Mr. Vijay Bharate, The AGM, M/s Serum Institute of India Private Limited vs Maharashtra Electricity Regulatory Commission on 22 September 2026

J U D G M E N T

PER HON’BLE MR. AJAY TALEGAONKAR, TECHNICAL MEMBER Background and Factual Matrix

1. The Appellant i.e. Serum Institute of India Private Limited (“SIIPL”) is engaged in the business of manufacturing immuno-biological drugs including vaccines in India. The Appellant is also a generating company within the meaning of Section 2(28) of the Electricity Act, 2003 and has set up Wind Energy Power Plants having total installed capacity of 57.2 MW in District- Dhule, Sangli and Satara in the State of Maharashtra. The present appeal is filed by M/s Serum Institute of India Private Limited (“Appellant/SIIPL”) challenging the Impugned Order dated 30.05.2019 passed by Maharashtra Electricity Regulatory Commission (“Respondent No. 1”/ “MERC”) in Case No. 49 of 2019.

2. The SIIPL had established wind generating capacity of 56.5 MW at 3 locations after Government of Maharashtra (“GoM”) introduced New Policy for Power Generation from Non-Conventional Sources of Energy, 2008 (“GOM Policy, 2008”). This capacity is identified as falling under Group-IV. Prior to this, after enactment of the Electricity Act, 2003 also, SIIPL had established 0.7 MW capacity, which identified as falling under Group-II.

3. The Appellant utilised the generation primarily for captive/ self-use and also supplied part of the energy to third-party consumers through Open Access (“OA”). During FY 2014-15 and FY 2015-16, where third-party consumers were not available for the entire generation, the Appellant obtained MSEDCL’s permission to sell surplus wind energy to MSEDCL on a short-term basis at the applicable tariff.

4. During FY 2017-18, the Appellant’s consumers applied for Short- Term Open Access (“STOA”). The Appellant states that, as a result, its captive utilisation and third-party OA sales were restricted, leaving surplus wind energy for which eligible OA consumers were not available. The MERC (Distribution Open Access) Regulations, 2016 (“DOA Regulations, 2016”) came into effect in April 2016, replacing the 2014 Regulations and, inter alia, restoring banking provisions applicable to RE.

5. Between April 2016 and March 2018, the Appellant generated and injected 3,67,58,630 units of wind energy into the MSEDCL grid. For FY 2016-17, out of approximately 9,00,00,000 units generated, the Appellant sought purchase of 1,69,26,475 units by MSEDCL; for FY 2017-18, out of approximately 8,00,00,000 units generated, it sought purchase of

1,98,32,155 units. The Appellant states that, consequent upon reduction of the Contract Demand of RE OA consumers to 23% of generation capacity, certain consumers exceeded their Contract Demand and became liable for penalty/ temporary tariff. The Appellant accordingly curtailed the OA capacity. The surplus units, namely, 1,69,26,475 units for FY 2016-17 and 1,98,32,155 units for FY 2017-18, continued to be banked in the MSEDCL grid and were recorded in Common Credit Reports and Joint Meter Readings (“JMRs”) issued by MSEDCL. The Appellant consequently sought purchase of the surplus energy by MSEDCL, for which credit notes were issued.

6. The Appellant made applications in March, April, May and September 2017 seeking action on the credit notes and purchase of the injected units on a short-term basis. MSEDCL, by letters dated 19.09.2017, 25.09.2017, 23.03.2018 and 14.11.2018, declined to purchase the units pertaining to FY 2016-17 and FY 2017-18. While MSEDCL acted upon and purchased the units covered by credit notes relating to the Appellant’s Group-II projects, it did not act upon the credit notes relating to the Group-IV projects.

7. Aggrieved thereby, the Appellant filed Case No. 49 of 2019 before MERC. By order dated 30.05.2019, the Commission rejected the Appellant’s claim for compensation in respect of the units injected during April 2016 to March 2018 and hence, the present Appeal.

8. The Appellant has prayed for the following relief before us:

“a) set aside the Impugned Order dated 30.05.2019, passed by the Ld. Maharashtra Electricity Regulatory Commission in Case No. 49 of 2019; and

b) pass such other or further orders as this Hon'ble Tribunal may deem appropriate, keeping in view the facts and circumstances of the present case.

Submissions of the Appellant- SIIPL

9. The Appellant has primarily premised the relief based on the Section 70 of the Indian Contract Act, 1872. It has been contended that energy was used by the MSEDCL and denying compensation for the same amounts to unjust enrichment and that the case satisfies all the ingredients to satisfy the section 70 of the Indian Contract Act.

10. It has been contended that the knowledge of injection of surplus energy by the Appellant into the MSEDCL’s grid is clearly established on record and consistent with the prevailing industry practice of Post Facto regularisation.

