Holding

The CERC Regulations, 2019 do not prohibit the respondent from supplying free power beyond 13% and the Implementation Agreement is not overridden by those Regulations; consequently, the writ petition is not maintainable.

Summary

The Himachal Pradesh government entered into an Implementation Agreement with JSW Hydro Energy Ltd (formerly JIL) to supply 12% free power for the first 12 years and 18% thereafter from a 1045 MW hydro project. When the free‑power obligation rose above the 13% cap prescribed in CERC (Terms and Conditions of Tariff) Regulations, 2019, the generator sought a writ to modify the agreement to conform to the Regulations, which the High Court granted. The Supreme Court held that Note 3 of Regulation 55 merely limits the free‑power considered for tariff calculation and does not prohibit supplying more than 13% under the contract. Consequently, the contract remains enforceable and the High Court’s writ jurisdiction was improper because tariff matters lie exclusively with the CERC and the APTEL. The appeal was allowed, setting aside the High Court order and dismissing the writ petition.

Issues considered

The CERC Regulations, 2019, whether they bar the respondent from supplying free power beyond 13% to the State.
Whether a writ petition under Article 226 is maintainable to align a pre‑existing Implementation Agreement with the CERC Regulations, 2019.

Legislation cited

CERC (Terms and Conditions of Tariff) Regulations, 2014
CERC (Terms and Conditions of Tariff) Regulations, 2019s. Note 3 of Regulation 55, s. Regulation 44, s. Regulation 55
Electricity Act, 1910
Electricity Act, 2003s. 10, s. 111, s. 14, s. 185, s. 61, s. 7, s. 79, s. 8
Electricity Regulatory Commissions Act, 1998
Electricity (Supply) Act, 1948

Headnote

Issue for Consideration The primary issues arising for consideration are: first, whether the CERC Regulations, 2019 bar respondent no. 1 from supplying free power to the appellant-State beyond 13%; and second, whether respondent no. 1 could have invoked the High for aligning the Implementation Agreement with the CERC Regulations, 2019. Headnotes† Electricity Act, 2003 – CERC (Terms and Conditions of Tariff) Regulations, 2019 – Regulations 44 and 55 – Note 3 of Regulation 55 – Respondent no.1, a generating company,

Subjects

Contractual obligationStatutory regulatorImplementation AgreementConsiderationFree energy for home StateWrit Jurisdiction of High CourtAligning the Implementation AgreementSupplying free power beyond 13%Interpreting cap under Note 3 of Regulation 55Calculation and fixation of tariffCERC as statutory regulator

Judgment

[2025] 7 S.C.R. 1104 : 2025 INSC 857

The State of Himachal Pradesh & Anr.
v.
JSW Hydro Energy Limited & Ors.
(Civil Appeal No. 12883 of 2024)
16 July 2025
[Pamidighantam Sri Narasimha* and
Joymalya Bagchi, JJ.]

Issue for Consideration
The primary issues arising for consideration are: first, whether the
CERC Regulations, 2019 bar respondent no. 1 from supplying
free power to the appellant-State beyond 13%; and second,
whether respondent no. 1 could have invoked the High Court’s
writ jurisdiction for aligning the Implementation Agreement with
the CERC Regulations, 2019.

Headnotes†
Electricity Act, 2003 – CERC (Terms and Conditions of
Tariff) Regulations, 2019 – Regulations 44 and 55 – Note 3
of Regulation 55 – Respondent no.1, a generating company,
installed and commissioned a hydroelectric power project
pursuant to a grant followed by an Implementation Agreement
with the appellant-State of Himachal Pradesh – Under
this agreement, respondent no. 1 undertook to supply as
consideration 18% of net generation free of cost (free power
supply of 12% of net generation for 12 years and 18% thereafter
for next 28 years) to the appellant-State – At the commencement
of the obligation to supply 18% free power, respondent no. 1
approached the High Court by way of a writ petition to align
the Implementation Agreement with the CERC (Terms and
Conditions of Tariff) Regulations, 2019, which provide for a
maximum of 13% free power to the State Government, on the
ground that contractual agreements, to the extent that they
are inconsistent with the applicable regulations, shall stand
overridden by their operation – The High Court directed for
modification of the Implementation Agreement – Correctness:
Held: 1. The purpose and intendment of Note 3 of Regulation 55
is for the State Commission to determine tariff by assuming that
* Author
[2025] 7 S.C.R. 1105

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

FEHS is 13%, whenever it is higher in actuality, while calculating
the energy and capacity charges – Neither the language of Note
3 nor the context in which it appears in the CERC Regulations,
2019 supports respondent no. 1’s contention that the legal effect of
this cap is to override its contractual obligations with the appellant-
State – On the other hand, use of the term “shall be taken as 13%
or actual, whichever is less” shows that the Regulations cover a
situation where the obligation to supply free power is higher than
13%, and in such an eventuality, allow only a certain portion of free
supply to be considered for tariff determination and payments by
beneficiaries for the saleable capacity – Once the Regulation does
not prohibit the supply of free power beyond 13%, respondent no. 1
cannot rely on it to wriggle out of its contractual obligations – The
Regulatory Commissions, APTEL, and the Courts must enforce
these contractual obligations and ensure that their interpretation
of regulations does not allow the party to circumvent and breach
its contractual undertakings when the same is not intended by the
regulation itself. [Paras 19, 20]
2. This Court holds that CERC Regulations, 2019 do not prohibit
respondent no. 1 from supplying free power beyond 13% to the
appellant-State, and the Implementation Agreement does not stand
overridden by the operation of these Regulations – Further, a writ
petition before the High Court for aligning the Implementation
Agreement with the CERC Regulations, 2019 and the CERC’s order
dated 17.03.2022 is not maintainable – Once respondent no.1’s
prayer for relief was rejected by the CERC and it specifically held
only the PPA and PSAs to stand overridden, which finding was
not further appealed, it would not be open for respondent no. 1
to seek modification of the Implementation Agreement by way of
a writ petition before the High Court. [Para 40]

Electricity Act, 2003 – Writ Jurisdiction of High Court –
Whether the writ petition before the High Court for aligning
the Implementation Agreement with the CERC Regulations,
2019 and the CERC’s order dated 17.03.2022 is maintainable:
Held: Under the Electricity Act, the statutory regulator has been
entrusted with discharging the function of tariff determination,
including making regulations for the purpose and interpreting
the same – Constitutional courts must enable the regulator to
comprehensively regulate all aspects of the sector such that
remedies are not fragmented and certain issues are not left
1106 [2025] 7 S.C.R.

Supreme Court Reports

outside the regulator’s domain – The regulator has the expertise,
specialisation, and institutional memory to conduct such an
interpretative exercise to further the objective of the regulatory
regime and systematically lay down legal principles – In this light, the
High Court should not have entered into the domain of interpreting
these Regulations which deal with tariff determination, as the same
falls within the exclusive domain of the CERC – The Electricity
Act itself provides the appellate mechanisms by establishing a
specialised and permanent tribunal, namely the APTEL, and an
appeal before this Court, against the CERC’s orders – In view
of the existence of a statutory regulatory forum, the High Court
should not have entertained the writ petition by interpreting the
CERC Regulations, 2019 – Therefore, a writ petition before the
High Court for aligning the Implementation Agreement with the
CERC Regulations, 2019 and the CERC’s order dated 17.03.2022
is not maintainable. [Paras 38, 40]

Electricity Act, 2003 – A complete and comprehensive code:
Held: The Electricity Act, 2003 is a complete and comprehensive
code for regulating the generation, transmission, distribution, trading
and use of electricity – One of the core features of the Act is that
it unbundles the functions of electricity generation, transmission,
and distribution that were erstwhile performed by State Electricity
Boards into separate utilities, and provides for their regulation
through independent Regulatory Commissions. [Para 7]

Electricity Act, 2003 – Electricity Regulatory Commissions Act,
1998 – Need for an independent and transparent regulatory
mechanism:
Held: The need for an independent and transparent regulatory
mechanism was felt due to the regulatory failures under the erstwhile
legal regime, wherein SEBs constituted by the State Governments
were entrusted with regulation – It was experienced that various
problems plagued the power sector, including lack of rational retail
tariffs, high level of cross-subsidies, poor planning and operation,
inadequate capacity, neglect of consumer interest, and limited
involvement of the private sector’s skills and resources – It is in this
context that the Electricity Regulatory Commissions Act, 1998 was
enacted to reform the governance of the sector by establishing an
independent and transparent regulatory mechanism – Thereafter,
the Electricity Act, 2003 was enacted as a comprehensive legislation
[2025] 7 S.C.R. 1107

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

for regulating the sector and it replaced the Electricity Act, 1910,
Electricity Supply Act, 1948 and the 1998 Act [Para 8]
Electricity Act, 2003 – Regulation of Electricity Generation
Under the Electricity Act – Discussed. [Paras 11 to 14]
Electricity Act, 2003 – CERC Regulations, 2019 – Interpretation
of – Discussed. [Para 15]

Case Law Cited
PTC India Ltd. v. Central Electricity Regulatory Commission [2010]
3 SCR 609 : (2010) 4 SCC 603; Transmission Corporation of A.P.
Ltd. v. Rain Calcining Ltd. [2019] 17 SCR 474 : (2021) 13 SCC
674; Ganga Retreat and Towers Ltd. v. State of Rajasthan [2003]
Supp. 6 SCR 1134 : (2003) 12 SCC 91; K.C. Ninan v. Kerala State
Electricity Board [2023] 9 SCR 637 : (2023) 14 SCC 431; W.B.
Electricity Regulatory Commission v. CESC Ltd. (2002) 8 SCC
715; Sesa Sterlite Ltd. v. Orissa Electricity Regulatory Commission
[2014] 13 SCR 426 : (2014) 8 SCC 444; Dilip v. Satish, 2022 SCC
OnLine SC 810; Chameli Singh v. State of U.P. [1995] Supp. 6 SCR
827 : (1996) 2 SCC 549; Tata Power Co. Ltd. v. Reliance Energy
Ltd. [2009] 9 SCR 625 : (2009) 16 SCC 659; Indsil Hydro Power
& Manganese Ltd. v. State of Kerala [2021] 13 SCR 136 : (2021)
10 SCC 165; Reliance Infrastructure Ltd. v. State of Maharashtra
[2019] 1 SCR 886 : (2019) 3 SCC 352; Cellular Operators Assn. of
India v. Union of India [2002] Supp. 5 SCR 222 : (2003) 3 SCC 186;
U.P. Power Corpn. Ltd. v. NTPC Ltd. [2009] 3 SCR 1060 : (2009) 6
SCC 235; BSES Ltd. v. Tata Power Co. Ltd. [2003] Supp. 4 SCR
932 : (2004) 1 SCC 195; Maharashtra State Electricity Distribution
Co. Ltd. v. Adani Power Maharashtra Ltd. [2023] 7 SCR 648 :
(2023) 7 SCC 401; Jaipur Vidyut Vitran Nigam Ltd. v. MB Power
(M.P.) Ltd. [2024] 1 SCR 909 : (2024) 8 SCC 513 – referred to.

