Justice Rajiv Sharma, Judge
1. Since common questions of law and facts are involved in both these petitions, the same were taken up together for hearing and are being disposed of by a common judgment. Material facts necessary for the adjudication of these petitions are that petitioners in both the petitions are incorporated under the Companies Act, 1956. Respondent-State has framed a policy called "Hydro Power Policy, 2006" to provide affordable, reliable and quality power to the consumers, create avenues for employment to the residents of Himachal Pradesh and at the same time mitigate, social, economical and environmental impact of power projects coming up within the State of Himachal Pradesh. The policy also stipulates 1 Whether reporters of the local papers may be allowed to see the judgment? Yes tariff rationalization in accordance with the provisions of Electricity Act, 2003 (hereinafter referred to as the ''Act'' for brevity sake). Chapter-5 of the Policy deals with the projects above 5 MW capacity. The hydroelectric projects have been divided into two categories for the purpose of allotment and implementation through private sector. Category-1: Projects above 5 MW to 100 MW installed capacity to be allotted through Memorandum of Understanding route and category-2 projects above 100 MW to be allotted through International Competitive Bidding route. Respondent-State issued notices on 7.1.2006, 19.4.2006 and 28.4.2006 inviting proposal for 28 Hydroelectric Projects including Bajoli Holi 180 MW Hydroelectric Project in various newspapers. The last date for the sale of bid document, as per corrigendum published in different newspapers, was 19.4.2006. The last date for submission of the proposals was 29.6.2006 and the date of opening of bids was prescribed as 30.6.2006. Petitioner-company submitted bid documents to respondent No. 1. Petitioner-company submitted the technical/financial bids, which were duly examined and on the basis of comparative assessment of merit, the respondent-State accepted the proposal of the petitioner-company and vide its communication dated 26.7.2007 allotted Bajoli Holi 180 MW Hydroelectric Project to it subject to the fulfillment of terms and conditions of allotment, which inter alia included payment of 50% amount of upfront premium as first installment, i.e. Rs. 82,06,20,000/- ( Rs. Eighty two crores six lakhs and twenty thousand only). The same was paid by the petitioner-company on 27.8.2007. Thereafter, the Pre-Implementation Agreement was signed between the parties on 15.2.2008 and another 25% amount of upfront perineum was deposited at the time of singing of Pre-Implementation Agreement. Petitioner-company submitted Detailed Project Report on 18.11.2009 and tripartite agreement was signed on 15.5.2010. Petitioner-company sought extension of time for singing the Implementation Agreement on 6.12.2010. Respondent-State issued notification dated 30.11.2009 and corrigendum was issued on 15.3.2010. The notification dated 30.11.2009 has been issued in sequel to the provisions of clauses 10 (d) and 10 (h) of the New Hydro Power Policy, 2008 of the Government of India whereby additional 1% free power from the hydel power projects would be provided and earmarked for Local Area Development Fund aimed at providing regular stream of revenue for income generation and welfare schemes, creation of additional infrastructure and common facilities etc. on a sustained and continued basis over the life of the project. The fund would be available in the form of an annuity over the entire life of the project. Petitioner-company sought six months time for signing the Implementation Agreement on 6.12.2010. Petitioner-company was supplied with the draft Implementation Agreement and format by the respondent-State. Petitioner-company raised objections to the draft Implementation Agreement and format on 18.2.2011. The plea of the petitioner-company was rejected on 24.2.2011. Implementation Agreement was signed between the parties on 29.3.2011 whereby clauses 5.3.1 and 5.3.2 were inserted in the Implementation Agreement.
2. In CWP No. 697/2010-A, Pre-Implementation Agreement was signed between the parties on 1.3.2008 for setting up of 260- MW Hydroelectric Power Project at Kutehr. Petitioner submitted letter dated 19.1.2010 to the respondents after the issuance of notification dated 30.11.2009 seeking certain clarifications with regard to 1% free power to LADF. Petitioners were informed on 2.3.2010 vide Annexure P-6 that 1% free power surcharge imposed for creating the Local Area Development Fund after commissioning of the project shall be over and above the royalty rates mentioned in the Implementation Agreement and the provisions would be incorporated in the Implementation Agreement and the additional free power would be a pass through in tariff.
3. Mr. K.D. Shreedhar, learned Senior Advocate and Mr. Ajay Mohan Goel have strenuously argued that the impugned notification dated 30.11.2009 is illegal and not binding upon the parties. They have also contended that the petitioners have submitted their bids on the basis of which the Pre-Implementation Agreement has been entered into between the parties and the terms and conditions contained therein being concluded contract cannot be altered, that too, unilaterally. They also argued that the New Hydro Power Policy, 2008 will not apply retrospectively. They further argued that the petitioners have given technical/financial bid on the basis of Hydro Power Policy, 2006. They have further argued that imposition of 1% additional free power will adversely affect the commercial viability of the project. They further argued that section 3 of the Act is not attracted in the present case. They have also argued that the rights of the parties have crystallized on the day when their bids were accepted and the projects were allotted to them and Pre-Implementation Agreements were signed between the parties. In other words their submission is that the rule of game cannot be changed midway. They have also contended that on the basis of acceptance of the financial bid and signing of Pre-Implementation Agreements, the petitioners have changed their position to their detriment by investing huge amount. Mr. Ajay Mohan Goel has submitted that his client has invested Rs. 862,3000,000/- till the date of filing of the petition. Both the learned counsel have also contended that "pass through in tariff" was not applicable in their case since the petitioners intend to sell the electricity as a merchant power plants and the same would be governed u/s 63 and not by section 62 of the Act. Mr. K.D. Shreedhar, learned Senior Advocate and Mr. Ajay Mohan Goel have strenuously argued that their clients were legitimately expecting that on the basis of clause incorporated in the bid document read with clauses incorporated in the Pre-Implementation Document, their clients were only required to pay 1.5% of the cost of the project to the LADF. They lastly contended that neither any public notice was issued before the policy was changed nor their clients were heard by the State Government.
