Talegaon Industrial Parks Pvt. Ltd. vs Central Electricity Regulatory Commission & Ors on 3 July 2026

JUDGMENT

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. In this Appeal, the Appellant has assailed the order dated 24.08.2015 passed by the Respondent No.1-Central Electricity Regulatory Commission (hereinafter referred to as “Commission”) in Petition No. 111/MP/2014 filed by the Appellant thereby dismissing the petition wherein the Appellant had sought stay on encashment/revocation

of application bank guarantee in the sum of Rs.1.5 Crore and Rs. 1 Crore furnished under the Long Term Access (LTA) granted to it for evacuation of power from its 2500 MW power project.

2. The facts and circumstances of the case stated briefly leading to filing of the instant Appeal are narrated hereunder:-

3. The Appellant is a developer of 2500 MW combined cycle power plant at village Navlakh Umbre, Yalegaon, Pune, Maharashtra. The Appellant applied for grant of connectivity on 13.1.2010 for an installed capacity of 2500 MW with the commissioning schedule progressively from April, 2012 to July, 2013. Central Transmission Utility of India Ltd. (in short “CTUIL”) carried out the system studies of the power system and decided the connectivity transmission system for evacuation of power from the generating station of the Appellant and circulated the same in the agenda for connectivity/long term access vide its letter dated 12.3.2010.

4. On 15.12.2010, the Appellant applied for long term access to CTUIL in accordance with the Connectivity Regulations for 1500 MW capacity from its proposed power plant with three target regions (Western Region-375 MW, Northern Region-375 MW, Eastern Region-750 MW) to be effective from December, 2014. The application was accompanied by a bank guarantee of Rs.1.5 crore with validity for one year from 15.12.2010 in addition to the application fee of Rs.9 lakh. The Appellant vide its application dated 28.2.2011 applied for another LTA for 1000 MW and furnished a Bank Guarantee of Rs.1 crore effective from 27.2.2012. The Appellant vide its letter

dated 28.2.2011 requested for revision of connectivity from 2500 MW to 2100 MW.

5. CTUIL carried out the system studies and evolved the transmission system for connectivity as well as transmission system strengthening for LTA and circulated the agenda vide letter dated 4.4.2011 for discussion in the meeting of Western Region Constituents. In the 14th meeting of Western Region Constituents regarding connectivity/open access application held on 13.5.2011, the Appellant’s applications for grant of connectivity and long term open access were considered. In the said meeting, the Appellant informed that it was reviewing the target beneficiaries/quantum of power in the LTA and requested CTUIL to put on hold its application for the time being and agreed to come back to CTUIL at the earliest.

6. The Appellant vide its letter dated 14.7.2011 again requested CTUIL to revise its connectivity from 2100 MW to 1110 MW. CTUIL in its letter dated 29.7.2011 advised the Appellant that on account of material charge in the quantum of power to be interchanged with ISTS, filing of fresh application would be required. On 18.8.2011, the Appellant applied for connectivity for 1137 MW. Further, the Appellant vide letter dated 20.9.2011 requested CTUIL to: (a) consider its LTA application dated 28.2.2011 for 1000 MW and connectivity application for 1137 MW in the meeting of the Western Region Constituents to be held on October, 2011; and (b) keep the LTA application dated 15.12.2010 on hold so as to be considered in the subsequent meeting of the Western Region Constituents. Keeping in view the request of the Appellant for revision of installed capacity for the purpose of connectivity and the LTA beneficiaries, CTUIL circulated the agenda

vide its letter dated 5.10.2011 for discussion in the meeting of the WR Constituents/Standing Committee meeting on power system planning proposed to be held on 21.10.2011 which included the request of the Appellant for grant of connectivity and long term access. In the 15th meeting of WR Constituents held on 21.10.2011 regarding connectivity/open access applications, the Appellant informed that environmental clearance has been granted for one unit of 379 MW but the letter regarding environmental clearance was awaited as the matter was sub-judice due to public interest litigation. It was decided in the meeting to grant connectivity and LTA for 379 MW keeping in view the progress of the generation project. Considering the desired date of connectivity as September 2013, the Appellant agreed to develop the connectivity transmission system including the bays at 400 kV Pune (AIS) and Pune (GIS) S/s. As regards the LTA, it was decided that the Appellant would sign the LTA Agreement/TSA with CTUIL for sharing of transmission charges corresponding to 379 MW (114 MW for SR and 265 MW for ER). Accordingly, CTUIL issued the intimation for connectivity and LTA to the Appellant.