Books and Periodicals Cited
H.W.R. Wade and C.F. Forsyth, Administrative Law (11th edn,
Oxford University Press 2014), 116-117 – referred to.

List of Acts
Electricity Act, 2003; Electricity Regulatory Commissions Act,
1998; Electricity Act, 1910; Electricity (Supply) Act, 1948; CERC
Regulations, 2019; CERC (Terms and Conditions of Tariff)
Regulations, 2014.
1108 [2025] 7 S.C.R.

Supreme Court Reports

List of Keywords
Contractual obligation; Statutory regulator; Implementation
Agreement; Consideration; Free energy for home State; Writ
Jurisdiction of High Court; Aligning the Implementation Agreement;
Supplying free power beyond 13%; Interpreting cap under Note 3
of Regulation 55; Calculation and fixation of tariff; CERC as
statutory regulator.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12883 of 2024
From the Judgment and Order dated 28.05.2024 of the High Court
of Himachal Pradesh at Shimla in CWP No. 7667 of 2023

Appearances for Parties

Advs. for the Appellants:
Vaibhav Srivastava, A.A.G., Kapil Sibal, Parag Tripathi, Anup
Rattan, Sr. Advs., Ms. Sugandha Anand, Bhargava Ravikumar,
Puneet Rajta, Ms. Mishika Bajpai.
Advs. for the Respondents:
P. Chidambaram, Dr. A.M. Singhvi, Gurminder Singh, Nikhil Nayyar,
Sr. Advs., Mahesh Agarawal, Aman Anand, Shashwat Singh, Ms.
Madhavi Agarwal, Chirag Nayak, Ms. Natasha Debroy, Shidharth
Seem, E. C. Agrawala, Anand K Ganesan, Amal Nair, Shivani
Verma, Nitin Saluja, Ms. Preetika Dwivedi, Abhisek Mohanty, Nikunj
Dayal, Jatinder Singh Gill, T. V. S. Raghavendra Sreyas, Siddharth
Vasudev, Brahma Prakash Soni, Kshitij Maheshwari.

Judgment / Order of the Supreme Court

Judgment

Pamidighantam Sri Narasimha, J.

Table of Contents*

I. Introduction ............................................................................ 2
II. Facts ....................................................................................... 4

* Ed. Note: Pagination as per the original Judgment.
[2025] 7 S.C.R. 1109

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

III. Impugned Order ..................................................................... 14
IV. Submissions ........................................................................... 16
V. Issue ....................................................................................... 29
VI. Analysis .................................................................................. 29
VII. Regulation of Electricity Generation Under the Electricity Act ... 33
VIII. Legal Effect of Note 3 of Regulation ...................................... 36
i) Interpretation of the CERC Regulations, 2019 ................ 36
ii) CERC’s Order dated 17.03.2022 ..................................... 41
IX. Maintainability of the Writ Petition .......................................... 44
i) CERC as an Expert and Specialised Regulator, and Extent 44
of Judicial Interference .....................................................
ii) Grant of Relief by the High Court ................................... 50
X. Conclusion .............................................................................. 53

I. Introduction:
1. Respondent no. 1, a generating company, installed and commissioned
a 1045MW hydroelectric power project pursuant to a grant followed
by an Implementation Agreement with the appellant-State of Himachal
Pradesh. Under this Agreement, respondent no. 1 undertook to
supply as consideration 18% of net generation free of cost1 to the
appellant-State. At the commencement of the obligation to supply
18% free power, respondent no. 1 approached the High Court by
way of a writ petition to align the Implementation Agreement with the
CERC (Terms and Conditions of Tariff) Regulations, 20192, which
provide for a maximum of 13% free power to the State Government,
on the ground that contractual agreements, to the extent that they are
inconsistent with the applicable regulations, shall stand overridden by
their operation. Accepting the argument, the High Court entertained

1 The obligation to supply free power is 12% of net generation from 12.09.2011 to 12.09.2023, and 18%
thereafter till 12.09.2051.
2 Hereinafter “CERC Regulations, 2019”.
1110 [2025] 7 S.C.R.

Supreme Court Reports

the writ petition and directed that the Implementation Agreement
stood modified.
2. We have allowed the appeal by the State of Himachal Pradesh by
interpreting the provisions of the Electricity Act, 20033 and the CERC
Regulations, 2019 in the context of the subsisting and continuing
contractual relationship between the parties. We have held that
the Central Electricity Regulatory Commission4 shall give effect to
the Regulations and provide a pass-through to the extent of 13%
free power but the remaining part of the obligation is contractual in
nature and will be governed by the provisions of the Implementation
Agreement. On interpreting the cap under Note 3 of Regulation 55 of
the CERC Regulations, 2019, we have held that it does not restrain
or prohibit respondent no. 1 from supplying free power beyond 13%
but it is only meant for the calculation and fixation of tariff. Further,
considering the expertise and specialisation of the CERC as a
statutory regulator and the wide-ranging jurisdiction it exercises
under the Electricity Act, as well as respondent no. 1’s conduct in
not seeking relief against the appellant before the CERC, we have
held that the present writ petition was not maintainable before the
High Court as the interpretation of the Regulations falls within the
exclusive domain of the regulator.

II. Facts:
3. The facts, to the extent necessary are as follows. By a Memorandum
of Understanding5 dated 28.08.1993, the appellant-State allotted the
Karcham Wangtoo Hydroelectric Project for an installed capacity of
900 MW to one Jaiprakash Industries Limited6, which is a power
generating company and the predecessor of respondent no. 1.
Under Clause 6 of the MoU, JIL agreed to supply 12% of the power
generated to the appellant-State free of cost.
3.1 Pursuant to the MoU, the appellant entered into an Implementation
Agreement with JIL for an enhanced capacity of 1000 MW. The
relevant clauses of the Implementation Agreement are as follows:

3 Hereinafter “Electricity Act”.
4 Hereinafter “CERC”.
5 Hereinafter “MoU”.
6 Hereinafter “JIL”.
[2025] 7 S.C.R. 1111

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

i. Article 1.2 is the definitions clause that defines “Law” as
any Act, rule, regulation, notification, order, or instruction
having the force of Law enacted or issued by any competent
legislature, government, or statutory authority in India.
ii. Further, the Effective Date of the Agreement is defined
as the date of signing, and the Scheduled Commercial
Operation Date 7 is defined as 120 months from the
Effective Date.
iii. Article 3.2 stipulates that the Implementation Agreement
shall remain in force for a period of 40 years from the
Commercial Operation Date8 of the Project (Agreement
Period), unless terminated earlier as per its provisions.
It reads:
“3.2 Agreement Period
a) This Agreement shall remain in force up to a
period of forty (40) years from the Commercial
Operation Date of the Project (Agreement
Period), unless terminated earlier in accordance
with the provisions of the Agreement.”
iv. Article 4 delineates the obligations of the appellant-State
under the Agreement, which include the grant of various
consents and permissions to JIL to establish, operate,
and maintain the Project; to acquire land and prepare a
rehabilitation and resettlement plan for local residents;
to enter into leases for government land required for the
works; to upgrade roads and bridges for the Project; and to
provide necessary assistance to JIL as per the Agreement.
v. Article 5 deals with the obligations of JIL, of which the
most relevant is the supply of power to the appellant-State
without any cost or charges under Article 5.1. Sub-clause
(a) stipulates the quantum of such supply as 12% of the
net generation for the first 12 years from the COD, and
18% of the net generation for the next 28 years. Further,

7 Hereinafter “SCOD”.
8 Hereinafter “COD”.
1112 [2025] 7 S.C.R.

Supreme Court Reports

sub-clause (b) stipulates that JIL shall ensure that any
Power Purchase Agreement9 entered into by it shall not be
detrimental to the rights of the appellant-State envisaged
in this clause. It reads:
“5.1 Government Supply
(a) The Company shall supply to the Government
or its Agent, during the Agreement Period, at
the Interconnection Point without any cost or
charges to the Government, the quantum of
electrical energy generated as specified below
(Government Supply):

i) Commencing from the date Twelve (12)
of synchronisation of the first percent of Net
Unit and for the first twelve Generation
(12) years from Commercial
Operation Date (COD)
ii) For the next twenty eight (28) Eighteen (18)
years after expiry of the period percent of Net
specified in (i) above. Generation

This quantum of Government Supply is
applicable in case the Project achieves
Commercial operation on Scheduled Commercial
Operation Date. In the event of early or delayed
commissioning of the Project, the same shall
be as per provision specified in Clause 5.19
and 5.20 respectively.
In case the Government levies any duty/tax
on generation and supply of power, the same
shall be borne by the Government in respect
of Government Supply. Further modalities for
providing the Government Supply shall be
mutually agreed between the Company and
the Board.

