Supreme Court dismisses TATA Power's challenge to ₹7,000 Crore transmission contract awarded to Adani Electricity on nomination basis

The Supreme Court on Wednesday dismissed Tata Power's challenge to Maharashtra Electricity Regulatory Commission's (MERC) decision to award a ₹7,000 crore transmission contract on a nomination basis to Adani Electricity [The Tata Power Company Ltd Transmission vs MERC & Ors.].

The Court upheld an order passed by Appellate Tribunal For Electricity (APTEL) in this regard.

The question before the Court was whether a large infrastructure project can be awarded on a nomination basis under Section 62 of the Electricity Act by departing from competitive bidding under Section 63 of the Act.

A bench led by Chief Justice of India DY Chandrachud observed that the Act provides States sufficient flexibility to regulate the intra-state transmission systems, wherein the Appropriate State Commissions possess the power to determine and regulate tariff.

"The Electricity Act 2003 seeks to distance the State Governments from the determination and regulation of tariff, placing such power completely within the ambit of the Appropriate Commissions," the Court added.

Further, it noted that the provisions of Electricity Act do not provide one dominant method to determine tariff and that competitive bidding cannot be meant to take precedence over nomination.

The Court, therefore, held that in exercise of appellate powers, it cannot interfere in concurrent findings arrived by MERC as it is an independent body to determine tariff.

"Electricity Act 2003 read with Maharashtra govt GOM does not make tariff only through bidding route. This case has brought to notice the ad hoc nature of state electricity transmission. MSETCL flip flops have led to waste of time," the Court added.

Therefore, it directed all State Electricity Regulatory Commissions to frame guidelines on determination of tariff under section 181 of Electricity Act in accordance with the national policy and dismissed the appeal.

"We direct all State Regulatory Commissions to frame Regulations under Section 181 of the Act on the terms and conditions for determination of tariff within three months from the date of this judgment. While framing these guidelines on determination of tariff, the Appropriate Commission shall be guided by the principles prescribed in Section 61, which also includes the NEP and NTP," the Court said.

The judgment said the law that both cost plus and tariff based competitive bidding are available to a Commission while setting up Transmission projects. Competitive Bidding is not a dominant route, the Court said putting the Section 62 vs. Section 63 controversy to rest.

Senior Advocate Shyam Divan, Advocate-on-Record (AoR) Nitin Saluja and advocate Shri Venkatesh appeared for TATA Power.

AoR Amita Singh Kalkal represented MERC.

Senior Advocates Dr AM Singhvi and Vikas Singh, and AoR EC Agrawala represented Adani Electricity.

AoR Sudhanshu S Choudhari appeared for Maharashtra State Electricity Transmission Company Ltd (MSETCL)

AoR Sachin Patil represented the State of Maharashtra.

[Read Judgment]