4. Mr. K.D. Sood, learned Senior Advocate has vehemently argued that notification dated 30.11.2009 is legal and binding on the parties as per clause 48 of the Pre-Implementation Agreement. Mr. K.D. Sood has also argued that the decision dated 30.11.2009 is a policy matter and has been taken in larger public interest to safeguard the interest of the people, which would be affected after the setting up of project. He then argued that 1.5% of the total cost of the project has to be deposited before commissioning of the project and 1% additional free power would be available for entire life of the project. In these circumstances, he has justified the signing of Implementation Agreement.
5. I have heard the learned counsel for the parties and have perused the pleadings carefully.
6. It would be appropriate at this stage to take into consideration clause (xx) of Chapter-V of the Hydro Power Policy, 2006:
(xx) The Government shall constitute a Local Area Development Committee (LADC) for project(s) being implemented in each river valley. The Deputy Commissioners shall be the Chairman of the LADC and other members shall be nominated by the Government, which will include the representatives of HEP''s also. Concerned SDM shall be the Member Secretary. The LADC will be entrusted with, but not limited to, the following activities in the Project Affected Areas, which are those areas/villages surrounding/falling in the catchment/watershed areas extending from the Reservoir to the Tail Race of the Project:-
(a) Oversee the restoration of facilities adversely affected due to implementation of the Project.
(b) Oversee the implementation of Rehabilitation and Relief Plan.
(c) Oversee the implementation of Catchment Area Treatment (CAT) Plan and Compensatory Afforestation.
(d) Local Development related to development of Agriculture, Horticulture, Animal Husbandry, Fisheries, Rural Development, I&PH, Health, Forest, Education, PWD, Power and other Social, Religious and Cultural activities etc.
The Deputy Commissioner may co-opt any other member as he deems fit.
However, PWD/ other roads leading to the Project areas shall not form part of LADC activities.
The activities of the LADC during execution shall be financed by the Project itself and for this purpose the Developer shall make a provision of 1.5% of final cost of the Project. The LADC activities shall be financed from the above provision and not from free power as royalty.
The amount on account of Local Area Development shall be paid by the Developer to the Deputy Commissioner of the Project Affected Areas (Chairman LADC) in equal annual instalments during the Construction Period of the Project and shall be payable in 1st quarter of every financial year, starting from the date of Financial Closure.
The Developer shall keep the Government informed of any change in the construction cost of the Project and for any increase in the construction cost of the Project from time to time, the Developer shall release the instalments accordingly.
7. Clauses 17, 18, 36 and 48 of the Pre Implementation Agreement read thus:
17. The Second Party shall be free to dispose of power from the Project(s), after allowing for royalty in the shape of free power to the First Party in any manner they like in accordance with the provisions contained in the Electricity Act, 2003 and the Rules & Regulations made there-under.
18. The Second Party shall to provide royalty in the shape of free power from the Project to the First Party in lieu of surrender of potential site @ 12% of the Deliverable Energy of the Project for the period starting from the date of synchronization of the first generating unit and extending up to 12 years from the date of Scheduled Commercial Operation of the Project, @ 18% of Deliverable energy of the Project for a period of next 18 years and @ 30% of the Deliverable Energy for the balance agreement period beyond 30 years.
36. The First Party shall constitute a Local Area Development Committee (LADC) for project(s) being implemented in each river valley. The Deputy Commissioners will be the Chairman of the LADC and other members shall be nominated by the Government. Concerned SDM shall be the Member Secretary. The LADC will be entrusted with, but not limited to, the following activities in the Project Affected Areas, which are those areas/villages surrounding/falling in the catchment/watershed areas extending from the Reservoir to the Tail Race of the Project:-
(a) Oversee the restoration of facilities adversely affected due to implementation of the Project.
(b) Oversee the implementation of Rehabilitation and Relief Plan.
(c) Oversee the implementation of Catchment Area Treatment (CAT) Plan and Compensatory Afforestation.
(d) Local Development activities related to development of Agriculture, Horticulture, Animal Husbandry, Fisheries, Rural Development, I&PH, Health, Forest, Education, PWD, Power and other Social, Religious and Cultural activities etc.
However, PWD/other roads leading to the Project areas shall not form part of LADC activities.
The activities of the LADC during execution shall be financed by the Project itself and for this purpose the Developer shall make a provision of 1.5% of final cost of the Project. The LADC activities shall be financed from the above provision and not from free power as royalty.
The amount on account of Local Area Development shall be paid by the Second Party to the Deputy Commissioner of the Project Affected Areas (Chairman LADC) in equal annual instalments during the Construction Period of the Project and shall be payable in 1st quarter of every financial year, starting from the date of Financial closure.
The Second Party shall keep the Government informed of any change in the construction cost of the Project and for any increase in the construction cost of the Project from time to time, the Second Party shall release the instalments accordingly.
48. The Second Party shall abide by the provisions as contained in Hydro Power Policy of First Party.
8. The respondent-State has also issued notification dated 11.12.2006 whereby District level "Local Area Development Committee" (LADC) was constituted in respect of each Hydroelectric Project above 5 MW being implemented/executed in each river valley of Himachal Pradesh by the various agencies in power sector in Himachal Pradesh, viz State Sector/Joint Venture Projects/State Utilities/Central Sector/ Independent Power Producers etc. for the development of "Project Affected Areas", i.e. "the areas/villages surrounding/falling in the catchment/watershed areas extending from the reservoir to the tail race of the project. This notification is at page 40 of the CWP No. 697/2010-A. The Central Government has framed New Hydro Power Policy, 2008. Relevant provisions of clauses 10 (d) and 10 (h) of New Hydro Power Policy, 2008 read thus:
(d) The tariff of the project would be decided by the appropriate Regulatory Commission. To this extent, the Tariff Policy notified in January 2006 is modified and the developer would be required to enter into long term PPAs with distribution companies subject to provisions in para 9.4.1 (g) below. While determining tariff the appropriate Regulatory Commission shall not allow as a part of the project cost the expenditure incurred or committed to be incurred by the project developer for getting the site allotted to him. The dispensation accorded under the Hydro Policy in 1998, regarding 12% free power to be provided to the host state government will, however, be supplemented by an additional 1% in accordance with Clause (h) below. Any free power beyond 13% would be met by the developers from their own resources and would not be a pass through in tariff.