9 Hereinafter “PPA”.
[2025] 7 S.C.R. 1113

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

(b) The Company shall ensure that any Power
Purchase Agreement entered into by it shall not
be detrimental to the rights of the Government
envisaged in this Clause.”
vi. Article 9 provides that the rights and obligations under
or pursuant to the Agreement shall be governed by and
construed according to Law.
vii. Article 10 provides for dispute resolution through mutual
discussions, and in case of failure of the same, arbitration.
3.2 By an addendum to the Implementation Agreement dated
24.05.2001, the time-period for commencing construction was
extended from 36 to 48 months from the Effective Date, but
the COD was unamended.
3.3 Subsequently, by a tripartite agreement dated 30.12.2002
between the appellant, JIL, and one Jaypee Karcham Hydro
Corporation Limited10 that was incorporated by JIL as per
Clause 8 of the MoU, the rights and liabilities of the Project
were transferred from JIL to JKHCL.
3.4 JKHCL entered into a PPA dated 21.03.2006 with respondent
no. 4, i.e., PTC India Limited, which is an inter-state trading
licensee, for sale of 704 MW of power. PTC then entered into
Power Sale Agreements11 with respondent nos. 5 to 10, which are
distribution companies in the States of Punjab, Haryana, Uttar
Pradesh and Rajasthan, to sell the power which it purchased
from JKHCL. In the PPA as well as the PSAs, “free power” is
defined in the same manner as Article 5.1 of the Implementation
Agreement.
3.5 The appellant and JKHCL entered into a Second Supplementary
Implementation Agreement on 20.12.2007 to extend the SCOD
to 144 months from the Effective Date, i.e. 18.11.2011.
3.6 The Project achieved commercial operation on 12.09.2011,
i.e., within the extended SCOD. It is relevant to note that
this is the date from which JKHCL’s obligation to supply free

10 Hereinafter “JKHCL”.
11 Hereinafter “PSAs”.
1114 [2025] 7 S.C.R.

Supreme Court Reports

power to the appellant-State commenced as per Article 5.1
of the Implementation Agreement. For the first 12 years from
12.09.2011, the quantum of free power to be supplied is 12%,
and 18% thereafter for the next 28 years.
3.7 By a tripartite agreement dated 29.08.2015, the rights and
liabilities in the Project were transferred from JKHCL to
Himachal Baspa Power Company Limited12, which is the
predecessor of respondent no. 1, with effect from 01.09.2015.
As per clause 3 of this agreement, HBPCL agreed to be bound
by and liable for the contractual undertakings as specified
in the Implementation Agreement, Addendum, tripartite
agreement dated 30.12.2002, and the Second Supplementary
Implementation Agreement.
3.8 In 2018, HBPCL changed its name to JSW Hydro Energy
Limited, which is the present respondent no. 1 company.
The parties signed the Third Supplementary Implementation
Agreement dated 21.10.2019 for effecting the change in name
while also agreeing that the other contractual undertakings
would remain unamended.
3.9 During this time, the CERC (Terms and Conditions of Tariff)
Regulations, 2014 governed the field with respect to tariff
determination of generating stations, including the specific
provision with respect to free power supply under Note 3 of
Regulation 42. This provided that “FEHS = Free energy for
home State, in percent and shall be taken as 13% or actual
whichever is less.” Respondent no. 1 sought for relaxation of
this cap in its tariff petition for the 2014-2019 period. This was
decided by the CERC’s order dated 30.03.2017, wherein it
did not consider this issue as the free power supply obligation
during this period was only 12%, which is below the 13%
cap prescribed in the CERC Regulations, 2014. However,
respondent no. 1 was given liberty to claim this relief at an
appropriate time.
3.10 In 2019, the CERC framed the CERC Regulations, 2019
determining tariffs for generating stations and transmission

12 Hereinafter “HBPCL”.
[2025] 7 S.C.R. 1115

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

units from 01.04.2019 to 31.03.2024. At this stage, it is
relevant to refer to Note 3 of Regulation 55 that provides that
free energy to home State (FEHS) shall be taken as 13% or
actual, whichever is lesser. Further, Regulation 44 deals with
the computation and payment of capacity and energy charges
for generating station, and Regulation 55(2) provides for billing
and payments. The relevant portions of these provisions are
extracted hereinbelow:
Regulation 44:
“44. Computation and Payment of Capacity Charge
and Energy Charge for Hydro Generating Stations:
(1) The fixed cost of a hydro generating station shall be
computed on annual basis, based on norms specified
under these regulations, and shall be recovered on
monthly basis under capacity charge (inclusive of
incentive) and energy charge, which shall be payable
by the beneficiaries in proportion to their respective
allocation in the saleable capacity of the generating
station, i.e., in the capacity excluding the free power
to the home State:…
***
(4) The energy charge shall be payable by every
beneficiary for the total energy scheduled to be
supplied to the beneficiary, excluding free energy,
if any, during the calendar month, on ex-bus basis,
at the computed energy charge rate. Total energy
charge payable to the generating company for a
month shall be:
Energy Charges = (Energy charge rate in Rs. / kWh) x
{Scheduled energy (ex-bus) for the month in kWh} x
(100 – FEHS) / 100
(5) Energy charge rate (ECR) in Rupees per kWh on
ex-power plant basis, for a hydro generating station,
shall be determined up to three decimal places based
on the following formula, subject to the provisions of
clause (7) of this Regulation:
1116 [2025] 7 S.C.R.

Supreme Court Reports

ECR = AFC X 0.5 x 10 / {DE x (100 – AUX) x (100 –
FEHS)}
Where,
DE = Annual design energy specified for the hydro
generating station, in MWh, subject to the provision
in clause (6) below.
FEHS = Free energy for home State, in per cent, as
mentioned in Note 3 under Regulation 55 of these
regulations…”
Regulation 55:
“55. Billing and Payment of charges:
***
(2) … Payment of capacity charge and energy charge
for a hydro generating station shall be shared by the
beneficiaries of the generating station in proportion
to their shares (inclusive of any allocation out of
the unallocated capacity) in the saleable capacity
(to be determined after deducting the capacity
corresponding to free energy to home State as per
Note 3 herein.
***
Note 3 FEHS= Free energy for home State, in percent
and shall be taken as 13% or actual whichever is
less…”
3.11 In 2019, respondent no. 1 filed a petition before the CERC for
approval of its tariff between 2019-2024, as well as truing up
the tariff for 2014-2019 period. In the tariff petition, respondent
no. 1 inter alia prayed for relaxation of the 13% cap on free
power under Note 3 of Regulation 55 of the 2019 Regulations,
since its free power obligation under the Implementation
Agreement is 18% of net generation after the completion of
12 years from COD.
3.12 This was decided by the CERC’s order dated 17.03.2022
wherein it rejected the prayer for relaxation of the 13% cap on
free power supply. The CERC held that it was bound by the
[2025] 7 S.C.R. 1117

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

CERC Regulations, 2019 while determining the tariff and that
the regulations will override inconsistent contractual provisions
in the PPA and PSAs executed by respondent no. 1 in respect
of free power to the appellant-State. We will be dealing with
the findings of the CERC in more detail in our analysis.
3.13 In the meanwhile, the Central Electricity Authority approved an
increase in the Project capacity from 1000MW to 1091MW in
two stages by a letter dated 29.04.2021. Pursuant to this, the
capacity of the Project was enhanced to 1045 MW by the Fourth
Supplementary Implementation Agreement dated 08.07.2021.
It was further agreed that respondent no. 1 would be required
to supply an additional 3% free power to the appellant-State
on the enhanced 45MW capacity.
3.14 In 2022, the present dispute arose between the parties as
respondent no. 1 issued various letters to the appellant that
Note 3 of Regulation 55 of the CERC Regulations, 2019 caps
the free power supplied to the State at 13%. Further, that
the CERC’s order dated 17.03.2022 requires inconsistent
contractual provisions to be aligned with the Regulations.
Relying on these, respondent no. 1 requested the appellant
to align the Implementation Agreement with the CERC
Regulations, 2019 and the order dated 17.03.2022 such that its
free power supply obligation is confined to 13%. On the other
hand, the appellant-State replied that the quantum of free power
must be determined as per the Implementation Agreement
and the Supplementary Implementation Agreements, which
comes to 18.46% commencing from 13.09.2023. The appellant
also issued a notice to respondent no. 1 dated 13.09.2023 to
adhere to the contractual terms, failing which consequential
action would be initiated against it. It also issued a notice dated
16.09.2023 to the Northern Regional Load Dispatch Centre to
schedule 18.46% free power to the appellant.
3.15 This led respondent no. 1 to file the present writ petition before
the High Court to direct the appellant to align the provisions
of the Implementation Agreement and Supplementary
Implementation Agreements on free power with the CERC
Regulations, 2019 and the CERC’s order dated 17.03.2022,
as well as to quash the notices issued by the appellant.
1118 [2025] 7 S.C.R.

