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JSA successfully represented T.P. Kirnali Limited (a group company of Tata Power) before Maharashtra Electricity Regulatory Commission, in obtaining Change in Law compensation due to increase in rate of GST and Basic Customs Duty

By an Order dated 21.05.2024, Hon’ble Maharashtra Electricity Regulatory Commission (“MERC”) held that T.P Kirnali Limited was impacted due to increase in rate of Goods and Services Tax and Basic Customs Duty and is accordingly entitled for a total compensation of Rs. 15.48 Crores along with Carrying Cost. MERC has further held that:

Any Change in Law relief would be governed by provisions of the PPA and is to be decided by MERC. A developer’s undertaking to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date (“SCOD”), pursuant to MNRE Office Memorandums dated 12.05.2021 and 29.06.2021, cannot be held against the developer. MNRE in its subsequent Office Memorandums dated 15.09.2021 and 03.11.2021 has clarified that such undertaking is limited to developer not claiming termination of PPA or increase in project cost for reasons other than Change in Law for the period of extension granted. [Para 17-17.5 @ Pg. 18-20]
Invoices towards supply of service raised post commissioning of project are also eligible for Change in Law relief, provided such invoice are raised within 30 days from the date of supply of such service. [Para 19-19.5 @ Pgs. 21-22]
MSEDCL’s claim of Safeguard Duty cannot be allowed since the developer has not financially gained due to non-levy of Safeguard Duty. Notification No. 1 of 2018 dated 30.07.2018 clearly provided that there would be no Safeguard Duty after 29.07.2020. In the present case, commissioning of the Project would have been beyond 29.07.2020, for which no Safeguard Duty was applicable. This was factored into the bid accordingly. [Para 20.3 @ Pg. 23]
Carrying cost is allowed at the rate of 1.25% plus SBI MCLR per annum on the compensation amount from the date of payment till date of Order. [Para 22.5 @ Pg. 26]
MSEDCL to choose between payment of compensation on lumpsum or per unit basis. This decision is to be communicated to the developer within a month of the Order. [Para 23-24 @ Pgs. 26-27]

MERC in a progressive Order rightly followed settled jurisprudence on Change in Law compensation by granting relief for impact on account of increase in GST and BCD. It disregarded extraneous submissions of MSEDCL to restrict compensation due to the developer. T.P. Kirnali’s undertaking dated 09.09.2021 to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date, was also rightly not held against its claim of Change in Law, since such undertaking only came in context of specific MNRE Office Memorandums. The undertakings required by these Office Memorandums have later been clarified to not be in context of Change in Law. In a progressive measure, MSEDCL has been afforded the opportunity at the outset to elect between lumpsum payment or a staggered payout should MSEDCL choose to save on carrying cost.

T.P. Kirnali Limited was advised and represented by JSA team consisting of Partner – Kunal Kaul and Senior Associate Samikrith Rao. The matter was argued by Mr. Kunal Kaul.

Our Disputes Team Comprised Partner – Kunal Kaul, Senior Associate – Samikrith Rao

Tags JSA, Leading Law Firm, Leading Lawyers, Maharashtra Electricity Regulatory Commission

JSA represented CPIPL against an application for rejection of its suit for non-compliance with pre-suit mediation provisions under the Commercial Courts Act, 2015

JSA represented Chemco Plastic Industries Private Limited (CPIPL / the Plaintiff) against an application for rejection of its suit for non- compliance with pre-suit mediation provisions under the Commercial Courts Act, 2015.

By an order dated 10 June 2024 (“Order”), a single judge of the Bombay High Court dismissed an application filed under Order VII Rule 11 of the Code of Civil Procedure, 1908 (“Application”) seeking rejection of a Commercial IP Suit for infringement of trademark (“Suit”) on the ground that Chemco Plastic Industries Private Limited had failed to comply with the mandatory provisions of Section 12-A of the Commercial Courts Act, 2015 (“Act”).

The Bombay High Court thus delivered its first decision on the interplay between seeking urgent interim relief in IPR matters and the applicability of Section 12-A of the Act.

The Plaintiff had filed the Suit for an injunction restraining M/s. Chemco Plast (“Defendant”) from infringing its registered trademark. The Defendant filed the Application inter alia contending that the Suit cannot contemplate any urgent interim relief as the Suit has been filed 8 years after the Plaintiff became aware of the cause of action. The Plaintiff also contended that – (i) the Plaint did in fact contemplate urgent interim relief; (ii) the question of alleged delay is of no relevance as any enquiry in that regard would require the court to go into the merits of the case, which could not be done at this stage; and (iii) in IPR matters the rights of consumers are relevant and the urgency is in the context of protecting the public at large from confusion likely to be created by the impugned mark.

The Hon’ble Court agreed with the contentions of the Plaintiff and dismissed the Application holding that –

While considering whether a plaint deserves to be rejected for non-compliance with Section 12-A of the Act, the court necessarily undertakes a limited exercise to appreciate the plaint, documents, and facts to assess whether the plaint “contemplates” urgent interim relief.
The court is not expected to enter into the merits of the matter and therefore shall not enquire into any delay in filing a suit. Delay and its effect on entitlement for interim relief are not relevant for the limited enquiry of finding as to whether on the basis of the material on record, the plaintiff can contemplate urgent interim relief.
In cases pertaining to IPR infringement, the cause of action arises on each occasion that the impugned mark is used by the defendant.
The Plaintiff in the present case has contemplated urgent interim relief while filing the Suit and the same cannot be rejected as being barred by Section 12-A of the Act.