7. The Appellant vide its letter dated 28.11.2011 has requested CTUIL to modify beneficiaries for full LTA quantum of 379 MW to ER since the Appellant had signed PPA with West Bengal. CTUIL vide its letter dated 30.1.2012 sought confirmation from the constituents of Western Region to the proposed modification. The Appellant vide its letter dated 6.2.2012 has confirmed its request for modification of beneficiary for full quantum of 379 MW to Eastern Region. The Appellant vide its letter dated 22.2.2012 also submitted to CTUIL the Connectivity Agreement in CON-4 duly filled in. Vide its letter dated 2.4.2012, CTUIL granted LTA for 379 MW to the Appellant for sale of

power in Eastern Region. Subsequently, CTUIL issued a revised LTA vide its letter dated 13.6.2013 for 379 MW to Eastern Region in line with the discussion held in the 17th Meeting of WR constituents regarding Connectivity and Open Access Applications held on 3.1.2013. The Appellant was required to enter into LTA Agreement with CTUIL within 30 days from the date of receipt of draft LTA Agreement. The Appellant vide letter dated 7.11.2013 requested for substitution of the existing bank guarantee of Rs.1 crore by a fresh bank guarantee of Rs.37.90 lakh in view of the reduced quantum of LTA granted to it. No action appears to have been taken by CTUIL on the request of the Appellant. Despite issue of reminders dated 11.11.2013 and 9.12.2013 by CTUIL, the Appellant has not signed the LTA Agreement.

8. The Appellant vide its letter dated 18.12.2013 intimated CTUIL that the Environment Clearance for Unit 1 for 379 MW dated 22.2.2012 has been quashed by the Bombay High Court. The Supreme Court directed the authorities to have a fresh look at the EIA report within a stipulated timeframe. The authorities required HPGCL to repeat the process which the Appellant undertook but the process could not be completed as the public hearing could not be held on account of agitation by local villagers and environmental NGOs. In the meantime, based on the report of Dr. K. Kasturirajan, Member (Science) Planning Commission, new or expansion project or activities related to thermal power plant development was prohibited in the Western Ghats where the project was to be located. The Appellant further intimated that WBSEDCL, the long term customer for Unit 1 has also terminated the PPA. The Appellant has further intimated that on account of developments beyond its control, the Appellant has decided to relocate its project from the existing location. The Appellant

requested CTUIL to refund its Application Bank Guarantee of Rs. 1.5 crore and Rs.1 crore as the LTAs have been frustrated and CTUIL has not incurred any expenditure towards any grid augmentation pursuant to the applications for LTA. The Appellant vide its letter dated 30.1.2014 reiterated its position with regard to non-signing of LTA Agreement and refund of Application Bank Guarantee.

9. Vide letter dated 22.04.2014, CTUIL rejected the request of the Appellant for refund of the application bank guarantee and called upon the Appellant to extend the bank guarantee that was to expire on 27.05.2014 failing which the same would be encashed as per the connectivity regulations. Accordingly, the bank guarantee was extended by the Appellant upto 27.08.2014.

10. However, feeling aggrieved by the rejection of its request by CTU, the Appellant approached the Commission vide Petition No. 111/MP/2014 with the following prayers:-

“(a) Direct the Respondent No. 1 and 2 to stay the encashment/invocation of the bank guarantee of the petitioner in view of frustration and impossibility of performance of the contract; (b) Grant ex-parte ad interim order staying the operation and effect of the letter dated 22.4.2014 addressed to the Respondent No. 2 and direct the Respondent Nos. 1 & 2 to stay the encashment/invocation of the bank guarantee of the petitioner in view of frustration and impossibility of performance of the contract; and

(c ) Pass any other order or orders in light of the facts and submissions made herein above which this Hon`ble Commission deems fit and appropriate in favour of the petitioner and against the respondents.”

11. The Petition has been dismissed by the Commission vide order dated 24.08.2015 which has been impugned in this Appeal. The relevant portion of the impugned order which embodies the reasoning of the Commission in rejecting the prayers of the Appellant is extracted herein below:- “It is therefore evident from the above that CTU has granted LTA for 379 MW in due consideration of the request of the petitioner. The LTA application for balance capacity of 2121 MW has been put on hold on the request of the petitioner. The petitioner is now pleading that execution of the project has become impossibility and has accordingly sought refund of bank guarantee. The request of the petitioner amounts to withdrawal of its applications for LTA. The question therefore arises as to whether the alleged impossibility of performance furnishes a good ground to the petitioner to contend that the Bank Guarantee ought not to been cashed. The Connectivity Regulations do not anywhere state that if the applicant is able to prove the existence of any circumstances beyond its control or existence of any force majeure conditions, which prevented it from performing the contract, its bank guarantee should not be encashed. The Connectivity Regulations do not prohibit the applicant to withdraw its LTA application. The Connectivity Regulations and the Detailed Procedure provide that if an applicant withdraws its application or does not sign the LTA Agreement, then its bank guarantee shall be encashed by CTU.