11. The Appellant has submitted that the its wind power plants carry ‘Must Run’ status and that during the relevant period there was no forecasting or scheduling regime, thereby indicating that no restriction could have been placed on the energy injection. In such circumstances, to treat every excess unit as valueless would be arbitrary, irrational and contrary to renewable policy.

12. Appellant has submitted that though in the original proceedings before MERC, its case was primarily based on Section 70 of the Indian

Contract Act, MSEDCL itself had relied on DOA Regulations, 2016. The Appellant has pointed out that the Regulation 20.6 of the DOA Regulation, 2016 has clear provision regarding deemed purchase of excess energy injected.

Submissions of the Respondent No. 2- MSEDCL

13. MSEDCL has supported the impugned order primarily on the basis of DOA Regulations, 2016 and need to maintain grid discipline. In particular, MSEDCL has drawn attention towards Regulations 5.10.5 and 8.10 of DOA Regulations, 2016.

14. MSEDCL has contended that the safety and security of the Grid are of paramount importance and cannot be compromised by excessive injection of infirm power above contracted capacity.

15. MSEDCL has submitted that the Section 70 of Indian Contract Act is not applicable in the present case, primarily because no monetary or economic benefit was derived by MSEDCL from such excessive injection.

16. MSEDCL has also rebutted the contention of the Appellant that it was fully aware of the injection of energy. MSEDCL has submitted that meter readings are acquired to facilitate open access and with the meter reading alone do not indicate the excess injection without further analysis.

Our Analysis and Conclusions

17. We have heard the Learned Counsel for the Appellant and the Learned Counsel for the Respondent at length. We have also carefully considered their respective submissions and the relevant material on record. Upon due consideration of the arguments advanced and the documents placed before us; we now proceed to analyse the issues arising for our consideration in the present Appeal.

18. We note that the Appellant has primarily based its case on Section 70 of the Indian Contract Act, 1872. On the other hand, MSEDCL has supported the Impugned Order primarily on the basis of the DOA Regulations, 2016 and the requirement of maintenance of grid discipline, while at the same time refuting the applicability of Section 70 of the Indian Contract Act.

19. We note that Section 70 of the Indian Contract Act is premised on the absence of a contract governing the transaction. A contract may be an express or implied agreement between the parties regarding the exchange of goods/ services and the consideration thereof, roles and responsibilities of the parties, timelines, dispute resolution, etc. In the power sector, however, many of the terms and conditions governing transactions are prescribed by the Regulations framed by the Central Commission or the State Commissions, as the case may. Such Regulations are binding and may either supplement the terms and conditions of contracts or, where any provision of a contract is contrary to the applicable Regulations, prevail over such contractual provisions (PTC India Ltd. v. CERC, 2010 4 SCC 603).

20. In view of the above, we are of the opinion that, in the power sector, while examining the applicability of Section 70 of the Indian Contract Act, it is necessary to consider not only whether there is a contract governing the transaction, but also whether the transaction is governed by any binding Regulation. Where the transaction is governed by Regulations, the rights and obligations of the parties have to be determined within the framework thereof before recourse can be taken to Section 70 of the Indian Contract Act.

21. In view of the forgoing, we would like to closely examine the provisions of DOA Regulations, 2016 and their relevance in the present controversy. MSEDCL in their submissions have referred to Regulation 5.10.5 and 8.10 of the DOA Regulations, 2016. We also observe that in the para 12.2 of the Impugned Order, a provision of DOA Regulations, 2016 regarding a limit of 10% of excess injection has been mentioned. A perusal of DOA Regulations, 2016 reveals such provision can be found in Regulation 20. In fact, Appellant has also referred to Regulation 20.6 regarding deemed purchase of excess energy injection. In order to analyse the issue properly, the relevant provisions of these Regulations are extracted below:

“1.2. These Regulations shall apply for Open Access to and use of the Distribution System of Distribution Licensees in the State of Maharashtra, and where the network of the Distribution Licensee is not being used but supply to an Open Access Consumer is being provided within the distribution area of the Distribution Licensee.

…

2.1. In these Regulations unless the context otherwise requires: …

(4) “Banking” means the surplus Renewable Energy injected in the grid and credited with the Distribution Licensee after set off with consumption in the same Time of Day slot as specified in Regulation 20; …

5. Grant of Connectivity …

5.10. Infirm Power

5.10.1. A Generating Station which has been granted Connectivity to the Distribution System shall be permitted by the Distribution Licensee, subject to grid security considerations, to undertake testing, including full-load testing, by injecting infirm power into the grid before its commercial operation and prior to availing Open Access.

5.10.2. A Generating Station or Unit which has been granted Connectivity to the Distribution System shall be permitted by the Distribution Licensee to inject infirm power into the grid during testing, including full-load testing, before its commercial operation for a period not exceeding six months from the date of its first synchronization:

Provided that, for the purposes of these Regulations, the Distribution Licensee may allow extension of the period for testing, including full load test, and consequent injection of infirm power by the Station or Unit, beyond six months in exceptional circumstances on an application made by the Generating Company at least two months before the close of the initial period of six months.

