Report, running in four Volumes, approving the settlement of Force Majeure claim towards the Additional Capital Expenditure to the tune of Rs.96.75 Crores and recommended that this expenditure to be added in the Capital Cost of the Project for computation of the O&M charges and other related components of tariff. (n) On 16.10.2009 the Electricity Board (the Appellant) accepted the said report also. Accordingly on 2.12.2009, the Electricity Board, the Appellant informed Jai Prakash Power (R -1) about its acceptance of the cost of Rs.96.75 Crores towards the Protection Work as a consequence to the Force Majeure Event to be added to the capital cost for the computation and operation and maintenance of expenses and other related components of tariff. Besides this, the Appellant informed about their decision to State Commission also through the letter dated 19.12.2009. (o) In the light of the above circumstances, the Jai Prakash Power (R -1) filed a Petition on 20.1.2010 before the State Commission for determination of tariff claiming the additional cost of Rs.96.75 Crores towards the capital expenditure as accepted by the Appellant Electricity Board. This Petition was entertained and registered as case No.11 of 2010. (p) The State Commission after admitting the said Petition directed the Jai Prakash Power (R -1) to publish the application and issued notices on 20.2.2010. At this stage, a consumer representative appointed by the Commission filed his objections stating that the Power House site was shifted to a new location and damage had occurred only due to the said improper farsightedness in planning the area. (q) On 10.5.2010, the Electricity Board, the Appellant filed its short reply and sought extension of time for filing the detailed reply. (r) During the pendency of the said Petition filed by the 1st Respondent for determination of tariff, the Electricity Board was unbundled on 10.6.2010 under the transfer scheme formulated in accordance with Section 131 of the Electricity Act 2003. Consequently a new entity under the provisions of the Companies Act in the name of Himachal Pradesh Electricity Board Limited (the Appellant) was constituted to discharge the obligations of the erstwhile State Electricity Board. (s) On 16.8.2010, the Management Committee of the new Board directed its Member (Project) to re -examine the issue of the applicability of the Force Majeure from all aspects and to bring it up for review before the Board. Accordingly, the Member (Project) after examining the documents and other materials including the Report of the earlier Committees viz., the Internal Committee and the Aggarwal Committee submitted his Report to the effect that the event in question did not qualify as a Force Majeure event. (t) On receipt of this Report, a meeting was convened on 25.8.2010 by the newly constituted Board and in the said meeting, earlier decision taken by the Predecessor Board was recalled and the fresh decision was taken annulling the approval conveyed earlier by the Board regarding Force Majeure event. This decision was conveyed by the Appellant to the Jai Prakash Power on 6.9.2010. Besides this, the Appellant also filed an application on 16.9.2010 before the State Commission to place on record the subsequent developments and the fresh decision taken in the Board meeting on 25.8.2010. (u) On 21.10.2010, the First Respondent filed its objection and questioned the legality and propriety of the Board to annul the earlier decision. (v) The State Commission, thereupon heard arguments of the both and as directed both the parties have filed their respective written submissions. (w) Then on 24.1.2011, the State Commission after considering the submissions and the documents, passed the impugned order approving the additional capital cost in favour Jai Prakash Power(R1) as claimed by it while rejecting the fresh plea taken by the Appellant on the ground that the insertion of a new case at the stage of final arguments would not be permissible. On being aggrieved by this order, the present Appeal has been filed by the State Electricity Board.