The rationale for encashment of bank guarantee has been explained in the Statement of Reasons to the Connectivity Regulations as under:

“68. We are of the view that furnishing of Bank Guarantee is required to bring seriousness to the applications made by the applicants. However, a provision has been made requiring the bank guarantee to stand discharged with the submission of bank guarantee required to be given by the applicant to the Central Transmission Utility during the construction phase when augmentation of transmission system is required, in accordance with the provisions in the detailed procedure. Furthermore, the amount of Bank Guarantee has been reduced from the originally proposed `1 lakh per MW to `10, 000 per MW.

69. It has been requested by MSEDCL that in the detailed procedure to be laid down by the nodal agency, the applicant may be allowed a time limit within which he may withdraw the application, when the Bank Guarantee will be returned to the applicants.

70. We are not in agreement with the suggestion made. In fact, the revised regulation specifies that the bank guarantee may be encashed by the nodal agency, if the application is withdrawn by the applicant or the long term access rights are relinquished prior to operationalization of such rights when augmentation of transmission system is not required.”

Therefore, the provision of bank guarantee has been made to ensure seriousness among the LTA applicants. In this connection, observations of the Appellate Tribunal for Electricity in Appeal No. 197 of 2014 (Jayaswal Neco Urja Limited Vs Power Grid Corporation of India Ltd. & Another) are relevant which are extracted as under:

“32. ………..The purpose behind the requirement of furnishing Bank Guarantee and the provisions for its encashment if the LTAA is not signed is to ensure commitment of the project developer to use the transmission line for which LTA has been sought. It gives assurance to Respondent No.1 that the transmission line would not be stranded after it is built. If the LTA applicants are allowed to withdraw the LTA applications without any deterrent like encashment of Bank Guarantee, then the purpose behind the scheme of grant of LTOA will be frustrated. We, therefore, find encashment of the Appellant’s Bank Guarantee to be perfectly legal.”

21. The petitioner has vehemently argued that since execution of the project has become impossibility, the contract has been frustrated. This argument cannot be accepted as the CTU has in no way contributed to the impossibility of performance of contract. This issue has also been dealt with by Appellate Tribunal in Appeal No. 197 of 2014 as under:

“33. Assuming that the Appellant’s contention about the existence of force majeure conditions is correct, so long

as Respondent No.1 by its acts of omission or commission has not contributed to the Appellant’s being unable to commence operation of its power plant, Respondent No.1 cannot be held responsible for it and encashment of Bank Guarantee cannot be faulted on that count.”

In view of the above finding of the Appellate Tribunal, it can be said that since CTU by its acts of commission or omission has not contributed to the abandonment of the project by the petitioner, CTU cannot be held responsible for it and no direction can be issued prohibiting CTU to encash the bank guarantee.

22. In view of the above discussion, we reject the prayer of the petitioner and accordingly, the petition is dismissed.”

12. Thus, the Commission has held that as per the Central Electricity Regulatory Commission (Grant of Connectivity, Long-term Access and Medium-term Open Access in inter-State Transmission and related matters) Regulations, 2009 (hereinafter referred to as “Connectivity Regulations, 2009”), the long term access applicant being affected by force majeure or reasons beyond its control cannot be a ground for non- signing of Long Term Access Agreement and failure to sign the LTA Agreement within the stipulated period, necessarily result in encashment of bank guarantee submitted along with LTA application.

13. We have heard Shri Sanjeev Puri, Learned Senior Counsel for the Appellant, Mr. Sitesh Mukherjee, Learned Senior Counsel for the Respondent No.4 and Mr. Shubham Arya, Learned Counsel for the Respondent No.2. We have also perused the written submissions filed by the Appellant and Respondent No.4.

14. The Appellant is assailing the impugned findings of the Commission primarily on the following two grounds; (i) There has been no invocation of application bank guarantee by the CTUIL which must necessarily precede before the encashment and as such the encashment of the bank guarantee is illegal in the eyes of law; and (ii) no loss has been suffered by the CTUIL on account of LTA granted to the Appellant since the said LTA has been without any system augmentation and in so far as the application for grant of 1000 MW LTA is concerned the Appellant has been granted LTA for only 379 MW. However, the bank guarantee of entire Rs.1 Crore has been invoked instead of Rs. 37.9 lakhs corresponding with the LTA quantum of 379 MW.