5.10.3. The Generating Station shall provide such information as may be required to satisfy the Distribution Licensee that the injection of infirm power prior to commercial operation is solely for the purpose of testing and commissioning.

5.10.4. The commercial treatment of such infirm power from a Generating Station or Unit, other than one based on Renewable Energy sources, shall

be as specified in the Regulations of the Commission governing multi-year tariff determination:

Provided that the power injected into the grid on account of such testing from a Generating Station for which tariff has not been determined by the Commission shall be the lower of the following:

• the rate for imbalance as arrived under the Intra-State Balancing and Settlement Code; or

• the average variable cost of long-term power purchase as approved by the Commission in the prevailing Tariff Order in respect of the Distribution Licensee to whom the Generating Station intends to sell power.

5.10.5. Before injecting infirm power, the Generating Station shall enter into an Agreement with the Distribution Licensee to supply such power:

Provided that, in case the Generating Station does not have an Agreement for sale of power with any Licensee, there shall be no charge for such infirm power injected into the grid, and it shall be credited to the Distribution Licensee to whom the Generating Station is connected. …

15. Compliance with State Grid Code

Notwithstanding any other consequence to which it may be liable, failure of the Consumer or Supplier to comply with the provisions of the State Grid Code may render the Connection Agreement liable to revocation.

…

20. Banking of Renewable Energy generation 20.1. Regulation 19.3 shall not be applicable in case an Open Access Consumer obtains supply from a Renewable Energy Generating Station identified as ‘non-firm power’ by the Commission in its Regulations governing the Tariff for Renewable Energy.

20.2. The surplus energy from a ‘non-firm’ Renewable Energy Generating Station after set-off shall be banked with the Distribution Licensee.

20.3. The banking year shall be the financial year from April to March.

20.4. Banking of energy shall be permitted during all twelve months of the year:

Provided that the credit for banked energy shall not be permitted during the months of April, May, October and November, and the credit for energy banked in other months shall be as per the energy injected in the respective Time of Day (‘TOD’) slots determined by the Commission in its Orders determining the Tariffs of the Distribution Licensees; Provided further that the energy banked during peak TOD slots may also be drawn during off-peak TOD slots, but the energy banked during off- peak TOD slots may not be drawn during peak TOD slots.

Illustration: Energy banked during:

• Night off-peak TOD slot (2200 hrs – 0600 hrs) may only be drawn in the same TOD slot

• Off-peak TOD slot (0600 hrs – 0900 hrs & 1200 hrs – 1800 hrs) may be drawn in the same TOD slot and also during Night off-peak TOD slot (However, the energy banked during night off peak and off peak shall not be drawn during morning peak and evening peak)

• Morning peak TOD slot (0900 hrs – 1200 hrs) may be drawn in the same TOD slot and also during Off-peak and Night off-peak TOD slots

• Evening peak TOD slot (1800 hrs – 2200 hrs) may be drawn in the same TOD slot and also during Off-peak and Night off-peak TOD slots

20.5. Banking charges shall be adjusted in kind @ 2% of the energy banked.

20.6. The unutilised banked energy at the end of the financial year, limited to 10% of the actual total generation by such Renewable Energy generator in such financial year, shall be considered as deemed purchase by the Distribution Licensee at its Pooled Cost of Power Purchase for that year:

Provided that such deemed purchase shall not be counted towards the Renewable Purchase Obligation of the Distribution Licensee, and the Generating Station would be entitled to Renewable Energy Certificates to that extent.

…

29. Curtailment Priority Subject to the provisions of the State Grid Code, if it becomes necessary to curtail the Open Access of the Consumer, Generating Station or Licensee in the event of technical constraints in the operation of the State grid, the

MSLDC or the Distribution Licensee shall curtail the Open Access in the following order:

Curtailment order Type of Transaction First Short-term Open Access Second Medium-term Open Access Third Long-term Open Access Last Short-term, Medium-term or Long-term Open-Access of' Distribution Licensee, in this order.

Provided that, amongst Short-term Open Access transactions, the curtailment order as between bilateral transactions and collective transactions shall be as specified by the Central Commission.”

22. We find that the reliance placed by MSEDCL on Regulation 5.10.5 is misplaced. It can be seen that this Regulation forms part of Regulation 5.10, which deals with the treatment of infirm power. Regulation 5.10.1 clearly indicates that infirm power is the power generated during testing prior to the commercial operation or grant of open access of the generating station. When viewed in this context, it is clear that Regulation 5.10.5 only prohibits injection of infirm power without a proper agreement with the distribution licensee. In the case at hand, the wind generating stations were already under commercial operation and had been granted open access for a long time. Therefore, categorising the excess energy injected by the Appellant as infirm power is clearly incorrect.