(h) An additional 1% free power from the project would be provided and earmarked for a Local Area Development Fund, aimed at providing a regular stream of revenue for income generation and welfare schemes, creation of additional infrastructure and common facilities etc. on a sustained and continued basis over the life of the project. It is recommended that the host state governments would also provide a matching 1% from their share of 12% free power towards this corpus. This fund could be operated by a standing committee headed by an officer of the State Government, not lower than a district magistrate to be designated by the State Government, male and female representatives of the Project Affected People and the project head nominated by the developer. This fund would be available in the form of an annuity over the entire life of the project.
9. According to clause 10 (h), an additional 1% free power from the project would be provided and earmarked for a Local Area Development Fund, aimed at providing a regular stream of revenue for income generation and welfare schemes, creation of additional infrastructure and common facilities etc. on a sustained and continued basis over the life of the project. It was recommended that the host State Governments would also provide a matching 1% from their share of 12% free power towards this corpus. This fund is to be operated by the standing committee headed by an officer of the State Government, not lower than a District Magistrate to be designated by the State Government, male and female representatives of the Project Affected People and the project head nominated by the developer. The respondent-State issued a notification dated 30.11.2009 on the basis of clause 10 (d) and 10 (h) of New Hydro Power Policy, 2008 vide Annexure P-10. A corrigendum was also issued by the respondent-State on 15.3.2010 vide Annexure RC at page 172 of the paper book.
10. The petitioner-company has made a representation for the extension of Implementation Agreement, as noticed above, on 6.12.2010. Thereafter, the petitioner-company has been issued draft Implementation Agreement and format on 15.5.2011. Implementation Agreement was signed between the parties on 29.3.2011. Following clauses 5.3.1 and 5.3.2 have been inserted in the Implementation Agreement. These clauses read thus:
5.3.1. The royalty in the shape of free power be levied @ 12% of the Deliverable Energy of the Project for the period starting from the date of synchronization of the first generating unit and extending up to 12 years from the date of Scheduled Commercial Operation of the Project, @ 18% of Deliverable energy of the Project for a period of next 18 years and @ 30% of the Deliverable Energy for the balance agreement period beyond 30 years. The royalty in the shape of free power shall start accruing to the First Party from the Schedule Commercial Operation Date/Synchronization of first generation unit, whichever is earlier.
5.3.2. The Second Party agreed to provide an additional 1% free power payable for Local Area Development, as per the National Hydro Power Policy (2008) and adopted by the State Government. (In respect of the Projects allotted prior to 2010, the provision of additional 1% free power for LADF shall be subject to the final outcome of the CWP No. 697 of 2010 filed by M/s JSW Energy, pending in the Hon''ble High Court of HP).
11. According to clause 5.3.2 of the Implementation Agreement, the party agrees to pay an additional 1% free power payable for Local Area Development, as per the National Hydro Power Policy, 2008 and adopted by the State Government, in respect of the projects allotted prior to 2010. The provision of additional 1% free power for LADF was subject to the final outcome of CWP No. 697/2010 filed by M/s JSW Energy, pending in this court. In both the writ petitions, rejoinders have also been filed.
12. Respondent-State has issued notice inviting proposals and the last date for sale of bid documents was 19.4.2006. Petitioner has submitted technical/financial bids on 29.6.2006, which was opened on 30.6.2006. Respondent No. 1 on the basis of the financial bids furnished by the petitioners allotted the project on 26.7.2007. It would be apt at this stage to take into consideration the general terms and conditions forming part of the bid document, reproduced as under:
5. The Project Developer will be required to provide royalty in the shape of free power from the Project to the Government of Himachal Pradesh in lieu of surrender of potential site @ 12% of the Deliverable Energy of the Project for the period starting from the date of synchronization of the first generating unit and extending up to 12 years from the date of Scheduled Commercial Operation of the Project, @ 18% of Deliverable energy of the Project for a period of next 18 years and @ 30% of the Deliverable Energy for the balance agreement period beyond 30 years. The royalty in the shape of free power shall start accruing to the First Party from the Scheduled Commercial Operation Date. In case the actual COD is delayed beyond the Scheduled COD, in that event the amount of free power component as royalty shall accrue to Govt. of H.P. because of extended COD and the Developer shall pay the same in 10 equal installments from the actual COD 11. The Government will constitute a Local Area Development Authority (LADA) for project (s) being implemented in each river valley. The Deputy Commissioners will be the chairman of the LADA and representatives of the developers, HPSEB/State Utility, PWD, IPH, Forest, Pradhan of the affected Panchayat, Chairman Panchyat Samiti, Block Development Officer, Land Acquisition Officer and any other Concerned Department will be the other members of the LADA. Concerned SDM shall be the Member Secretary. The LADA will be entrusted with, but not limited to the following activities:-
(a) Oversee the restoration of facilities adversely affected due to implementation of the Project.
(b) Oversee the implementation of Rehabilitation and Relief Plan.
(c) Oversee the implementation of Catchment Area Treatment (CAT) Plan and Compensatory Afforestation.
(d) Local Development activities related to development of Agriculture, Horticulture, Animal Husbandry, I&PH, Health, Forest Departments and other social activities. The activities of the LADA during execution will be financed by the Project itself and for this purpose the Developer shall make a provision of 1.5% of total cost in the Detailed Project Report other than the funds required for R&R scheme and CAT plan. The LADA activities should be financed from the 1.5% provision proposed in the DPR and not from free power royalty. The State Government will use the free power royalty.
13. Clauses 5 and 6 of the general terms and of the Hydro Power Policy, 2006, which has already been reproduced hereinabove. The same clauses were incorporated in Pre-Implementation Agreement dated 15.2.2008. Petitioner-Company had already paid upfront premium of Rs. 82,06,20,000/- on 27.8.2007, i.e. 50% of the amount and remaining 25% at the time of execution of Pre-Implementation Agreement.