Our analysis:

15. We have already noted that in the impugned order, the Commission has proceeded on the assumption that the provisions of the Connectivity Regulations, 2009 and Detailed Procedure provide that failure to sign LTA Agreement within the stipulated period will necessarily result in encashment of Application Bank Guarantee whether or not the said failure on the part of the LTA Applicant was occasioned by any event beyond its control. In view of the said reasons given by the Commission in the impugned order for rejecting the prayers of the Appellant, primary thrust of this Appeal would be with regards to the interpretation of the Regulation 12 of the Connectivity Regulations, 2009 issued by the Commission.

16. We may also note that this Tribunal was confronted with the interpretation of the said Regulation 12 of the Connectivity Regulations, 2009 in Appeal No. 99 of 2017 titled Chettinad Power Corporation Private Ltd. Vs. Power Grid Corporation of India Limited & Ors. decided on

11.09.2025 wherein this Tribunal held that Regulation 12(5) of the Connectivity Regulations, 2009 is only directory or discretionary and it is not mandatory for the nodal agency i.e. CTUIL to encash the Bank Guarantee furnished along with the LTA application in case of default and decision in this regard shall have to be taken by the CTUIL upon considering all the relevant facts and circumstances which may have prevented the LTA Applicant from complying with the conditions upon which the LTA has been granted. We find it pertinent to extract the relevant paragraphs of the said judgment: - “13. In view of the factual matrix involved in this case and the reasons given by the Commission in the impugned order for rejecting the petition of the Appellant, the scope of this appeal is limited to the interpretation of Regulation 12 of the Connectivity Regulations, 2009 issued by the Commission. For the sake of convenience, we reproduce herein after the said Regulation 12 of the Connectivity Regulations, 2009 :- “12. Application for long-term access

The application for grant of long-term access shall contain details such as name of the entity or entities to whom electricity is proposed to be supplied or from whom electricity is proposed to be procured along with the quantum of power and such other details as may be laid down by the Central Transmission Utility in the detailed procedure:

Provided that in the case where augmentation of transmission system is required for granting open access, if the quantum of power has not been firmed up in respect

of the person to whom electricity is to be supplied or the source from which electricity is to be procured, the applicant shall indicate the quantum of power along with name of the region(s) in which this electricity is proposed to be interchanged using the inter- State Transmission system; Provided further that in case augmentation of transmission system is required, the applicant shall have to bear the transmission charges for the same as per these regulations, even if the source of supply or off-take is not identified; Provided also that the construction of such augmentation of the transmission system may be taken up by the CTU or the transmission licensee in phases corresponding to the capacity which is likely to be commissioned in a given time frame after ensuring that the generating company has released the advance for the main plant packages i.e. Turbine island and steam generator island or the EPC contract in case of thermal generating station and major civil work packages or the EPC contract in case of hydro generating stations for the corresponding capacity of the phase or the phases to be commissioned, subject to a minimum of 10% of the sum of such contract values:

Provided that a generating company after firming up the beneficiaries through signing of long term Power Purchase

Agreement(s) shall be required to notify the same to the nodal agency along with the copy of the PPA:

Provided also that in cases where there is any material change in location of the applicant or change by more than 100 MW in the quantum of power to be interchanged using the inter-State Transmission system or change in the region from which electricity is to be procured or to which supplied, a fresh application shall be made, which shall be considered in accordance with these regulations.

The applicant shall submit any other information sought by the nodal agency including the basis for assessment of power to be interchanged using the inter- State Transmission system and power to be transmitted to or from various entities or regions to enable the nodal agency to plan the inter-State transmission system in a holistic manner.

The application shall be accompanied by a bank guarantee of Rs 10,000/- (ten thousand) per MW of the total power to be transmitted. The bank guarantee shall be in favour of the nodal agency, in the manner laid down under the detailed procedure.

The bank guarantee of Rs. 10,000 /- (ten thousand) per MW shall be kept valid and subsisting till the execution of the long-term access agreement, in the case when augmentation of transmission system is required, and till

A.No. 300 of 2015 Page 16 of 30

operationalization of long-term access when augmentation of transmission system is not required.

The bank guarantee may be encashed by the nodal agency, if the application is withdrawn by the applicant or the long-term access rights are relinquished prior to the operationalization of such rights when augmentation of transmission system is not required.