Supreme Court Reports

III. Impugned Order:
4. By the order 28.05.2024, which is impugned before us, the High
Court allowed the writ petition and directed the appellant to align
the Implementation Agreement and Supplementary Implementation
Agreements in respect of the quantum of free power with the
provisions of the CERC Regulations, 2019 till they remain in force.
Further, it directed that if respondent no. 1 supplied any free power
above the maximum ceiling limit under the Regulations, the same
shall be adjusted. For arriving at this conclusion, the High Court
adopted the following reasoning:
4.1 First, it held that the writ petition is maintainable inspite of the
arbitration clause in Article 10.1 of the Implementation Agreement
as the issues of whether the CERC Regulations, 2019 will
override the Implementation Agreement and whether the
contractual provisions need to be aligned pertain to enforcement
of statutory regulations. Hence, the arbitration clause does not
stand in the way of invoking writ jurisdiction.
4.2 The High Court then took note of various provisions of the
Electricity Act, the CERC Regulations, 2019, and the CERC’s
order dated 17.03.2022 and rejected the appellant’s argument
that these do not affect the obligations under the Implementation
Agreement and held that the CERC’s order has a direct bearing
on the supply of free power by respondent no. 1 to the appellant.
Noting that the appellant-State was a party before the CERC
and did not contest respondent no. 1’s prayer for relaxing the
cap on free power, the Court held that such cap is not only to
determine the tariff but is relevant for every other incidental
and connected purpose.
4.3 While the CERC in its order dated 17.03.2022 held that
inconsistent provisions in the PPA and PSAs stand overridden
by the Regulations, the High Court observed that these
provisions are the same as in the Implementation Agreement
and Supplementary Implementation Agreements. In a composite
scheme for generation and sale of electricity, it held that there
cannot be any mismatch in respect of the quantum of supply
of free electricity. Hence, the corollary of the CERC’s order that
the PPA and PSAs stand overridden is that the Implementation
Agreement becomes unworkable and must be aligned with the
CERC Regulations, 2019.
[2025] 7 S.C.R. 1119

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

4.4 Further, since the appellant-State accepted the CERC’s order,
respondent no. 1 was within its right to seek alignment of the
Implementation Agreement with the CERC Regulations, 2019
and the CERC’s order.
4.5 The High Court also relied on this Court’s decision in PTC India
Ltd. v. Central Electricity Regulatory Commission13 where it
was held that statutory regulations under the Electricity Act will
override existing contracts between regulated entities. On this
basis, the High Court concluded that the CERC Regulations,
2019 will have supremacy over contractual undertakings and
the provisions of the Implementation Agreement must be aligned
accordingly.

IV. Submissions:
5. We have heard Mr. Kapil Sibal and Mr. Parag Tripathi, learned
senior counsel for the appellant, and Mr. P. Chidambaram and
Dr. A.M. Singhvi, learned senior counsel for respondent nos. 1
and 2. We also heard Mr. Nikhil Nayyar, learned senior counsel for
respondent no. 11 (CERC), Ms. Preetika Dwivedi, learned counsel
for respondent nos. 7-9 (distribution companies operating in the State
of Rajasthan), and Mr. Gurminder Singh, learned senior counsel for
respondent no. 10 (distribution company operating in the State of
Punjab). Their submissions can be recapitulated as follows:
5.1 Mr. Tripathi and Mr. Sibal appearing for the appellant-State
have broadly submitted that the quantum of free power to be
supplied under the Implementation Agreement is not regulated
or curtailed by the CERC Regulations, 2019 or the CERC’s
order dated 17.03.2022. While taking us through the sequence
of events, the following submissions have been made:
i. Regulation 2 provides the scope and extent of application
of the CERC Regulations, 2019, which is to determine the
tariff for generating and transmission companies.
ii. The purport of Note 3 of Regulation 55, which stipulates
the 13% cap on free power, is for calculating the bill
amount that the generating company can recover from

13 (2010) 4 SCC 603.
1120 [2025] 7 S.C.R.

Supreme Court Reports

beneficiaries. It does not prohibit respondent no. 1 from
supplying free power beyond this cap. The effect of the
cap is that the CERC Regulations, 2019 provide a pass-
through to the extent of 13% free power while determining
the tariff. Any further supply of free power must be borne
by the generating companies from their resources.
iii. Further, that the Regulations govern agreements between
the generation and distribution companies but do not
extend to the Implementation Agreement, which was
executed even prior to the commencement of generation.
In the written submissions, it is further submitted that
the Implementation Agreement is a contract for natural
resources, and not a tariff agreement. It hence falls outside
the ambit of the CERC Regulations, 2019.
iv. In this vein, the learned senior counsel have also
referred us to the relevant portions of the CERC’s order
dated 17.03.2022 wherein respondent no. 1 prayed for
relaxation of the 13% cap while calculating tariff in view
of its contractual obligations under the Implementation
Agreement. This was rejected by the CERC and it held
that the PPA and PSAs executed by respondent no. 1
are overridden by the Regulations. The learned senior
counsel submit that respondent no. 1 did not appeal this
order before the Appellate Tribunal for Electricity14 and
instead filed a writ petition in 2023 seeking amendment
of the Implementation Agreement.
v. Coming to the impugned order of the High Court, they
submit that the High Court has proceeded on the basis
that the appellant-State is a regulated entity under the
Electricity Act, and thereby relied on PTC (supra) where this
Court held that contracts between regulated entities stand
overridden by statutory regulations under the Electricity
Act. They submitted that this is incorrect as the State
Government is not a deemed licensee under the third
proviso of Section 14 as it is not engaging in transmission,
distribution, or trading of electricity.

14 Hereinafter “APTEL”.
[2025] 7 S.C.R. 1121

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

vi. They also submitted that contractual terms could not have
been amended in exercise of writ jurisdiction, and the only
remedy available to respondent no. 1 was to challenge
the validity of the Regulation itself, which it had not
done. Regarding the exercise of writ jurisdiction to align
the contractual terms with the Regulations, it is further
contended in the written submissions that the High Court
has rewritten the Implementation Agreement by relying on
the PPA and PSAs being overridden as per the CERC’s
order dated 17.03.2022. However, the High Court ignored
that these agreements are not on the same footing and
Article 5.1(b) of the Implementation Agreement provides
that it shall not be affected by the PPA.
vii. In the written submissions, the appellant submitted that
the quantum of free power was arrived after a series of
negotiations with JIL, which was awarded the Project
through the MoU route rather than through competitive
bidding. In order to avoid competitive bidding, JIL agreed
to supply 18% free power during a certain portion of the
Agreement period.
viii. The learned senior counsel further submitted that despite
a similar cap on free power in the Hydroelectric Policy,
1998 @ 12%, respondent no. 1 knowingly agreed to
supply 18% free power in the Implementation Agreement
that was executed in 1999. Further, this obligation has
been reiterated in all the Supplementary Agreements.
Moreover, the Fourth Supplementary Implementation
Agreement was executed in 2021 for additional free
power on the enhanced capacity, which was executed
after the CERC Regulations, 2019 came into force.
Hence, once respondent no. 1 consented to supplying
free power @ 18% despite a similar cap existing all
through, the same cannot be avoided by filing a writ
petition.
5.2 Mr. Chidambaram, learned senior counsel for respondent
no. 1 submitted that the Implementation Agreement, which
was negotiated prior to the CERC Regulations, 2019 stands
overridden by the Regulations.
1122 [2025] 7 S.C.R.

Supreme Court Reports

i. Referring to Article 9 of the Implementation Agreement,
he submitted that the rights and obligations under the
Agreement are subject to “Law”, which has been widely
defined as including regulations. The regulations in this
case are framed under the Electricity Act, which was
enacted in 2003, after the Implementation Agreement
was executed. Prior to this, there was no law restricting
the quantum of free power at the time of execution of the
Implementation Agreement.
ii. The State Government is a regulated entity under the
Electricity Act as it is a deemed licensee as per the
third proviso of Section 14. He referred us to certain
portions of the writ petition before the High Court, where
respondent no. 1 contended that the appellant-State is a
deemed licensee and the same was not denied by the
appellant in its reply. He also referred to Section 10(2) of
the Electricity Act to submit that generating companies
can supply electricity to licensees only. On this basis, he
submitted that respondent no. 1 is supplying electricity
to the appellant-State as a licensee, albeit free of cost.
iii. Relying on the decisions of this Court in PTC (supra) as well
as Transmission Corporation of A.P. Ltd. v. Rain Calcining
Ltd.15, he submitted that even concluded contracts between
regulated entities are overridden by regulations. Since
the State Government is a licensee, the Implementation
Agreement stands overridden by the Regulations. Further,
he submitted that performance of a contract must be in
conformity with the law in force at the time.16
iv. He then referred us to Regulation 30 of the CERC
Regulations, 2019 that provides for Return on Equity17 to
hydro-electric generating companies @ 16.5%, which the
generating company earns through tariff on saleable power.
The tariff is calculated by considering the free power cap
@ 13% as per Note 3 of Regulation 55. However, if the

15 (2021) 13 SCC 674.
16 Relied on Ganga Retreat and Towers Ltd. v. State of Rajasthan, (2003) 12 SCC 91.
17 Hereinafter “RoE”.
[2025] 7 S.C.R. 1123

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

actual free power supply is 18% as per the Agreement,
this will negatively impact the RoE. Further, to ensure that
RoE is maintained, respondent no. 1 will be required to
sell the remaining 82% of power at a higher rate to PTC
and the distribution companies, which will ultimately be
passed on to the consumers thereby affecting consumer
interest. In the written submissions, respondent no. 1
also contended that the cost of generation and supply of
electricity must be recovered through tariff as per Section
61 of the Electricity Act. However, if it is required to supply
18% free power despite the 13% cap in the Regulations, it
will not recover revenue for 5% of the power it generates
and supplies, and this will negatively impact its RoE.
5.3 Dr. Singhvi supplemented these submissions with the following
arguments:
i. The consequence of a change in law (i.e., the cap on free
power supply) must be borne by both parties, and cannot
be unilaterally imposed on the generating company.
ii. The State Government is a regulated entity as per the third
proviso to Section 14 as well as under Section 10(2) of
the Electricity Act. Hence, the CERC Regulations, 2019
govern and override the contractual obligations under the
Implementation Agreement.
iii. Since this is a composite scheme for generation and
distribution of electricity, there can be no mismatch on the
quantum of free power stipulated in the Implementation
Agreement, which is an upstream agreement with the
State Government, and the PPA and PSAs, which are
downstream agreements with distribution companies.
5.4 We also heard Mr. Nikhil Nayyar for the CERC, who submitted
the following:
i. The CERC Regulations, 2019 are only concerned with
tariff fixation and neither deal with the Implementation
Agreement nor impose restrictions on the quantum of free
power supply to the appellant-State. The purport of the
Regulations is to cap the free power that will be considered
while fixing tariff and whose costs can be passed onto
1124 [2025] 7 S.C.R.