14. Now, the Court will advert to clauses 10 (d) and 10 (h) of the new Hydro policy framed by the Ministry of Power. According to clause 10 (d) of the New Hydro Power Policy, 2008, the tariff of the project would be decided by the appropriate Regulatory Commission and while determining tariff the appropriate Regulatory Commission shall not allow as a part of the project cost the expenditure incurred or committed to be incurred by the project developer for getting the site allotted to him. The dispensation accorded under the Hydro Policy of 1998, regarding 12% free power to be provided to the State Government, will, however, be supplemented by an additional 1% in accordance with clause (h) and any free power beyond 13% would be met by the developers from their own resources and would not be a pass through in tariff. Clause (h) of the New Hydro Policy provides that additional 1% free power from the project would be provided and earmarked for a Local Area Development Fund aimed at providing a regular stream of revenue for income generation and welfare schemes, creation of additional infrastructure and common facilities etc. It was also recommended that the State Governments would also provide a matching 1% from their share of 12% free power towards this corpus. The fund is to be operated by a standing committee headed by an officer of the State Government, not lower than a District Magistrate to be designated by the State Government, male and female representatives of the Project Affected People and the project head nominated by the developer. This fund has to be available over the entire life of the project.
15. The respondent-State on 30.11.2009 has issued notification on the basis of clauses 10 (d) and (h) of the New Hydro Power Policy, 2008. According to this notification, the additional 1% free power, over and above 12% free power is to be provided to the State and the same will be a pass through in tariff and the petitioner has to provide 13% free power, i.e. 12%+1% to the State Government and the Government will provide revenue received from such 1% free power to the Local Area Development Fund for the project to be operated by a standing committee to be constituted by the State Government. The additional 1% free power is to be provided and earmarked for Local Area Development Fund by all the project developers of all the capacities and will be applicable on projects which are commissioned under Implementation Agreement and which are to be allowed in future. It was also provided in the notification dated 30.11.2009 that wherever required, an SIA be signed with each developer to fulfill the requirements of the notification. The clauses to be inserted in SIA were also enumerated as item (a) to (d) of the notification dated 30.11.2009. Petitioner-company had sought six months time for signing the Implementation Agreement on 6.12.2010 and has also made suggestion on 27.1.2011. Petitioner-company has forwarded Draft Implementation Agreement/format on 15.5.2011. Petitioner-Company signed the Implementation Agreement on 29.3.2011 though it has protested against the same by seeking clarification and also making suggestions.
16. In the instant case, the petitioners have given technical/financial bids. These were universal tenders and the petitioners have given competitive rates after taking into consideration the overall viability of the project. Petitioners were put to notice of the terms and conditions in the bid documents the manner in which the project developer is required to pay the royalty in the shape of free power in future @ 12% of the deliverable energy of the project for the period starting from the date of synchronization of the first generating unit and extending upto 12 years from the date of scheduled commercial operation of the project, @ 18% of deliverable energy of the project for a period of next 18 years and @ 30% of the deliverable energy for the balance agreement period beyond 30 years. The provision was made for Local Area Development Fund which was to be financed by the project itself and for this purpose the developer has to make a provision of 1.5% of the total cost of the project. Thereafter, clauses 18 and 36 were included in the Implementation Agreement.
17. Now, the question which requires consideration of this Court is whether these clauses could be incorporated to the detriment of the petitioner-company on the basis of clause 10 (d) and clause 10 (h) of the New Hydro Power Policy notified by the Ministry of Power, Government of India. There is no tangible material placed on record by the respondents that the policy framed by the Central Government was binding on the State Government.
18. Mr. K.D. Shreedhar, learned Senior Advocate and Mr. Ajay Mohan Goel have argued that clauses 18 and 36 of the Implementation Agreement corresponding to other clauses in the bid documents have been inserted on the basis of Hydro Power Policy framed by the respondent-State in the year 2006. Mr. K.D. Shreedhar has also argued that the New Hydro Power Policy is not binding on the State and the developers, as per section 3 of the Act. According to sub section (1) of sub-section 3, The Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Governments and the Authority for development of the power system based on optimal utilisation of resources such as coal, natural gas, etc. The respondent-State has not placed any material on record that the Central Government has consulted the State Government at the time of framing a new Hydro Power Policy, 2008. According to sub-section (4) of section 3, the Authority shall prepare a National Electricity Plan in accordance with the National Electricity Policy and notify such plan once in five years. There is no material on record that the National Electricity Policy as defined in sub-section (4) of section 3 has been prepared. It is stipulated in first proviso to sub-section (4) of section 3 that the Authority while preparing the National Electricity Plan shall publish the draft National Electricity Plan and invite suggestions and objections thereon from licensees, generating companies and the public within such time as may be prescribed.
19. The basis for issuance of notification dated 30.11.2009 is clauses 10 (d) and 10 (h) of the New Hydro Power Policy, as is evident from the language employed in this notification.
20. The advertisement, whereby notice inviting proposals were called for, was issued in the year 2006. New Hydro Power Policy framed by the Ministry of Power has come into existence in the month of January, 2008. The petitioner-company has been allotted the project on 26.7.2007 pursuant to which it has also deposited 75% amount of the upfront premium. On the date when the Pre-Implementation Agreement was signed on 15.2.2008, New Hydro Power Policy had come into existence, but the respondent-State in its own wisdom has not inserted new clauses. The New Hydro Power Policy, 2008 would not apply retrospectively since the rights of the parties have crystallized on the basis of terms and conditions contained in the bid documents, as noticed hereinabove, read in conjunction with the Pre-Implementation Agreement dated 15.2.2008. This Policy would apply prospectively and would not impair the vested and acquired rights of the petitioner and similarly situate persons, who have spent considerable amount and were allotted the projects by the respondent-State.