The aforesaid bank guarantee will stand discharged with the submission of bank guarantee required to be given by the applicant to the Central Transmission Utility during construction phase when augmentation of transmission system is required, in accordance with the provisions in the detailed procedure. (Emphasis supplied)

14. Perusal of the said Regulation would reveal that application for Long-Term Access (LTA) has to be submitted containing all such details as provided in the Detailed Procedure issued under Regulation 27 of the connectivity Regulations. The application shall be accompanied by a Bank Guarantee in the sum of Rs.10,000 per MW of the total power to be transmitted in favour of the nodal agency, in the manner laid down under the Detailed Procedure. If as a result of system studies, it is found that no further augmentation of the transmission system is required, the application will be required to sign the LTA agreement and the Bank Guarantee already submitted will remain valid till the operationalization of the LTA. If it is found that the augmentation

of the transmission system is required, the Appellant will be required to enter into the LTA agreement and submit a fresh Bank Guarantee for construction period calculated as per Detailed Procedure and the Bank Guarantee given earlier along with LTA application shall stand discharged. We may here note clause 24 of the Detailed Procedure laid down by the Commission providing timeline for entering into LTA agreement :- “24. Processing of Applications

ii) Where system strengthening is involved

(ii) The nodal agency shall intimate grant of long term access on format [FORMAT LTA- 5] indicating identified system strengthening with direction to the applicant to enter into Long term access agreement, Bulk Power Transmission Agreement (BPTA) with CTU within thirty days.”

15. Accordingly, in view of the provisions of the Connectivity Regulations and Detailed Procedure, the application who has been granted long-term access is required to sign LTA agreement, with the nodal agency i.e. CTUIL or any other inter State Transmission Licensee, if involved, within a period of 30 days from the date of grant of LTA. Where system strengthening is involved, the applicant shall be required to submit a fresh Bank Guarantee and the Bank Guarantee earlier submitted along with LTA application shall stand discharged.

16. Regulation 12(5) of the Connectivity Regulations, 2009, envisages that the Bank Guarantee submitted along with LTA application may be encashed by the nodal agency, if the

application is withdrawn by the applicant or the long-term access rights are relinquished prior to the operationalization of such rights when augmentation of transmission system is not required.

17. Clause 23(5) of the Detailed Procedure also assumes importance on this aspect which provides that bank guarantee may be encashed by the nodal agency: (i) if the application is withdrawn by the applicant; or (ii) if the long-term access rights are relinquished prior to the operationalization of such long-term access when augmentation of transmission system is not required; or (iii) If the applicant fails to sign the Long Term Access Agreement with CTU or a tripartite agreement with CTU and transmission licensee, as the case may be, and fails to furnish appropriate BG for construction phase, within stipulated time as indicated in the intimation letter; (iv) if the applicant fails to revalidate the earlier furnished BG at least 30 days prior to its expiry; and (v) If the applicant fails to firm up beneficiaries in terms of clause 22.7, 3 years prior to intended date of Long Term Access.

18. Thus, upon conjoint reading of Regulation 12(5) of Connectivity Regulations, 2009 and Clause 23(5) of the Detailed Procedure, following are the valid grounds for the nodal agency i.e. CTUIL for encashing the Bank Guarantee submitted along with the LTA application;

a) Withdrawal of LTA application;

b) Relinquishment of LTA rights prior to the operationalization of such rights. When augmentation of transmission system is not required;

c) Not signing of LTA agreement within stipulated period of 30 days from the date of grant of LTA.

d) Failure to furnish Bank Guarantee for construction phase.

19. The power/authority to encash the Bank Guarantee of LTA applicant has been given to the nodal agency under Regulation 12(5) of the Connectivity Regulations, 2009, which has already been quoted herein above. We may emphasize here that the word used in the said Regulation is “May”.

20. The issue which arise for consideration is whether the Bank Guarantee of LTA applicant is to be necessarily encashed by the nodal agency i.e. CTUIL on the basis of any of the grounds existing in a particular case, as noted herein above, or the nodal agency is required to exercise its discretion in doing so on case to case basis in view of the facts and circumstances involved in a particular case. In other words, the issue to be decided would be whether the word “May” used in Regulation 12(5) is merely directory in nature or has a mandatory force.

21. According to the Commission, as held in the impugned order, the said Regulation 12(5) is mandatory in nature and the expression “May” has to be read as “Shall”.

22. According to the Appellant, the Commission has proceeded on an erroneous interpretation of Regulation 12(5) for the reasons that the purpose of requirement of Bank Guarantee along with the LTA application is only to provide a security to CTUIL against any potential damage and is not meant as a measure of liquidity damages or penalty. Reliance placed upon decision of Delhi High Court in NSL Nagapatnam Infrastructure Pvt. Ltd. Vs. Central Electricity Regulation Commission and Ors., W.P.(C) 6791 of 2017, decided on November 24, 2022. It is further argued that the CTUIL was not entitled to encash the Appellant’s Bank Guarantee in the absence of a provision for liquidated damages as well as in the absence of any proof of loss or damages suffered by it on

account of delay on the part of the Appellant in executing the LTA agreement.