Supreme Court Reports

the distribution companies and consumers. Since the
actual quantum of free power supply is determined by
contract, respondent no. 1 must use contractual remedies
to challenge the same.
ii. Relying on PTC (supra), he submitted that the CERC is
bound by its Regulations, including the cap on free power
supply, while determining the tariff. Any further supply is to
be met by the generating company from its own resources,
which is also stipulated in the Hydro Power Policy, 2008
that forms the basis of the CERC Regulations, 2019.
iii. RoE for respondent no. 1 is stipulated as 16.5% under
Regulation 30(2), which is arrived at after considering
commercial principles and consumer interest, as per
Section 61(b) and (d) of the Electricity Act. Referring to
Regulations 14(4), 15, and 18 of the CERC Regulations,
2019, he submitted that the RoE is part of the Annual Fixed
Cost, which is used to derive capacity charges that is in
turn used to determine the tariff. Hence, RoE forms a part
of the tariff itself and the tariff is structured on this basis.
RoE is not the same as the net profit of respondent no. 1.
In its written submissions, the CERC further submitted that
RoE is calculated on the equity component of the Project,
which has been granted in full to respondent no. 1 for the
2014-19 and 2019-24 periods.
iv. The CERC’s order dated 17.03.2022 only directs that the
PPA and PSAs must be aligned with the Regulations.
It does not deal with or decide on the Implementation
Agreement. This order was not challenged by respondent
no. 1 before the APTEL, and they instead relied on the
same to file a writ petition before the High Court to seek
the relief of aligning the Implementation Agreement. The
filing of the writ petition is a way to avoid the CERC order
dated 17.03.2022 and an attempt to achieve the same
result through a different prayer.
5.5 Mr. Gurminder Singh, learned senior counsel submits that the
State Government cannot be treated as a deemed licensee in
the present case. Further, he submits that the CERC’s role of
tariff determination does not extend to allocating or apportioning
[2025] 7 S.C.R. 1125

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

the power supplied by the generating company to various
entities. It only relates to fixation of tariff for such supply, after
the generating company has decided the allocation.
5.6 Ms. Preetika Dwivedi submitted that PTC (supra) does not
apply as tariff regulation is not concerned with a contract
between the State Government and a generating company.
When respondent no. 1 consented to supply 18% free power,
a similar cap of 12% with respect to free power supply was
provided in the Hydroelectric Policy, 1998. Finally, that the
burden of free power cannot be passed on to the distribution
companies or consumers.
5.7 Finally, Mr. Sibal responded to the submissions made on
behalf of respondent nos. 1 and 2. He disputed the status of
the appellant-State as a deemed licensee by contending that
there is no transmission, distribution, or trading of electricity in
this case. Specifically referring to Section 2(71) of the Electricity
Act which defines “trading” as purchase of electricity for resale,
he submitted that the State Government is not purchasing any
power as it is supplied free of cost. Since the State Government
is not a deemed licensee, it does not fall under the CERC’s
jurisdiction and the terms and conditions of free power supply
cannot be regulated under the Electricity Act. Second, he
submitted that the tariff order dated 17.03.2022 provides for
more than 16.5% RoE to respondent no. 1, and the only impact
of free power supply beyond 13% is on the net profit, which
is not guaranteed under the CERC Regulations, 2019. Finally,
he submitted that the Implementation Agreement falls outside
the jurisdiction of the Regulatory Commissions constituted
under the Electricity Act, which deal with tariff determination.
Rather, this is a case of free supply of electricity to the State
Government that it can dispose of in a manner it deems fit as
per the Electricity [Removal of Difficulty] (Third) Order, 2005.
5.8 Mr. Tripathi also submitted that while RoE is guaranteed by
the Regulations, net profit is not guaranteed. He submitted
that this issue was raised by respondent no. 1 in its tariff
petition and the prayer for relaxation of the cap on free power
supply was rejected by the CERC, which was not subsequently
challenged.
1126 [2025] 7 S.C.R.

Supreme Court Reports

5.9 Regarding the status of the State Government as a deemed
licensee, respondent no. 1 has submitted the following in its
written submissions: First, although power is supplied free of
monetary cost, there is purchase as there is non-monetary
consideration for the power under the Implementation Agreement.
Second, the State Government undertakes trading of such
electricity through respondent no. 3, the Himachal Pradesh State
Electricity Board, which is its agent/instrumentality. Considering
these factors, the State Government is a regulated entity and
is governed by the CERC Regulations, 2019. As per PTC
(supra) as well as Article 9 of the Implementation Agreement,
the contractual rights and obligations relating to free power are
subject to the CERC Regulations, 2019.
5.10 Further, in its written submissions, respondent no. 1 has also
contended that the policies relied on by the appellant, including
the Hydro Power Policy 2008, do not apply to it as the Project
was awarded through MoU and not competitive bidding.

V. Issue:
6. Having considered the sequence of events and the subject-matter of
the dispute, as well as the extensive oral and written submissions of
the parties, we find that the primary issues arising for our consideration
are: first, whether the CERC Regulations, 2019 bar respondent no.
1 from supplying free power to the appellant-State beyond 13%; and
second, whether respondent no. 1 could have invoked the High Court’s
writ jurisdiction for aligning the Implementation Agreement with the
CERC Regulations, 2019. In this context, we will also examine the
scope and ambit of the Electricity Act and the rights and liabilities
of the entities governed thereunder.

VI. Analysis:
7. The Electricity Act, 2003 is a complete and comprehensive code for
regulating the generation, transmission, distribution, trading and use
of electricity. One of the core features of the Act is that it unbundles
the functions of electricity generation, transmission, and distribution
that were erstwhile performed by State Electricity Boards18 into

18 Hereinafter “SEBs”.
[2025] 7 S.C.R. 1127

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

separate utilities, and provides for their regulation through independent
Regulatory Commissions.19
8. The need for an independent and transparent regulatory mechanism
was felt due to the regulatory failures under the erstwhile legal
regime20, wherein SEBs constituted by the State Governments were
entrusted with regulation.21 It was experienced that various problems
plagued the power sector, including lack of rational retail tariffs, high
level of cross-subsidies, poor planning and operation, inadequate
capacity, neglect of consumer interest, and limited involvement of
the private sector’s skills and resources.22 It is in this context that
the Electricity Regulatory Commissions Act, 199823 was enacted to
reform the governance of the sector by establishing an independent
and transparent regulatory mechanism.24
9. Within a few years thereafter, the Electricity Act, 2003 was enacted as
a comprehensive legislation for regulating the sector and it replaced
the 1910 Act, the 1948 Act, and the 1998 Act.25 The following salient
features emerge from the Preamble26 of the Electricity Act:
9.1 The Act consolidates laws, and therefore comprehensively deals
with all aspects of the electricity sector, from production to usage.
9.2 Electricity being a public good27 and a basic amenity28, it has
been recognised as a part of the right to shelter and right to

19 PTC (supra), para 17.
20 Electricity Act, 1910 (hereinafter “the 1910 Act”); the Electricity (Supply) Act, 1948 (hereinafter “the 1948
Act”).
21 K.C. Ninan v. Kerala State Electricity Board, (2023) 14 SCC 431, para 6.
22 Statement of Objects and Reasons of the Electricity Regulatory Commissions Act, 1998.
23 Hereinafter “the 1998 Act”.
24 W.B. Electricity Regulatory Commission v. CESC Ltd., (2002) 8 SCC 715, para 52; PTC (supra), para 17;
Sesa Sterlite Ltd. v. Orissa Electricity Regulatory Commission, (2014) 8 SCC 444, para 22.
25 Section 185 of the Electricity Act.
26 The Preamble of the Electricity Act reads:
“An Act to consolidate the laws relating to generation, transmission, distribution, trading and use
of electricity and generally for taking measures conducive to development of electricity industry,
promoting competition therein, protecting interest of consumers and supply of electricity to all areas,
rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of
efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory
Commissions and establishment of Appellate Tribunal and for matters connected therewith or
incidental thereto.”
27 See K.C. Ninan (supra), para 93.
28 Dilip v. Satish, 2022 SCC OnLine SC 810, para 9.
1128 [2025] 7 S.C.R.

Supreme Court Reports

life29. In this light, the Act covers the entire process of production,
transfer, and sale of electricity and also deals with the utilisation
of electricity. These are covered under generation, transmission,
distribution, trading and use of electricity.
9.3 The Act is also concerned with the development of the electricity
sector so as to ensure that there is sufficient amount of electricity
available to all. In furtherance of this goal of enhancing the
availability of electricity, the Act envisages private sector
participation and promotion of competition.
9.4 These measures are ultimately intended to protect and subserve
consumer interests by making electricity supply accessible at
cheaper rates for those who cannot afford it, as well as making
supply accessible in all areas and regions. In this vein, the Act
provides for the need for transparent subsidy policies.
9.5 Taking the ecological impact of the electricity sector’s activities,
the Act provides for promotion of efficient and environmentally
benign policies.
9.6 Finally, the Act provides for the constitution of permanent
expert bodies, i.e., Central and State Electricity Regulatory
Commissions, to regulate the production, transfer and use of
electricity, as well as for the development of the sector through
private sector participation and competitiveness to subserve
consumer interests. Considering the specialised nature of
functions performed by these bodies, the Act also provides
for an appellate forum to challenge the Central and State
Commissions’ decisions, i.e., the APTEL, which can appreciate
the technicalities and nuances of the sector.
10. Since the facts of this case relate to hydro-power generation, we
will now examine the relevant statutory provisions for its regulation.