21. Mr. K.D. Sood, learned Senior Advocate has referred to clause 48 of the Implementation Agreement, which reads thus:
The second party shall abide by the provisions as contained in Hydro Power Policy of first party.
22. This clause means that the parties have bound themselves to regulate their affairs of Hydro Power Policy, which was in vogue at the time when the notice inviting proposals were published. It was never agreed by the parties that they were also be bound by the new terms and conditions incorporated in the New Hydro Power Policy, 2008 on the basis of which notification dated 30.11.2009 has been issued. It only means that the terms and conditions at the time of notice inviting proposals and acceptance were to prevail. What has been agreed by the parties as per clause 36 of the Implementation Agreement and the bid document, the petitioner-company shall make a provision of 1.5% of final cost of the project. This was to be spent as per the constitution of LADC notified by the State Government. The petitioners have participated and have given competitive/comparative rates taking into consideration that they were only required to pay 1.5% of the final cost of the project. Now, if the notification dated 30.11.2009 is made applicable to the petitioners and they are required to pay 1% free power to LADF throughout the life of the project. In view of this, availability of the power with the petitioners would be reduced and viability of the project will also be affected. There is no merit in the contention of Mr. K.D. Sood that 1.5% costs is to be paid during the construction of the project and thereafter free power has to be given in the existing life of the project. The fact of the matter is that there would be deficiency of 1% in the total availability of the power with the developers/petitioners.
23. Mr. K.D. Sood has also argued that as per notification dated 30.11.2009, 1% free power over and above 12% will be a pass through in tariff.
24. Mr. K.D. Shreedhar, Senior Advocate and Mr. Ajay Mohan Goel have argued that their clients would be merchant power plants and in their case, the tariff would be determined as per section 63 and not as per section 62 of the Act by the Regulatory Electricity Commission and in these circumstances, it would effect the financial health of the petitioners.
25. The petitioners have paid 75% of the upfront premium as agreed between the parties, initially 50% at the stage when the project was allotted and remaining 25% at the time of signing of Pre-Implementation Agreement. The petitioners have changed their position to their detriment by paying 75% of the upfront premium and in these circumstances, the respondent-State is estopped from changing the terms and conditions, which stood entered into between the parties on the basis of bid document and Pre-Implementation Agreement. The petitioners have also sought certain clarifications from the State Government. Their pleas have been rejected by the respondent-State. In case of CWP No. 1698/2011, the plea has been rejected on 24.2.2011 and in case of CWP No. 697/2010-A; it has been rejected on 2.3.2010. The difference between the two cases is that as far as petitioners in CWP No. 1698/2011 is concerned, despite their protest they have been asked to execute Implementation Agreement on 29.3.2011 whereby clauses 5.3.1 and 5.3.2 vide Annexure RE have been inserted. In case of CWP No. 697/2010-A, the Implementation Agreement has not been signed between the parties. The respondent-State has unilaterally taken a decision to alter the terms and conditions, which had earlier been agreed between the parties, on the basis of notification dated 30.11.2009. The petitioners have not been associated at the time of taking decision. The terms and conditions as earlier agreed and binding upon the parties have been unilaterally altered to the detriment of the petitioners.
26. According to clause 10 (h) of the New Hydro Power Policy, the State Government has to provide a matching 1% from their share of 12% free power towards this corpus. However, as per clause (d) of notification dated 30.11.2009, the expression used is "the Government of Himachal Pradesh may also provide a matching 1% from its share of 12% free power through plan budgetary provisions for schemes where the normal plan budgetary provisions and the 1% free power provided by the developers to the LADF is not adequate to meet the requirement for infrastructure and schemes which benefit the project area in the cluster or across more than one Panchayat as identified/recommended by the District Level Standing Committee for each project to the State Power Department/Planning Department, which is against the mandate of clause (h). It is true that the policy can be changed, but that cannot be arbitrarily applied retrospectively to destroy the vested and accrued rights. The policy must conform to Article 14 of the Constitution of India and there has to be due application of mind.
27. The respondent-State has issued advertisement on the basis of which the petitioners have participated in the tendering process. The general terms and conditions forming part of the bid document have already been reproduced in para 13 hereinabove. According to this, the petitioners were liable to make a provision of 1.5% of total cost in the Detailed Project Report for carrying out the activities by LADA. This clause is being changed on the basis of notification dated 29.3.2011 whereby the petitioners are now made liable to pay 1% free power throughout the life of the project to LADF. The respondent-State has not issued any public notice before issuing notification dated 29.3.2011 on the basis of New Hydro Power Policy. The petitioners were also required to be at least associated with the decision making process before issuing the impugned notification.
28. Their Lordships of the Hon''ble Supreme Court in
15. It also appears to us that in any event the new policy decision as contained in the impugned memorandum of January 20, 1990 should not have been implemented without making such change in the existing crietrion for allotment known to the Group Housing Societies if necessary by way of a public notice so that they might make proper representation to the concerned authorities for consideration of their view points. Even assuming that in the absence of any explanation of the expression "first come first served" in Rule 6(vi) of Nazul Rules there was no statutory requirement to make allotment with reference to date of Registration, it has been rightly held, as a matter of fact, by the High Court that prior to the new guideline contained in the memo of January 20, 1990 the principle for allotment had always been on the basis of date of Registration and not the date of approval of the list of members. In the brochure issued in 1982 by the DDA even after Gazette Notification of Nazul Rules on September 26, 1981 the policy of allotment on the basis of seniority in registration was clearly indicated. In the aforesaid facts, the Group Housing Societies were entitled to ''legitimate expectation'' of following consistent past practice in the matter of allotment, even though they may not have any legal right in private law to receive such treatment. The existence of ''legitimate expectation'' may have a number of different consequences and one of such consequences is that the authority sought not to act to defeat the ''legitimate expectation'' without some overriding reason of public policy to justify its doing so. In a case of ''legitimate expectation'' if the authority proposes to defeat a person''s ''legitimate expectation'' it should afford him an opportunity to make representations in the matter. In this connection reference may be made to the discussions on ''legitimate expectation'' at page 151 of Volume 1 (I) of Halsbury''s Laws of England Fourth Edition (Re-issue). We may also refer to a decision of the House of Lords in Council of Civil Service Unions v. Minister for Civil Service reported in (1984) 3 All ER 935. It has been held in the said decision that an aggrieved person was entitled to judicial review if he could show that a decision of the public authority affected him of some benefit or advantage which in the past he had been permitted to enjoy and which he legitimately expected to be permitted to continue to enjoy either until he was given reasons for withdrawal and the opportunity to comment on such reasons.