23. On behalf of the 3rd Respondent – CTUIL, it is argued that as per settled law of statutory interpretation, the word “May” and “Shall” can be used interchangeably depending upon the context. It is argued that a plain reading of the said Regulation 12 would make it abundantly clear that only discretion which the nodal agency is required to exercise is to satisfy itself about the occurrence of either of the two events namely (a) withdrawal of application by the applicant or (b) the LTA has been relinquished prior to the operationalization of such rights when augmentation of transmission system is not required. Reliance is placed upon judgement of the Hon’ble Supreme Court in Smt. Bachahan Devi and Anr. vs. Nagar Nigam, Gorakhpur and Anr. AIR 2008 SC 1282 and judgment of this Tribunal in Appeal No. 197 of 2014 Jayaswal Neco Urja Limited Vs. PGCIL and Anr. decided on 15th April, 2015.

24. We have given thoughtful consideration to the detailed rival submissions made by the Learned Counsels and have also gone through the Written Submission filed by them. The judgements cited by the Learned Counsels in support of their arguments have also been perused. Our Analysis :

25. At the outset like to refer to what the Hon’ble Supreme Court has observed/held on the aspect of interpretation of words “May” and “Shall” used in a statute in Bachahan Devi’s case. The same are quoted herein below : - "31. It is well-settled that the use of word 'may' in a statutory provision would not by itself show that the provision is directory in nature. In some cases, the legislature may use

the word 'may' as a matter of pure conventional courtesy and yet intend a mandatory force. In order, therefore, to interpret the legal import of the word may', the court has to consider various factors, namely, the object and the scheme of the Act, the context and the background against which the words have been used, the purpose and the advantages sought to be achieved by the use of this word, and the like. It is equally well-settled that where the word 'may' involves a discretion coupled with an obligation or where it confers a positive benefit to a general class of subjects in a utility Act, or where the court advances a remedy and suppresses the mischief, or where giving the words directory significance would defeat the very object of the Act, the word 'may' should be interpreted to convey a mandatory force. As a general rule, the word 'may' is permissive and operative to confer discretion and especially so, where it is used in juxtaposition to the word 'shall', which ordinarily is imperative as it imposes a duty. Cases however, are not wanting where the words 'may 'shall', and 'must' are used interchangeably. In order to find out whether these words are being used in a directory or in a mandatory sense, the intent of the legislature should be looked into along with the pertinent circumstances. The distinction of mandatory compliance or directory effect of the language depends upon the language couched in the statute under consideration and its object, purpose and effect. The on conferment of power. Depending upon the context, 'may' does not always mean may. 'May' is a must for enabling compliance of provision but there are cases in which, for

various reasons, as soon as a person who is within the statute is entrusted with the power, it becomes his duty to exercise that power, Where the language of statute creates a duty, the special remedy is prescribed for non- performance of the duty.

32. If it appears to be the settled intention of the legislature to convey the sense of compulsion, as where an obligation is created, the use of the word 'may' will not prevent the court from giving it the effect of Compulsion or obligation. Where the statute was passed purely in public interest and that rights of private citizens have been considerably modified and curtailed in the interests of the general development of an area or in the interests or removal of slums and unsanitary areas. Though the power is conferred upon the statutory body by the use of the word 'may that power must be construed as a statutory duty. Conversely, the use of the term 'shall' may indicate the use in optional or permissive sense. Although in general sense 'may' is enabling or discretional and shall' is obligatory, the connotation is not inelastic and inviolate." Where to interpret the word 'may' as directory would render the very object of the Act as nugatory, the word 'may' must mean 'shall."

26. Thus generally the word “May” is permissive or directory in nature and confers discretion whereas the word “shall” is imperative in nature as it imposes a duty. However, there may be cases where the word “May” used in a Statute or Regulation ought to be interpreted to convey a mandatory force. In order to

ascertain that a word “May” used in a Statute or a Regulation is directory, merely conferring discretion or conveys a mandatory force, the Court or Tribunal must consider :-

a) The object and scheme of the Act/Regulations;

b) The context and the background in which the word has been used;

c) The purpose and the advantages sought to be achieved by the use of word;

d) Whether giving the word directory significance would render the very object of the Acts/Regulations as nugatory; and

e) The intent of the legislature along with the relevant circumstances.

27. Here we are concerned with the interpretation of the word “May” used in Regulation 12(5) of the Connectivity Regulations, 2009 which is reproduced here at the cost of repetition:- “(5) The bank guarantee may be encashed by the nodal agency, if the application is withdrawn by the applicant or the long-term access rights are relinquished prior to the operationalization of such rights when augmentation of transmission system is not required.”