VII. Regulation of Electricity Generation Under the Electricity Act:
11. Part III of the Electricity Act deals with generation of electricity.
Section 7 of the Electricity Act permits generating companies to
establish, operate and maintain a generating station without obtaining

29 Chameli Singh v. State of U.P., (1996) 2 SCC 549, para 8.
[2025] 7 S.C.R. 1129

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

a license under the Electricity Act.30 However, in cases of hydro-electric
generation, the concurrence of the Central Electricity Authority is
required as per Section 8.31
12. Section 10 lays down the duties of generating companies. While
sub-section (1) requires a generating company to establish, operate
and maintain generating stations, sub-section (2) provides that
a generating company may supply electricity to any licensee in
accordance with the Act and rules and regulations made thereunder,
and it may supply electricity to any consumer subject to the regulations
under Section 42(2). Section 10 is extracted hereinbelow for ready
reference:
“Section 10. (Duties of generating companies): ---
(1) Subject to the provisions of this Act, the duties of a
generating company shall be to establish, operate and
maintain generating stations, tie-lines, sub-stations and
dedicated transmission lines connected therewith in
accordance with the provisions of this Act or the rules or
regulations made thereunder.
(2) A generating company may supply electricity to any
licensee in accordance with this Act and the rules and
regulations made thereunder and may, subject to the
regulations made under sub-section (2) of section 42,
supply electricity to any consumer.
(3) Every generating company shall –
(a) submit technical details regarding its generating
stations to the Appropriate Commission and the
Authority;

30 Section 7 of the Electricity Act reads:
“Section 7. (Generating company and requirement for setting up of generating station): Any
generating company may establish, operate and maintain a generating station without obtaining a
licence under this Act if it complies with the technical standards relating to connectivity with the grid
referred to in clause (b) of section 73.”
31 The relevant portion of Section 8 of the Electricity Act reads:
“Section 8. (Hydro-electric generation): --- (1) Notwithstanding anything contained in section 7,
any generating company intending to set-up a hydrogenerating station shall prepare and submit to
the Authority for its concurrence, a scheme estimated to involve a capital expenditure exceeding
such sum, as may be fixed by the Central Government, from time to time, by notification…”
1130 [2025] 7 S.C.R.

Supreme Court Reports

(b) co-ordinate with the Central Transmission Utility
or the State Transmission Utility, as the case may
be, for transmission of the electricity generated by it.”
13. While the Electricity Act has done away with the licensing requirement
for generating companies, it continues to regulate electricity
generation as the tariff at which the generating company supplies
electricity to a distribution licensee is determined by the Central or
State Commission, as is appropriate, as per Section 62(1)(a) read
with Section 79 and Section 86 of the Act.32 We will further deal
with the tariff determination function of the CERC at a later stage.
14. At this juncture, it is also relevant to note this Court’s decision in
Tata Power Co. Ltd. v. Reliance Energy Ltd.33. It was observed that
delicensing of generation under the Electricity Act, 2003 marks a
shift from the position under the 1910 Act, the 1948 Act, and the
1998 Act.34 The Court held that delicensing electricity generation
is intended to encourage the setting up of generating stations and
to promote competition among generating companies. Hence,
courts must ensure that while interpreting the Electricity Act and
the regulations made thereunder, they do not bring back licensing
requirements through the backdoor.35
14.1 The primary issue before the Court was whether the State
Commission could have directed a generating company to
allot additional quantities of power to a particular distribution
company based on its requirements and number of consumers.
Answering the question in the negative, this Court held
that generating companies have the freedom to enter into
agreements for the sale of generated electricity, including the
freedom to allocate the quantum of electricity to be sold to

32 Section 62(1)(a) of the Electricity Act reads:
“Section 62. (Determination of tariff): --- (1) The Appropriate Commission shall determine the tariff
in accordance with the provisions of this Act for –
(a) supply of electricity by a generating company to a distribution licensee:
Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix
the minimum and maximum ceiling of tariff for sale or purchase of electricity in pursuance of an
agreement, entered into between a generating company and a licensee or between licensees, for a
period not exceeding one year to ensure reasonable prices of electricity;…”
33 (2009) 16 SCC 659.
34 ibid, paras 68-73.
35 ibid, paras 83-84.
[2025] 7 S.C.R. 1131

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

each distribution company.36 However, such freedom is not
entirely unregulated as the generating company is subject to
tariff determination by the appropriate Regulatory Commission,
and its agreements with distribution companies are subject to
the approval of State Commissions under Section 86(1)(b),
who will examine whether the allocation of power and terms
and conditions of the agreement are reasonable.37

VIII. Legal Effect of Note 3 of Regulation 55:
15. Interpretation of the CERC Regulations, 2019: It is a settled position
of law that a regulation made by the CERC in exercise of its powers
under Section 178 of the Act will override existing contracts between
regulated entities. Contractual terms, insofar as where the regulation
operates, must be aligned or modified such that they are in line with
the regulation.38 For example, a regulation for determining tariff will
override inconsistent and contrary provisions in an agreement to that
extent. The crux of the dispute between the parties in the present
case is whether Note 3 of Regulation 55 prohibits the generating
company from supplying free power beyond 13% to the State, and
consequently, whether it overrides the contractual obligation of
respondent no. 1 under the Implementation Agreement.
16. The contractual obligation of respondent no. 1 to supply free power
can be understood as a form of “royalty” payable to the State as

36 ibid, paras 108-109.
37 ibid, paras 77, 108, 110-113. This position has been reiterated in Transmission Corporation of Andhra
Pradesh Ltd. v. Sai Renewable Power (P) Ltd., (2011) 11 SCC 34, para 64.
38 PTC (supra), paras 58 and 66. This has been consistently followed by the Court. See Gujarat Urja Vikas
Nigam Ltd. v. Renew Wind Energy (Rajkot) (P) Ltd., 2023 SCC OnLine SC 411, para 48; Haryana Power
Purchase Centre v. Sasan Power Ltd., (2024) 1 SCC 247, paras 110-111.
The relevant portions from PTC (supra) are extracted hereinbelow for ready reference:
“58. … Further, it is important to bear in mind that making of a regulation under Section 178
became necessary because a regulation made under Section 178 has the effect of interfering
and overriding the existing contractual relationship between the regulated entities. A regulation
under Section 178 is in the nature of a subordinate legislation. Such subordinate legislation can
even override the existing contracts including power purchase agreements which have got to
be aligned with the regulations under Section 178 and which could not have been done across
the board by an order of the Central Commission under Section 79(1)(j).
66. While deciding the nature of an order (decision) vis-à-vis a regulation under the Act,
one needs to apply the test of general application. On the making of the impugned 2006
Regulations, even the existing power purchase agreements (PPA) had to be modified and
aligned with the said Regulations. In other words, the impugned Regulations make an inroad
into even the existing contracts…”
(emphasis supplied)
1132 [2025] 7 S.C.R.

Supreme Court Reports

compensation, in lieu of being allowed to utilise river water, which
is a public and commons resource, for undertaking its commercial
activity of power generation from which it derives benefits through
sale of power.39 Perusal of Article 4 of the Implementation Agreement
also shows that the appellant-State fulfilled various other obligations
like acquiring land, granting permissions, and executing leases in
favour of respondent no. 1 to enable it to set up its hydropower
generating station. In return, respondent no. 1 undertook various
obligations provided in Article 5 of the Implementation Agreement,
including supplying free power at a certain percentage. Therefore, it
is clear that the free power supply is a part of the consideration by
respondent no. 1 under the Implementation Agreement.
17. Now the question is whether such a consideration is impermissible
or prohibited by virtue of the CERC Regulations, 2019. To answer
the same, it is necessary to appreciate the context in which Note 3
of Regulation 55, which stipulates that FEHS shall be taken as
13% or actual, whichever is less, has been made. Regulation 55
deals with billing and payment of charges to generating companies.
While sub-clause (1) deals with raising bills for capacity and energy
charges and payment, sub-clause (2) is relevant for our purpose. It
provides that payment of capacity and energy charges for a hydro-
generating station shall be shared by its beneficiaries40 in proportion
to their shares in saleable capacity, which is to be determined after
deducting the capacity corresponding to FEHS as per Note 3. Hence,
Note 3 of Regulation 55 is relevant for the calculation of saleable
power, which is in turn relevant for the generating company to raise
bills and for payments by beneficiaries.