16. It may be indicated here that the doctrine of ''legitimate expectation'' imposes in essence a duty on public authority to act fairly by taking into consideration all relevant factors relating to such ''legitimate expectation''. Within the conspectus of fair dealing in case of ''legitimate expectation'', the reasonable opportunities to make representation by the parties likely to be affected by any change of consistent past policy, come in. We, have not been shown any compelling reasons taken into consideration by the Central Government to make a departure from the existing policy of allotment with reference to seniority in Registration by introducing a new guideline. On the contrary, Mr. Jaitley the learned counsel has submitted that the DDA and/or Central Government do not intend to challenge the decision of the High Court and the impugned memorandum of January 20, 1990 has since been withdrawn. We therefore feel that in the facts of the case it was only desirable that before introducing or implementing any change in the guideline for allotment, an opportunity to make representations against the proposed change in the guideline should have been given to the registered Group Housing Societies, if necessary, by way of a public notice.
29. It is reiterated that the respondent-State petitioners and similarly situate persons to make representation against the notification dated 29.3.2011.
30. In few cases may be imperative to hear the parties before the policy is changed. The respondent-State should have been aware that the viability of the project would be adversely affected in case the developers/petitioners were made to provide additional 1% free power, over and above the sum which they have to pay equal to 1.5% of the total project cost to the Local Area Development Committee. The bids were very very competitive and there is merit in the contention of learned counsel appearing on behalf of the petitioners that if the petitioners had been informed that the terms and conditions would be so drastically changed affecting the overall viability of the projects, they would have not participated in the competing/tendering process.
31. Mr. K.D. Sood, learned Senior Advocate has lastly contended that the notification dated 30.11.2009 is a policy decision and the scope of judicial review in these matters is very limited. The Court has gone through the entire New Hydro Power Policy, 2008. The objective contained therein is to rehabilitate the persons likely to effect by the project. However, the Court cannot be oblivious to the facts and circumstances of the case where the process has already been initiated in the year 2006 and the New Hydro Power Policy, 2008 has come into existence in the year 2008.
32. Their Lordships of the Hon''ble Supreme Court in
9. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning" and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness.
33. Their Lordships of the Hon''ble Supreme Court in Union of India and others versus Asian Food Industries, (2006) 13 SCC 542 have held that by reason of a policy, vested or accrued right cannot be taken away. Their Lordships have held as under:
48. The Delhi High Court, however, in our view correctly opined that the notification dated 4.07.2006 could not have been taken into consideration on the basis of the purported publicity made in the proposed change in the export policy in electronic or print media. Prohibition promulgated by a statutory order in terms of Section 5 read with the relevant provisions of the policy decision in the light of Sub-section (2) of Section 3 of the 1992 Act can only have a prospective effect. By reason of a policy, a vested or accrued right cannot be taken away. Such a right, therefore, cannot a fortiori be taken away by an amendment thereof."
34. Their Lordships of the Hon''ble Supreme Court in
51. A distinction must be made between a policy decision and a statute. Whereas prima facie a policy decision may not have any retroactive operation, a statute may have. Only because it affects a past transaction the same, by itself, would not come in the way of the legislature in enacting an enactment or the executive government to exercise its power of subordinate legislation.
35. Their Lordships of the Hon''ble Supreme Court in
18. Tourism was declared to be an industry. The wide range of concessions as noticed hereinbefore, inter alia, covered electricity and water charges. It is not a case where some exemptions or concessions were to be given for a specific period or as a one time measure. No time limit was fixed for applicability in respect of the policy decisions. Pursuant thereto long term investments might have been made. It is not based on a principle of giving benefit with a view to facilitate the initial growth of the industry. It was not based on any formula or criteria to evaluate the realization of the object of grant of such concession over a period. It was an open ended offer. It must, therefore, be held that the Government was satisfied that the need was to grant concession if not permanently, at least for a long time.
19. There cannot be any doubt whatsoever that a policy decision can be reviewed from time to time. It is also beyond any doubt that the concessions granted can be withdrawn in public interest.
20. Indisputably, the State is also entitled to change or alter the economic policies. Appellants do not have any vested right to enjoy the concessions granted to them forever, particularly when the Board is constituted and incorporated under the provisions of Electricity (Supply) Act, 1948. Any policy decision adopted by the State would not be binding on the Board, save and except provided for in the Act. The Board being an independent entity, the duties and functions of the Board vis-a-vis the State are enumerated in the Act. The Board, however, would be bound by any direction issued by the State Government on questions of policy. A dispute which may arise as to whether a question is or not a question of policy involving public interest, Central Government is the final arbiter. The policy decision adopted by the State on the basis whereof the Board felt obligated to grant electrical connection in favour of the appellants on the basis of industrial tariff must, therefore, be understood in the context of Section 78A of the 1948 Act. What is binding on the Board is the policy of the State. The direction of the State was to apply a particular category of tariff to the appellants. Such directions could have been withdrawn while making another tariff. The State indisputably has the power to grant subsidy from its own coffer instead of directing the Board to grant concession.
21. It is now a well settled principle of law that the doctrine of promissory estoppel applies to the State. It is also not in dispute that all administrative orders ordinarily are to be considered prospective in nature. When a policy decision is required to be given a retrospective operation, it must be stated so expressly or by necessary implication. The authority issuing such direction must have power to do so. The Board, having acted pursuant to the decision of the State, could not have taken a decision which would be violative of such statutory directions.
