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Synopsis

The Supreme Court on January 2, 2025 upheld the power of Municipal Corporation of Delhi to issue the tariff based bid and Request for Proposal for setting up the Waste to Energy project at Narela Bawana, Delhi.

The apex court also affirmed the orders by the Delhi Electricity Regulatory Commission, approving the bid tarrif for the project.

A bench of Justices B R Gavai and K V Vishwanathan allowed an appeal filed by the Municipal Corporation of Delhi against August 31, 2023 judgment by the Appellate Tribunal for Electricity at New Delhi, which set aside the Delhi Electricity Regulatory Commission's orders of March 6 and 7, 2023, dismissing the petition filed by Waste to Energy Research & Technology Council.

The DERC rejected a challenge to the authority of the Municipal Corporation of Delhi (MCD) to issue the tariff-based bid and Request for Proposal for setting up the Waste-to-Energy (WTE) project at Narela Bawana, Delhi. The DERC approved the bid tariff of Rs 7.38/KWh for the project and directed the Distribution Licensee to negotiate the terms of the Power Purchase Agreement with the appellant-MCD.

Acting on a civil appeal filed by the MCD, the bench held that the APTEL had upset the DERC's orders on hyper-technical grounds, having failed to take into consideration that the WTE project in question was in the larger public interest, thereby providing for the disposal of the huge quantity of waste generated in the city of Delhi.

"The APTEL has grossly erred in treating the present Appellant-MCD as a total stranger. The WTE project was on Design, Build, Finance and Operate basis. The ownership of the said project was always to be with the appellant-MCD and the operation of the facility is required to be transferred back to the appellant-MCD after 25 years," the bench said.

The court opined that the reasoning given by the APTEL—that if the application of the appellant-MCD for adoption of tariff was held to be tenable, then it would amount to permitting any stranger to apply under Section 63 of the Electricity Act—was factually incorrect.

When the provisions of Section 63 (determination of tariff by bidding process) of the Act re read in harmony with the provisions of Section 86(1)(b) (function of the State Commission on regulating electricity purchase and procurement) of the Act, the powers of the State Commission can not be curtailed by interpreting that the same can be invoked only by the Discoms or the generating companies, the bench said.

"The APTEL failed to take into consideration that the appellant-MCD was establishing the said project in order to perform its statutory obligations. The plain reading of Section 63 of the Act would reveal that the appropriate Commission has to adopt the tariff only after being satisfied that such a tariff has been determined through a transparent process of bidding in accordance with the guidelines issued by the Central Government," the bench said.

In the case, the court noted that the DERC, after taking into consideration all the relevant factors, had granted its approval to the tariff with certain conditions, such as the mandate of Rule 15 of the Solid Waste Management Rules, 2016; the financial evaluation report sent by the Bidding Evaluation Committee; the certificate on the conformity that the bidding process had been completed by following the transparent process; and the mandate under the National Tariff Policy (NTP) to the effect that the entire power generated by the WTE project was to be procured by the Discoms.

The court examined the issue of whether the application under Section 63 of the Electricity Act could have been made by the present appellant MCD, which is a "local authority" within the meaning of Section 2(41) of the Act.

The court also considered the Solid Waste Management Rules, 2016, which stated that the authorities would give a preference to decentralized processing to minimize transportation costs and environmental impacts such as waste-to-energy processes, including refuse-derived fuel for combustible fractions of waste or supply as feedstock to solid waste-based power plants or cement kilns.

It also noted the "Tariff Policy" notified by the Ministry of Power on January 28, 2016, which made a provision for renewable sources of energy generation, including cogeneration from renewable energy sources.

"Under the SWM Rules 2016, a duty is cast upon the Ministry of Power to decide tariff or charges for the power generated from the waste to energy plants based on solid waste and compulsory purchase of power generated from such waste to energy plants by distribution company," it noted.

Allowing the applications filed by Respondent no. 1, Gagan Narang, the APTEL had interpreted Section 63 of the Act and had held that since the appellant-MCD was neither a distribution licensee nor a generating company, it had no jurisdiction to file an application under Section 63 of the Act for adoption of tariff.

"Under Section 63 of the Act, the appropriate Commission is entitled to adopt the tariff if such tariff has been determined through a transparent process of bidding in accordance with the guidelines issued by the central government. It could be seen that a plain reading of Section 63 of the Act would reveal that it does not restrict invoking of the provisions of Section 63 only to Discoms or generating companies," the bench said.

Referring to a settled principle of law that the first and foremost principle of interpretation is that of literal interpretation, the bench said that when the statute read in a literal manner is capable of giving meaning to the provision that the legislation intended to and does not lead to any absurdity, it is not permissible by judicial interpretation to add, alter, or delete any words to such a statute.

The court pointed out that the intention of the legislature was to empower the appropriate Commission to adopt the tariff if such tariff had been determined through a transparent process of bidding in accordance with the guidelines issued by the Central Government.

"The legislative purpose appears to be that when the power is being produced through a process of bidding it has to be done in a transparent manner. Another requirement is that the same must be done in accordance with the guidelines issued by the Central Government," the bench said.

"We are of the view that APTEL could not have read the provisions of Section 63 of the Act in isolation. The provisions of Section 63 will have to be read in harmony with the provisions of Section 86(1)(b) (functions of the state commission) of the Act," the bench said.

The bench said that a perusal of the provision of Section 86(1)(b) of the Act would reveal that a duty was cast upon the State Commission to regulate electricity purchase and procurement processes of distribution licensees, including the price at which electricity should be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State.

Case Title: Municipal Corporation of Delhi Vs Gagan Narang & Ors Etc