39 See Indsil Hydro Power & Manganese Ltd. v. State of Kerala, (2021) 10 SCC 165, paras 43-43.1; 56-57.
40 “Beneficiary” has been defined in Regulation 3(8) of the CERC Regulations, 2019 as follows:
“3. Definitions. - In these regulations, unless the context otherwise requires:
***
(8) ‘Beneficiary’ in relation to a generating station covered under clauses (a) or (b) of sub-section 1 of
section 79 of the Act, means a distribution licensee who is purchasing electricity generated at such
generating station by entering into a Power Purchase Agreement either directly or through a trading
licensee on payment of capacity charges and energy charges;
Provided that where the distribution licensee is procuring power through a trading licensee, the
arrangement shall be secured by the trading licensee through back to back power purchase
agreement and power sale agreement.
Provided further that beneficiary shall also include any person who has been allocated capacity in
any inter-State generating station by Government of India”
[2025] 7 S.C.R. 1133

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

18. Regulation 44, which deals with the computation and payment of
capacity and energy charges for hydro-generating stations also
defines FEHS similarly. Sub-clause (1) provides that the fixed cost of a
hydro-generating station shall be recovered on a monthly basis under
capacity and energy charges, which are payable by beneficiaries
in proportion to their respective allocation in saleable capacity, i.e.,
capacity excluding FEHS. Further, the formula for calculating energy
charges is provided in sub-clauses (4) and (5), which also relies on
FEHS as defined in Note 3 of Regulation 55.
19. Therefore, the purpose and intendment of Note 3 of Regulation 55
is for the State Commission to determine tariff by assuming that
FEHS is 13%, whenever it is higher in actuality, while calculating
the energy and capacity charges. Neither the language of Note 3
nor the context in which it appears in the CERC Regulations, 2019
supports respondent no. 1’s contention that the legal effect of this
cap is to override its contractual obligations with the appellant-State.
On the other hand, use of the term “shall be taken as 13% or actual,
whichever is less” shows that the Regulations cover a situation
where the obligation to supply free power is higher than 13%, and
in such an eventuality, allow only a certain portion of free supply to
be considered for tariff determination and payments by beneficiaries
for the saleable capacity.
20. Once the Regulation does not prohibit the supply of free power
beyond 13%, respondent no. 1 cannot rely on it to wriggle out of
its contractual obligations. Such an interpretation is necessary to
recognise and enforce the generating company’s freedom of contract,
which includes its choice of business dealings. The Regulatory
Commissions, APTEL, and the Courts must enforce these contractual
obligations and ensure that their interpretation of regulations does not
allow the party to circumvent and breach its contractual undertakings
when the same is not intended by the regulation itself.
21. Further, the above interpretation of the regulation balances the social
justice obligation of the Regulatory Commission to ensure that the
tariff is not increased by allowing pass-through to the extent of only a
certain portion of free supply while balancing the commercial viability
and financial position of the generating company. Public interest is
also subserved since the State can utilise the free power for its own
purposes. This interpretation balances the twin values of freedom
1134 [2025] 7 S.C.R.

Supreme Court Reports

of business choices and the social justice obligations of the State,
which the Regulatory Commission channelises towards protecting
consumer interests and maintaining the health of the sector.
22. CERC’s Order dated 17.03.2022: The relief sought by respondent
no. 1 in its tariff petition for 2019-2024 before the CERC is relevant
as it shows that the initial position taken by it was not an attempt to
wriggle out of the contract by seeking its modification. In contrast to
claiming that the Implementation Agreement stands overridden and
must be aligned with the 13% cap, as is the case before the High
Court and in this appeal, respondent no. 1 sought relaxation of the
cap itself. In other words, respondent no. 1 sought a pass-through
for the full extent of 18% free power, rather than 13% as per the
Regulations, in recognition of its contractual obligations under the
Implementation Agreement.
23. In the tariff order dated 17.03.2022, the CERC rejected this prayer on
the following basis. It took note of the free power supply obligation
under Article 5.1 as being 12% of net generation for the first 12 years
from the COD, and 18% of net generation for the next 28 years.
It also noted that the PPA executed with respondent no. 4 defines
free power in the same manner. Relying on this Court’s decision in
PTC (supra), it held that the provisions of the agreement must be
aligned with the Regulations. Hence, the provisions of the PPA and
PSAs executed by respondent no. 1 in respect of free power are
inconsistent and stand overridden by Note 3 of Regulation 55 such
that FEHS is to be considered as 13% only. The relevant portions
of the CERC’s order are extracted below for ready reference:
“145. The main contention of the Petitioner is that since
the quantum of free power to be supplied to the home
State was based on the agreement between the parties,
which were executed prior to coming into force of the
Tariff Regulations notified by the Commission, the same
may be considered by the Commission in exercise of
the power to relax/power to remove difficulties. The
Respondent HPPC has submitted that in terms of the
judgment of the Hon’ble Supreme Court in PTC v CERC
& ors. Tariff Regulations override existing contracts. Note
3 under Regulation 55 of the 2019 Tariff Regulations
provides as under:
[2025] 7 S.C.R. 1135

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

Note 3: FEHS = Free energy for home State,
in percent and shall be taken as 13% or actual
whichever is less.
146. The Constitution Bench of the Hon’ble Supreme
Court in PTC India Ltd Vs CERC & ors (2010 4 SCC
603) has laid down the principle of law, whereby any
provision of an agreement, if it falls within the domain
of the Regulations of subordinate legislation, has to be
aligned with the Regulations. The relevant portion of the
judgment is quoted below…
147. Thus, the provisions of the PPA/PSAs executed by
the Petitioner in respect of free power to the home State
is inconsistent and shall accordingly stand overridden by
Note 3 under Regulation 55 of the 2019 Tariff Regulations.
We, therefore, find no reason to exercise the power to relax
and grant relief, as prayed for by the Petitioner. Accordingly,
the free energy to home state is to be considered as 13%
in this case.”
24. There are two aspects of the CERC’s reasoning and decision that
we must note: first, the CERC was made aware of the contractual
obligation of respondent no. 1 under the Implementation Agreement,
but it did not hold the same as being overridden by Note 3 of
Regulation 55. This is in line with the interpretation of the cap that
we have elaborated hereinabove, i.e., it does not prohibit or restrain
respondent no. 1 from entering into or performing a contract for
supplying a higher quantum of free power. Second, the CERC only
held that the PPA and PSAs stand overridden to the extent that
they are inconsistent with the Regulation. The effect of this is that
only 13% of free power would be considered as a pass-through
for tariff fixation and recovery of charges from the beneficiary
distribution companies as per the Regulations. Since respondent
no. 1 did not appeal this order before the APTEL under Section
111 of the Electricity Act, these findings are now final and binding
on it.
25. We will now examine whether the High Court could have, in exercise
of its writ jurisdiction, granted the relief of aligning the Implementation
Agreement by relying on the CERC’s order dated 17.03.2022.
1136 [2025] 7 S.C.R.

Supreme Court Reports

IX. Maintainability of the Writ Petition:
26. CERC as an Expert and Specialised Regulator, and Extent of Judicial
Interference: In order to appreciate the issue on maintainability of the
writ petition, it is necessary to take note that postmodern legislation
institutionalises governance through regulation. Under the Electricity
Act, we see such a statutory incorporation of the regulators through
the CERC and the State Commissions that are expert and specialised
bodies to perform wide-ranging regulatory functions.41
27. The jurisprudence on regulation is that independent regulators,
armed with statutory powers and duties, were established to reduce
the government’s control and interference with the market while
safeguarding consumer interests, preventing abuse of monopoly, and
enabling private participation in the sector. Therefore, the regulator
has socio-economic obligations of ensuring accessibility of goods
and services, as well as the duties towards the development of the
industry by promoting efficiency and competition.42 The nature of
functions and the jurisdiction of these regulatory bodies are wide
and extensive as they perform a mix of legislative, executive and
administrative, and judicial functions.43 Concomitantly, they are
sufficiently empowered under the statute, and legislative, executive
and adjudicatory powers are telescoped into one institution.
Regulators have the power to lay down rules and regulations; issue
licenses; fix prices and scope and areas of operation; investigate
and prosecute offences, and impose penalties; adjudicate disputes
and interpret the law; implement and enforce the statute, the rules
and regulations made thereunder, and their decisions; and exercise
incidental and ancillary powers to deal with all aspects relating to
the sector.44
28. Specifically, in the context of the CERC under the Electricity Act,
Section 79 sets out its functions, including tariff determination. The
relevant portion is extracted hereinbelow:

41 See PTC (supra), para 17; Sai Renewable (supra), paras 36 and 38; Reliance Infrastructure Ltd. v. State
of Maharashtra, (2019) 3 SCC 352, para 38.
42 H.W.R. Wade and C.F. Forsyth, Administrative Law (11th edn, Oxford University Press 2014), 116-117.
43 ibid, 124.
44 ibid; Cellular Operators Assn. of India v. Union of India, (2003) 3 SCC 186, para 33; U.P. Power Corpn.
Ltd. v. NTPC Ltd., (2009) 6 SCC 235, paras 4, 22, 48.
[2025] 7 S.C.R. 1137

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

“Section 79. (Functions of Central Commission): ---
(1) The Central Commission shall discharge the following
functions, namely:-
***
(b) to regulate the tariff of generating companies other
than those owned or controlled by the Central Government
specified in clause (a), if such generating companies enter
into or otherwise have a composite scheme for generation
and sale of electricity in more than one State…”
29. “Tariff” has not been defined under the Electricity Act, but it has been
interpreted by this Court on several occasions. This Court in PTC
(supra) held that “tariff” does not only mean fixation of rates but also
the rules and regulations relating to it45. Further, in Transmission
Corporation of Andhra Pradesh Ltd. v. Sai Renewable (supra), this
Court relied on the meaning of the term in general law or common
parlance, and held its meaning to be as follows:
“62. Therefore, in the absence of any specific definition
in any of these Acts we will have to depend upon the
meaning attached to these expressions under the general
law or in common parlance. The expression “tariff” has
been explained in Law Lexicon With Legal Maxims, Latin
Terms And Words & Phrases (2nd Edn., 1997) as
“determination, ascertainment, a table of rates
of export and import duties, in which sense the
word has been adopted in English and other
European languages and as defined by the
law dictionaries the word ‘tariff’ is a cartel of
commerce; a book of rates; a table or catalogue,
drawn usually in alphabetical order, containing
the names of several kind of merchandise, with
the duties or customs to be paid for the same as
settled by the authority or agreed between the
several princes and States that hold commerce
together.”