22. 15.5.1999 was fixed as the cut off date by the Board. It, by itself, could not have done so. But the State for issuing the GO dated 26.9.2000 could have fixed the said cut off date on its own. We although do not agree that by granting retrospectivity to the said order, the entirety of the Government Order should be set aside the same or per se would be held to be unreasonable, but what we mean to say is that it could be given effect to only from the date of the order, i.e., prospectively and not from an anterior date, i.e., retrospectively.
30. We are not concerned with the exercise of a statutory power in this case. We are concerned with issuance of a direction by the State which is binding on the Board as also how and to what extent it can be rescinded.
36. The law which emerges from the above discussion is that the doctrine of promissory estoppel would not be applicable as no foundational fact therefor has been laid down in a case of this nature. The State, however, would be entitled to alter, amend or rescind its policy decision. Such a policy decision, if taken in public interest, should be given effect to. In certain situations, it may have an impact from a retrospective effect but the same by itself would not be sufficient to be struck down on the ground of unreasonableness if the source of power is referable to a statute or statutory provisions. In our constitutional scheme, however, the statute and/or any direction issued thereunder must be presumed to be prospective unless the retrospectivity is indicated either expressly or by necessary implication. It is a principle of rule of law. A presumption can be raised that a statute or statutory rules has prospective operation only.
37. The State of Kerala in this case did not grant any concession by itself. The Central Government took a larger policy of treating the tourism as an industry. A wide range of concessions were to be granted by way of one time measure; some of them, however, had a recurring effect. So far as grant of benefits which were to be recurring in nature, the State exercises its statutory power in the case of grant of exemption from payment of building tax wherefor it amended the statute. It issued directions which were binding upon the Board having regard to the provisions contained in Section 78A of the 1948 Act. The Board was bound thereby. The Board, having regard to its financial constraints, could have brought its financial stringency to the notice of the State. It did so. But the State could not have taken a unilateral decision to take away the accrued or vested right. The Board''s order dated 11.10.1999 in law could not have been given effect to. The Board itself kept the said notification in abeyance by reason of order dated 8.11.1999.
38. Appellants, indisputably, continued to derive the benefits in terms of the original order. They obtained certificates of classification. It is on the aforementioned context, the question as regards construction of the impugned notification dated 26.9.2000 arises. Ex facie, the said policy decision could not be given a retrospective effect or retroactive operation. The State was not exercising the power under any statute to grant or withdraw the concession. It was exercising its statutory power of issuing direction. It is, therefore, a statutory authority. The 1948 Act does not authorize the State to issue a direction with retrospective effect. The Board, therefore, could only give prospective effect to such directions in absence of any clear indication contained therein. By reason of withdrawal of concession with retrospective effect, the accrued right of the appellants had been affected. In
36. In a case of this nature, where the State has the exclusive privilege and the citizen has no fundamental right to carry on business in liquor, in our opinion, the policy which would be applicable is the one which is prevalent on the date of grant and not the one, on which the application had been filed. If a policy decision had been taken on 16.9.2005 not to grant L-52 licence, no licence could have been granted after the said date.
We, however, are not concerned with a similar situation.
40. We, therefore, are of the opinion that the impugned GO dated 26.9.2000 must be held to have a prospective operation and not a retrospective operation. That view would save it from being vulnerable to the challenge of being hit by Article 14 of the Constitution of India.
36. In the instant case, the change in policy is based on New Hydro Power Policy, 2008, which is not statutory in character.
37. Their Lordships of the Hon''ble Supreme Court in Sime Darby Engineering SDN BHD versus Engineers India Limited, (2009) 9 SCC 545 have held that the policy cannot change the contract clause. In this case the contract was signed between the parties in the year 2004 and the policy has come into force in the year 2005. Thus, it was held by their Lordships that the policy cannot in any way override the contract between the parties. Their Lordships have held as under:
27. In the instant case, the arbitration clause 12.2 is silent as to the number of arbitrator. The said clause read with Section 10(2) of the Act makes it very clear that arbitral tribunal in the instant case would be consisting of a sole arbitrator.
28. The learned counsel for the respondent has referred to its policy decision which has been quoted hereinabove. Such policy decision cannot change the contractual clause. In any event the contract between the parties was entered into in 2004. The said policy decision came into effect in 2005. Therefore, the said policy decision cannot in any way override contract between the parties.
38. In the present writ petitions, the rights of the parties were to be restricted as to the conditions of the Pre-Implementation Agreement read with conditions enumerated in the bid document and Hydro Power Policy of the State Government framed in the year 2006.
39. Their Lordships of the Hon''ble Supreme Court in a recent judgment in Brij Mohan Lal versus Union of India and others, JT 2012 (4) SC 212 have held that it is a settled cannon of law that the Government has the authority and power to not only frame its policies, but also to change the same and the change in policy must be made fairly and should not give impression that it was so done arbitrarily on any ulterior intention. Their Lordships have held as under:
72. It is also settled cannon of law that the Government has the authority and power to not only frame its policies, but also to change the same. The power of the Government, regarding how the policy should be shaped or implemented and what should be its scope, is very wide, subject to it not being arbitrary or unreasonable. In other words, the State may formulate or reformulate its policies to attain its obligations of governance or to achieve its objects, but the freedom so granted is subject to basic Constitutional limitations and is not so absolute in its terms that it would permit even arbitrary actions. Certain tests, whether this Court should or not interfere in the policy decisions of the State, as stated in other judgments, can be summed up as:
(I) If the policy fails to satisfy the test of reasonableness, it would be unconstitutional.
(II) The change in policy must be made fairly and should not give impression that it was so done arbitrarily on any ulterior intention.
(III) The policy can be faulted on grounds of mala fide, unreasonableness, arbitrariness or unfairness etc.
(IV) If the policy is found to be against any statute or the Constitution or runs counter to the philosophy behind these provisions.
(V) It is dehors the provisions of the Act or Legislations.
(VI) If the delegate has acted beyond its power of delegation.