23. Another Regulation relied upon by MSEDCL, namely Regulation 8.10, also deals with the situation prior to the grant of open access and, in effect, provides that open access shall be granted only if the resulting flow

can be accommodated. In the present case, open access had already been granted and was operational, but the energy injected was in excess of the permitted limit. We shall examine the consequences of such excess injection separately. However, Regulation 8.10 cannot be construed as a provision prohibiting excess injection after open access has already been granted.

24. On the other hand, Regulation 20 has definite applicability in the present case. Sub-Regulation 20.2 categorically provides that any excess injection from renewable generators shall be banked with the distribution licensee. The subsequent sub-Regulations of Regulation 20 deal in detail with the accounting of such banked energy, and sub-Regulation 20.6 specifically provides that unutilised banked energy at the end of the financial year, limited to 10% of the actual total generation by such Renewable Energy generator during such financial year, shall be considered as deemed purchase by the Distribution Licensee at its Pooled Cost of Power Purchase for that year. Therefore, in our opinion, MSEDCL was bound to treat the appropriate quantum of excess energy injected as deemed purchase in accordance with Regulation 20.6. MERC has, though, referred to this provision in the Impugned Order, but failed to direct MSEDCL to implement the same.

25. We do not find the contention of MSEDCL, or the finding of MERC with regard to maintenance of grid discipline to be appropriate. While there is no doubt that grid discipline is of utmost importance, the distribution licensee and/ or SLDC are fully empowered under the Grid Code to issue specific instructions for reduction of generation in the event of a

contingency, even where such injection is well within the contracted capacity. Regulation 29 of the DOA Regulations, 2016 also clearly provides for curtailment of a transaction during operation, subject to the provisions of the Grid Code. However, there is nothing on record to show that the excess energy injected by the Appellant’s generating plants over and above the contracted capacity was in violation of any specific instruction to restrict injection for maintaining grid security. Further, we note that the two orders referred to in the Impugned Order, namely, (i) MERC Order in Case No. 86 of 2016 and (ii) MERC Order in Case No. 120 of 2018, are dated 11.04.2018 and 25.07.2018, respectively, and were issued after the lapse of the period in controversy, i.e., 01.04.2016 to 31.03.2018. Therefore, MSEDCL and MERC obviously cannot rely upon any direction contained in those orders. Further, these orders were related to injection by a generator without any agreement, which is not the situation in the present case.

26. Most importantly, when the field was governed by Regulations having the force of law, an order cannot be relied upon to circumvent or override the provisions of such Regulations.

27. We note that the Appellants have relied upon the object of the Act to promote renewable energy and the MUST RUN status under the MERC (Terms & Conditions for Determination of Renewable Energy Tariff) Regulations, 2015 while seeking deemed sale to MSEDCL of the entire excess energy injected by their generating stations. To us, it appears that the provision for banking of energy and deemed purchase thereof, as it was prevailing then, was itself a promotional measure. However, where the

applicable Regulations specifically provide for the treatment of excess energy, such promotional measure cannot be extended beyond the treatment specifically prescribed therein. Further, since the Appellants were using open access for drawing power for their captive use and for third- party sale, the applicable regulatory framework is the DOA Regulations, 2016.

28. In view of the specific provision under the DOA Regulations, 2016, which came into effect from 01.04.2016, governing the treatment of excess energy, we do not consider it necessary to take into account the past practice of post facto approval by MSEDCL of sale of excess energy, as pointed out by the Appellant. For the same reason, neither the absence of consent nor the question whether MSEDCL was aware of the excess injection alters the applicability of the said regulatory provision and is, therefore, not material to the controversy.

29. Since we have concluded, for the reasons already elaborated, that the DOA Regulations, 2016 are applicable for the treatment of excess energy injected by the Appellants’ generating stations, we do not find it necessary to examine the aspect of undue enrichment under Section 70 of the Indian Contract Act.

ORDER

For the foregoing reasons as stated above, the captioned Appeal No. 294 of 2019 is allowed and the Impugned Order is set aside to the extent it disallows deemed purchase of entire excess energy injected by the wind generating stations of the Appellant.

Further, the matter is remanded to MERC to determine the amount payable by MSEDCL in respect of the appropriate quantum of excess energy, in accordance with the provisions of the DOA Regulations, 2016, along with the carrying cost thereon.

The Captioned Appeal and pending IAs, if any, are disposed of in the above terms.

PRONOUNCED IN THE OPEN COURT ON THIS 22nd DAY OF SEPTEMBER, 2026.

(Ajay Talegaonkar)

(Virender Bhat)

Technical Member (Electricity)

Judicial Member

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REPORTABLE / NON REPORTABLE

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