28. In order to find out whether the word “May” has been used in a directory sense or in a mandatory sense in the said Regulation 12(5), we need to refer to the Statement of reasons to the Connectivity Regulations, 2009, in which it is found. The same reads as under :- “68. We are of the view that furnishing of Bank Guarantee is required to bring seriousness to the applications made by applicants. However, a provision has been made requiring

the bank guarantee to stand discharged with the submission of bank guarantee required to be given by the applicant to the Central Transmission Utility during construction phase when augmentation of transmission system is required, in accordance with the provisions in the Detailed Procedure. Furthermore, the amount of Bank Guarantee has been reduced from the originally proposed Rs. 1 lakh per MW to Rs. 10,000 per MW.”

29. It is limpid from these statement of reasons that the only object/purpose of requiring and LTA applicant to annex the Bank Guarantee of requisite amount along with LTA application is to bring seriousness to the application made by the applicants.

30. The Bank Guarantee so annexed to the LTA application would automatically stand discharged upon submission of another Bank Guarantee required to be given by the applicant to the CTUIL during construction phase when augmentation of transmission system is required. We may also note that in the draft Regulations, the Commission had proposed a Bank Guarantee of Rs.1,00,000/- per MW which was later on reduced to Rs.10,000/- per MW.

31. This would definitely indicate that the encashment of Bank Guarantee furnished along with LTA application is at the discretion of the nodal agency i.e. CTUIL and the Regulation 12(5) of the Connectivity Regulations cannot be construed to make it mandatory or necessary for the CTUIL to encash the Bank Guarantee in all cases where the LTA applicant does not execute the LTA agreement within a stipulated period of 30 days from the date of grant of LTA. The purpose of requiring an LTA applicant to

furnish Bank Guarantee along with LTA application manifestly appears to be only to ensure that serious applicants alone apply for LTA and do not submit such application for mere fancy.

32. We may note here that even the maker of the Connectivity Regulations, 2009 i.e. the Commission itself has conveyed to the Delhi High Court in W.P.(C) 6791 of 2017 that Commission’s intention was never that Regulation 12(5) be read as mandatory requiring encashment of Bank Guarantee in all cases. This is evident from the following portion of the judgement dated 24th November, 2022 passed by the High Court in the said writ petition:- “10. Mr T.V.S. Raghvendra Sreyas, learned counsel appearing for CERC, submits that present petition is not maintainable. He also submits that the word “may” is used in Regulation 12(5) of the Connectivity Regulations as encashment of the bank guarantees furnished along with the application for LTA is at the discretion of CTU. He submits that Regulation 12(5) of the Connectivity Regulations cannot be read as mandatory and necessarily requiring the CTU to encash the bank guarantee in all cases where the application does not proceed to the construction phase or result in grant of LTA.

11. He referred to the Statement of Reasons for framing the Connectivity Regulations and drew the attention of this Court to paragraph 68 of the said Statement of Reasons, which reads as under: “68. We are of the view that furnishing of Bank Guarantee is required to bring seriousness to the applications made by applicants. However, a

provision has been made requiring the bank guarantee to stand discharged with the submission of bank guarantee required to be given by the applicant to the Central Transmission Utility during construction phase when augmentation of transmission system is required, in accordance with the provisions in the detailed procedure. Furthermore, the amount of Bank Guarantee has been reduced from the originally proposed Rs. 1 lakh per MW to Rs. 10,000 per MW.”

12. He contended that it was never the intention of CERC that the Regulation 12(5) of the Connectivity Regulations be read as necessarily requiring encashment of bank guarantee in all cases. He emphasized that the purpose was to ensure that only serious applicants apply for LTA and do not move the application at a premature stage.”

33. In the said Writ Petition also, the High Court was called upon to interpret Regulation 12(5) of Connectivity Regulations, 2009 and upon consideration of all the relevant aspects, the High Court has held as under:- “15. We are of the view that Regulation 12(3) – which, it is important to note, has not been impugned by the petitioner – requiring furnishing of the bank guarantee in the sum of ₹10,000/- per MW, cannot be considered as a penal provision. The requirement of furnishing the bank guarantee may also be considered as a regulatory measure. Concededly, CERC has the power to impose a regulatory fee. The fact that the bank guarantee is discharged in terms of Regulation 12(6) of the Connectivity Regulations, with the CTU undertaking the construction phase, indicates that the

said security dovetails into a higher security – bank guarantee in the sum of ₹5,00,000/- per MW – which is furnished at that stage. There is no dispute that thereafter, if there is any failure on the part of the applicant to proceed further, the requisite compensatory payment is required to be made and recovered from the bank guarantee.

16. Having stated the above, there is much merit in the contention that Regulation 12(5) of the Connectivity Regulations cannot be read to mean that the CTU must necessarily, in all cases, encash the bank guarantee where the applicant does withdraw the application or relinquishes his rights prior to operationalization.