73. Cases of this nature can be classified into two main classes: one class being the matters relating to general policy decisions of the State and the second relating to fiscal policies of the State. In the former class of cases the Courts have expanded the scope of judicial review when the actions are arbitrary, mala fide or contrary to the law of the land; while in the latter class of cases, the scope of such judicial review is far narrower. Nevertheless, unreasonableness, arbitrariness, unfair actions or policies contrary to the letter, intent and philosophy of law and policies expanding beyond the permissible limits of delegated power will be instances where the Courts will step in to interfere with government policy.
74. In the case of
22. We are conscious of the fact that the issue is a matter of policy having financial and other implications. But where an issue involving public interest has not engaged the attention of those concerned with policy, or where the failure to take prompt decision on a pending issue is likely to be detrimental to public interest, courts will be failing in their duty if they do not draw attention of the authorities concerned to the issue involved in appropriate cases. While courts cannot be and should not be makers of policy, they can certainly be catalysts, when there is a need for a policy or a change in policy.
75. The correct approach in relation to the scope of judicial review of policy decisions of the State can hardly be stated in absolute terms. It will always depend upon the facts and circumstances of a given case. Furthermore, the Court would have to examine any elements of arbitrariness, unreasonableness and other Constitutional facets in the policy decision of the State before it can step in to interfere and pass effective orders in such cases. A challenge to the formation of a State policy or its subsequent alterations may be raised on very limited grounds. Again, the scope of judicial review in such matters is a very limited one. One of the most important aspects in adjudicating such a matter is that the State policy should not be opposed to basic Rule of Law or the statutory law in force. This is what has been termed by the courts as the philosophy of law, which must be adhered to by valid policy decisions.
76. The independence of the Indian Judiciary is one of the most significant features of the Constitution. Any policy or decision of the Government which would undermine or destroy the independence of the judiciary would not only be opposed to public policy but would also impinge upon the basic structure of the Constitution. It has to be clearly understood that the State policies should neither defeat nor cause impediment to discharge of judicial functions. To preserve the doctrine of separation of powers, it is necessary that the provisions falling in the domain of judicial field are discharged by the Judiciary and that too, effectively.
77. This Court has consistently held that the writ of mandamus can be issued, perhaps not as regards the manner of discharge of public duty but with respect to the due exercise of discretion in the course of such duty. In the case of
In a parliamentary democracy with a written Constitution in which three organs of the Governments are clearly marked out, it becomes a primary duty of the State to provide for fair and efficient administration of justice. Justice must be within the easy reach of the lowest of the lowliest. Rancour of injustice hurts an individual leading to bitterness, resentment and frustration and rapid evaporation of the faith in the institution of judiciary. Two vital limbs of the Justice system are that Justice must be within the easy reach of the weaker sections of the society and that it must be attainable within a reasonably short-time, in other words, speedily. Leaving aside other factors contributing to the arrears in courts, it cannot be gainsaid that in each High Court adequate number of Judges must be appointed and the situation in each High Court must be regularly reviewed by the President so as to efficiently discharge the duty cast on him by Article 216. In the course of hearing a statement was made on behalf of the Union of India that the Government is taking steps to review the strength of each High Court to determine the adequate strength of each High Court and then to take steps to make appointments according to the targets so devised. As this statement is a solemn undertaking to this Court, it may be reproduced in extenso
The Union Government has decided to increase the number of posts of permanent judges in the various High Courts keeping in view the load of work, the guidelines prescribed and other relevant considerations. In fact in 1980 itself, on the basis of institution, disposal and arrears of cases and the guidelines prescribed, the Governments of seven States where the problem was more acute, had been addressed to consider augmentation of the Judge strengths of their High Courts. It has been decided that where necessary the guidelines prescribed will be suitably relaxed by taking into account local circumstances the trend of litigation and any other special or relevant factors that may need consideration. The Union Government will take up the matter with the various State Governments so that after consulting the Chief Justices of the High Courts, they expeditiously send proposals for the conversion of a substantial number of posts of Additional Judges into those of permanent judges.
2. The Union Government has also decided that ordinarily further appointments of Additional Judges will not be made for periods of less than one year. But to say that a litigant who wants his case to be disposed of as early as possible being convinced that his case is not handled by the Court for want of adequate number of judges can bring an action to issue a mandamus to the Government to appoint adequate number of judges requires more elaborate arguments and in view of the statement it is not necessary to deal with the submission.
XXX XXX XXX
1251. Notwithstanding the principle of separation of powers found entrenched in the Constitution of the United States of America, as can be seen from the last part of para 141 of Vol. 52 of the American Jurisprudence 2d. under the title ''Mandamus'' if it is the constitutional or statutory duty of a governor or the President to exercise his discretion with respect to a certain matter he may be required by mandamus to do so but the manner in which he has to discharge that duty cannot be directed by the courts. As observed in the English decisions referred to 70 above it is manifest that a statutory discretion is not necessarily or indeed usually absolute, it may be qualified by express and implied legal duties to comply with substantive and procedural requirements before a decision is taken, whether to act and how to act. I am of the view that the power conferred on the President by Article 216 of the Constitution to appoint sufficient number of Judges is a power coupled with a duty and is not merely a political function. In the instant case ordinarily the court would have been reluctant to issue any mandamus to the Government to comply with the duty of determination of the strength of Judges of High Courts. But having regard to the undisputed total inadequacy of the strength of Judges in many High Courts, it appears to be inevitable that the Union Government should be directed to determine within a reasonable time the strength of permanent Judges required for the disposal of cases instituted in them and to take steps to fill up the vacancies after making such determination.
40. Accordingly, in view of the observations and analysis made hereinabove, both the petitions are allowed. It is declared that Annexure P-10 dated 30.11.2009 would apply prospectively and not retrospectively. Consequently, clause 5.3.2 of Annexure ''RE'' dated 29.3.2011 and Annexure P-13 dated 24.2.2011 in CWP No. 1698/2011 are struck down and quashed and set aside. Annexure P-6 dated 2.3.2010 in CWP No. 697/2010-A is also quashed and set aside. Pending application(s), if any, also stands disposed of. There shall, however, be no order as to costs.