45 PTC (supra), para 26.
1138 [2025] 7 S.C.R.

Supreme Court Reports

It has also been explained as a schedule, system, or
scheme of duties imposed by the Government of a country
upon goods imported or exported; published volume of
rate schedules and general terms and conditions under
which a product or service will be supplied; a document
approved by the responsible regulatory agency listing the
terms and conditions including a schedule of prices, under
which utility services will be provided.”46
30. Determination of tariff must be in accordance with Section 61 of the
Electricity Act, which requires the CERC to specify the terms and
conditions for the determination of tariff and stipulates the principles
that shall guide the CERC. These include commercial principles,
competition, efficiency, economical use of resources, consumer
interest, and cost-reflective tariffs. The relevant portion of Section
61 has been extracted hereinbelow:
“Section 61. (Tariff regulations): The Appropriate
Commission shall, subject to the provisions of this Act,
specify the terms and conditions for the determination of
tariff, and in doing so, shall be guided by the following,
namely:-
***
(b) the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
(c) the factors which would encourage competition,
efficiency, economical use of the resources, good
performance and optimum investments;
(d) safeguarding of consumers’ interest and at the same
time, recovery of the cost of electricity in a reasonable
manner;
***
(g) that the tariff progressively reflects the cost of supply of
electricity and also, reduces cross-subsidies in the manner
specified by the Appropriate Commission;…”

46 A similar definition has been adopted by this Court in BSES Ltd. v. Tata Power Co. Ltd., (2004) 1 SCC
195, para 16.
[2025] 7 S.C.R. 1139

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

31. The CERC must weigh and balance these competing principles during
tariff determination, such that interests of various stakeholders and
the social justice obligation of the State to ensure access to electricity
are fulfilled. The Act empowers the CERC to make regulations under
Section 178, including on terms and conditions for the determination of
tariff. The relevant portions of Section 178 of the Electricity Act read:
“Section 178. (Powers of Central Commission to make
regulations): --- (1) The Central Commission may, by
notification make regulations consistent with this Act and
the rules generally to carry out the provisions of this Act.
(2) In particular and without prejudice to the generality of
the power contained in sub-section (1), such regulations
may provide for all or any of following matters, namely:-
***
(s) the terms and conditions for the determination of tariff
under section 61;…”
32. This Court has time and again emphasised that since tariff
determination, including the power to make regulations for this
purpose, has been entrusted to a specialised and expert regulator
constituted under the statute itself, it would not be proper for
constitutional courts to interfere and assume these functions, or to
examine tariff fixation on its merits and substitute its own determination
for the one made by the expert body after duly considering all material
circumstances.47 We are of the opinion that this is necessary not
only to ensure that these specialised functions are performed by
expert regulators but to also facilitate a systematic and consistent
development of sectoral laws.
33. In this light, when a constitutional court is interpreting statutes, rules,
or regulations that fall within the regulator’s domain, it must bear in
mind the need to enable the regulator to exercise comprehensive
jurisdiction. Courts must not impair the functioning of the regulator
by taking away certain aspects of the sector outside the regulator’s
scope, thereby fragmenting regulation and creating plurality of

47 Sai Renewable (supra), paras 38, 40, 41; Reliance Infrastructure Ltd (supra), para 38; Transmission
Corpn. of A.P. Ltd. v. Rain Calcining Ltd., (2021) 13 SCC 674, para 66; Maharashtra State Electricity
Distribution Co. Ltd. v. Adani Power Maharashtra Ltd., (2023) 7 SCC 401, paras 118-121.
1140 [2025] 7 S.C.R.

Supreme Court Reports

jurisdictions. It is in the interest of good governance through regulation
to ensure that there is no proliferation of remedies and there are no
parallel, multiple remedial forums. Further, this also ensures that the
sectoral law is developed in a coordinated and systematic fashion
by the regulator that is equipped to deal with not only legal issues
but also has specialised knowledge in other areas.
34. The above principles are also reflected in a recent decision of
this Court in Jaipur Vidyut Vitran Nigam Ltd. v. MB Power (M.P.)
Ltd.48. Here, the High Court exercised writ jurisdiction and directed
distribution companies to procure power from bidders, who are
generating companies, at the prices quoted in their bids till the
requisite quantum of power was procured. Allowing the appeal
of the distribution companies, this Court held that the High Court
was not justified in entertaining the writ petition as the Electricity
Act is an exhaustive code and all issues dealing with electricity
must be considered by the expert bodies, i.e., the Regulatory
Commissions constituted under the Act. The relevant portion is
extracted hereinbelow:
“128. We find that the High Court was not justified in
entertaining the petition. The Constitution Bench of
this Court in PTC has held that the Electricity Act is an
exhaustive code on all matters concerning electricity. Under
the Electricity Act, all issues dealing with electricity have to
be considered by the authorities constituted under the said
Act. As held by the Constitution Bench of this Court, the
State Electricity Commission and the learned APTEL have
ample powers to adjudicate in the matters with regard
to electricity. Not only that, these Tribunals are tribunals
consisting of experts having vast experience in the field
of electricity. As such, we find that the High Court erred
in directly entertaining the writ petition when Respondent
1 i.e. the writ petitioner before the High Court had an
adequate alternate remedy of approaching the State
Electricity Commission.
129. This Court in Reliance Infrastructure Ltd. v. State
of Maharashtra has held that while exercising its power

48 (2024) 8 SCC 513.
[2025] 7 S.C.R. 1141

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

of judicial review, the Court can step in where a case of
manifest unreasonableness or arbitrariness is made out.
130. In the present case, there is not even an allegation
with regard to that effect. In such circumstances, recourse
to a petition under Article 226 of the Constitution of India
in the availability of efficacious alternate remedy under
a statute, which is a complete code in itself, in our view,
was not justified.”
(emphasis supplied)

35. Grant of Relief by the High Court: Applying these legal principles, we
will now analyse whether the High Court could have granted relief of
aligning the Implementation Agreement with the CERC Regulations,
2019 by exercising writ jurisdiction. The High Court proceeded on the
basis that: (i) the appellant-State is a deemed licensee; (ii) the CERC
Regulations, 2019 are relevant not only for determination of tariff
but also for other purposes and are binding on the appellant-State;
and (iii) the 13% cap on free power supply under Note 3, Regulation
55 has the effect of overriding the free power supply clause in the
Implementation Agreement since a similar clause in the PPA and
PSAs stands overridden as per the CERC’s order dated 17.03.2022.
36. On the first aspect of whether the appellant-State is a deemed
licensee, it is clear from the impugned order that the High Court has
only cited the statutory provisions on licensing but has neither delved
into this issue nor arrived at any express conclusion regarding the
same. This is perhaps because the parties did not raise or argue
the issue before it. However, before us, respondent no. 1 strongly
contends that the appellant-State is a deemed licensee, and the
appellant has disputed the same.
37. We are of the opinion that this issue need not be determined on
merits, but is relevant to show respondent no. 1’s conduct in taking
contrary positions by filing the writ petition. On the one hand, it is
claiming that the appellant being a deemed licensee is a regulated
entity under the Electricity Act. The sequitur of this would be that
the appellant, and its contractual rights and liabilities, are subject to
the CERC’s regulatory jurisdiction. However, respondent no. 1 never
sought relief against the appellant-State before the CERC, as we
have indicated above, and instead filed a writ petition. Considering
1142 [2025] 7 S.C.R.

Supreme Court Reports

the contradictory positions of respondent no. 1, it cannot be allowed
to approbate and reprobate, or blow hot and cold at the same time
to secure relief under the law.
38. The second aspect pertains to the interpretation of CERC Regulations,
2019 by the High Court. We have already dealt with the interpretation
of the Regulations hereinabove, and will presently deal with the same
in the context of maintainability of the writ petition. Under the Electricity
Act, the statutory regulator has been entrusted with discharging
the function of tariff determination, including making regulations for
the purpose and interpreting the same. Constitutional courts must
enable the regulator to comprehensively regulate all aspects of the
sector such that remedies are not fragmented and certain issues
are not left outside the regulator’s domain. The regulator has the
expertise, specialisation, and institutional memory to conduct such
an interpretative exercise to further the objective of the regulatory
regime and systematically lay down legal principles. In this light, the
High Court should not have entered into the domain of interpreting
these Regulations which deal with tariff determination, as the same
falls within the exclusive domain of the CERC. The Electricity Act
itself provides the appellate mechanisms by establishing a specialised
and permanent tribunal, namely the APTEL, and an appeal before
this Court, against the CERC’s orders. In view of the existence of a
statutory regulatory forum, the High Court should not have entertained
the writ petition by interpreting the CERC Regulations, 2019.
39. Equally, we are of the opinion that the High Court incorrectly relied
on the CERC’s order dated 17.03.2022 to grant relief to respondent
no. 1. As explained above, the CERC’s order only deals with the PPA
and PSAs despite taking note of Article 5.1 of the Implementation
Agreement. Upon reading the order, it is clear that its effect is not
that of restraining respondent no. 1 from supplying free power beyond
13%. Hence, it does not in any way adversely affect or prejudice
the contractual rights of the appellant-State. Hence, the High Court
could not have proceeded on the basis of this order to grant the
relief of modifying the Implementation Agreement.

X. Conclusion:
40. In view of the above reasons, we hold that CERC Regulations, 2019
do not prohibit respondent no. 1 from supplying free power beyond
[2025] 7 S.C.R. 1143

The State of Himachal Pradesh & Anr. v.
JSW Hydro Energy Limited & Ors.

13% to the appellant-State, and the Implementation Agreement does
not stand overridden by the operation of these Regulations. Further,
a writ petition before the High Court for aligning the Implementation
Agreement with the CERC Regulations, 2019 and the CERC’s
order dated 17.03.2022 is not maintainable. Once respondent no.
1’s prayer for relief was rejected by the CERC and it specifically
held only the PPA and PSAs to stand overridden, which finding was
not further appealed, it would not be open for respondent no. 1 to
seek modification of the Implementation Agreement by way of a writ
petition before the High Court.
41. For the reasons stated above, we allow Civil Appeal No. 12883/2024
and set aside the order and judgment of the High Court in CWP
7667/2023 dated 28.05.2024.
42. Pending applications, if any, stand disposed of.
43. No order as to costs.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Ankit Gyan