17. The word “may” can never be read as “must” (see Nicholas v. Baker: 59 LJ Ch 661). In certain circumstances, the use of the word “may”, in a statutory provision, indicates an enabling power that is coupled with a duty to exercise the same. In such cases, use of the word “may” would not change the mandatory character of the said provision. However, in this case, requirement of furnishing a bank guarantee is to screen the applicants to ensure that only serious applicants apply. To that extent, it is meant to regulate the applicants.

18. In the aforesaid context, it is difficult to accept that there is a necessary requirement for the CTU to encash the bank guarantee in all cases. The question, whether a bank guarantee is required to be encashed, would have to be determined by the CTU, keeping in mind the facts of each case. There may be cases of genuine hardship where an applicant, who has already committed sufficient resources,

is unable to proceed further. It would be erroneous to accept that in such cases, the encashment of the bank guarantee is required to serve as a further deterrent.”

34. We find ourselves in total agreement with the decision of the High Court in the said Writ Petition. It is amply clear that the only purpose requiring the Bank Guarantee to be submitted along with the LTA application is to have an overview of the applicants and to screen the applicants to ensure that only serious applicants apply. At best, the requirement for furnishing Bank Guarantee along with application may be considered as a regulatory measure. The fact that the Bank Guarantee submitted along with LTA application gets automatically discharged upon submission of fresh Bank Guarantee by the LTA applicant for construction period as per the Detailed Procedure, also indicates that the object of the initial Bank Guarantee submitted along with the LTA application is merely to demonstrate the seriousness of the LTA applicant and nothing more and hence its encashment by the CTUIL is not necessary or mandatory merely for the reason that the LTA applicant fails to sign the LTA agreement within the stipulated period.

35. Hence, we are of the firm opinion that the word “May” used in Regulation 12(5) of Connectivity Regulations does not convey any mandatory force and the said Regulation cannot be read to mean that CTUIL must necessarily encash the Bank Guarantee in all cases where the applicant withdraws the LTA application or relinquishes its LTA rights prior to operationalization or fails to sign LTA agreement within the stipulated period. Whether the Bank Guarantee submitted along with LTA application is required to be encashed or not would depend upon the facts and circumstances

of each case and shall have to be determined by the CTUIL having regard to all those facts and circumstances. There may be cases where the applicant, who has been granted LTA, is prevented from executing the LTA agreement within the stipulated period by some genuine hardship or by the reasons beyond its control. Serious mis-carriage of justice would entail if Regulation 12(5) is termed as mandatory in nature requiring encashment of Bank Guarantee in those cases also.

36. Accordingly, the impugned order of the Commission can not be sustained. Same is hereby set aside. Appeal stands allowed.

37. We hold and declare that Regulation 12(5) of the Connectivity Regulations, 2009 is only directory or discretionary and it is not mandatory for the nodal agency i.e. CTUIL to encash the Bank Guarantee furnished along with LTA application in every case of default. Decision in this regard shall have to be taken by the CTUIL upon considering all the relevant facts and circumstances which may have prevented the LTA applicant from complying with the conditions upon which LTA has been granted.”

17. It is manifest that in view of the factual matrix involved in the instant Appeal, the law laid down by this Tribunal in the aforementioned judgment is squarely applicable to the instant Appeal also and the claims of the Appellant ought to be decided in the light of what has been observed in the aforesaid judgment. Therefore, the matter at hand also needs to be remanded back to the Commission for fresh consideration in order to determine whether the CTUIL was justified in encashing the Bank Guarantee of the Appellant and pass a fresh order accordingly.

18. In so far as the contention of the Appellant that there has been no invocation of the Application Bank Guarantee by CTUIL which must necessarily precede before the encashment, is concerned we refrain from giving any finding on the same for the reasons that we are remanding the matter back to the Commission for fresh consideration. Therefore, the Appellant is at liberty to raise this contention also before the Commission during the re-hearing of its petition upon remand.

Conclusion:

19. Accordingly, we hereby set aside the impugned order of the Commission and remand the matter back to the Commission with the directions to conduct a fresh hearing in order to determine whether the CTUIL was justified in encashing the Bank Guarantee of the Appellant in this case and pass a fresh consequential order in this regard within two months from the receipt of the judgment. We make it clear that all other contentions raised by the Appellant in this Appeal are also left open to be raised before the Commission during the re-hearing of the petition.

20. The Appeal stands disposed of in these terms.

Pronounced in the open court on this the 3rd day of July, 2026.

Virender Bhat Judicial Member

Seema Gupta Officiating Chairperson mk