Our Disputes Team Comprised Lead Partner – Farhad Sorabjee, Partner – Pratik Pawar, Principal Associate – Siddhesh Pradhan, and Associate – Meher Mistri

Tags Chemco Plastic, JSA, Leading Law Firm, Leading Lawyers

Hon’ble High Court of Uttarakhand allows Industries Association of Uttarakhand to make payment of 50% of the enhanced Minimum Wages during the pendency of the Writ Petition

JSA represented Industries Association of Uttarakhand (“IAU”) in a Writ Petition filed challenging the vires of twenty-four (24) Notifications dated 15.03.2024 (“Impugned Notifications”) issued by the Government of Uttarakhand revising the rates of minimum wages for fifty-seven (57) scheduled employments in the State of Uttarakhand.

IAU is an association having membership of over 700 industrial units across six (6) districts in Uttarakhand. It was IAU’s case that:

Impugned Notifications were issued post haste, contrary to the statutory regime (Section 5, 7 and 9 of the Minimum Wages Act, 1948) governing how revisions can be legally implemented and without complying with statutorily imposed minimum notice with agenda to Advisory Committee and Board (Rule 12 of the UP Minimum Wages Rules, 1952).
Process followed was a premeditated decision enforced through a sham meeting making a mockery of legislative intent behind the notice and agenda and consultation of stakeholders prescribed by law.
In the meeting convened to welcome members without agenda, allegedly full evaluation of data, including inflationary impact on minimum wages and comparative assessment with other states, was completed and hustled though an overnight Advisory Committee meeting on 11.03.2024 and Advisory Board meeting on 12.03.2024.
Constitution of Advisory Committee and Advisory Board was flawed as there was no equal representation of the employers and employees.
Impugned Notifications are fundamentally flawed and destructive of the legislative intent that revision of minimum wages must be done after due consultation and consideration of representatives of the employers and employees. No enquiry or investigation or due consideration of relevant material was reflected from records of Advisory Committee and the Advisory Board and the GoU.

The Hon’ble High Court of Uttarakhand by Order dated 11.06.2024 while issuing Notice in the Writ Petition was pleased to allow IAU to make payment of 50% of the enhanced Minimum Wages during the pendency of the Writ Petiiton. The order protects the Association and its members from any coercive actions by the Government of Uttarakhand, subject to them making payment of the 50% of the enhanced Minimum Wages.

This would have wide implications on the entire array of Shops and establishments, Industries in manufacturing, trading, Hospitality and all other sectors under which the employees are covered by the Minimum Wages Act.

Our Disputes Team Comprised Joint Managing Partner – Amit Kapur, Partner – Anupam Varma, Principal Associate – Aditya Gupta and Associate – Sahil Arora.

Tags High Court of Uttarakhand, JSA, Leading Law Firm, Leading Lawyers, Writ Petition

JSA Brief | May 2024

This edition of the JSA Brief showcases JSA authored articles, updates & newsletters and achievements such as deals and events in all practice area over the preceding month (May 2024).

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Articles, Deal Making, Events, JSA, JSA Prism, Legal Updates, Newsletters, Publications, Recognitions

Redemption of Debentures using Section 71(10), Companies Act read with Rule 73, NCLT Rules: An underutilized provision

Most of us know that a debenture holder is a “financial creditor” under the Insolvency and Bankruptcy Code, 2016 (“IBC”) regime. Most of us also know that if the default of redeeming these debentures exceed ₹1 crore, only then can they approach National Company Law Tribunal (“NCLT”) under the IBC regime.

Please click here to read the full article by Harshavardhan Abburi, published in Bar and Bench.

Tags Ibc, JSA, Leading Law Firm, Leading Lawyers, NCLT

NCLAT finds YEIDA must be treated as a secured creditor; directs payment of additional INR 1334 crores to it

JSA successfully advised and represented Yamuna Expressway Industrial Development Authority (“YEIDA“) in proceedings before the Hon’ble National Company Law Appellate Tribunal, Delhi (“NCLAT“) in an appeal challenging the treatment provided to its claims under successful resolution plan submitted by Suraksha Realty Limited (“Suraksha“) for the insolvency resolution of Jaypee Infratech Limited (“JIL“). The NCLAT partly allowed YEIDA’s appeal, holding that provision of INR 10 lakhs towards its claim on account of acquisition cost of land was untenable, and an additional payment of INR 1334 crores must be made by Suraksha to YEIDA.

During JIL’s insolvency proceedings, YEIDA had inter alia submitted a claim of INR 1689 crores on account of acquisition cost of the land provided to JIL. However, under Suraksha’s resolution plan, which was approved by the Adjudicating Authority vide order dated 07 March 2023 (“Impugned Order“), a trivial amount of INR 10 lakhs was allocated towards YEIDA’s claim. YEIDA challenged the treatment provided to it in the Impugned Order and Suraksha’s resolution plan before the NCLAT inter alia on the following grounds: (a) that YEIDA is a secured creditor since amounts owed to it are protected by a statutory charge under the Uttar Pradesh Industrial Area Development Act, 1976 (“UP Act”); (b) that amounts owed to YEIDA cannot be extinguished citing its status as an operational creditor; (c) that Suraksha, who seeks to step into the shoes of JIL, must be bound by the same terms and conditions to which JIL was bound; and (d) YEIDA”s consent was prerequisite for approval of those provisions in the resolution plan which concerned YEIDA.

The NCLAT partly allowed YEIDA’s appeal, holding that: (a) YEIDA’s claim on account of acquisition cost payable to farmers was protected by the statutory charge under the UP Act; and (b) YEIDA was entitled to be treated at parity with other secured creditors. Accordingly, the NCLAT directed Suraksha to pay an additional amount of INR 1334 crores to YEIDA towards the claim on account of acquisition cost of land. While doing so, the NCLAT also noted that since the additional payment to YEIDA was to be made over and above the amounts stipulated in the resolution plan, the framework of the plan would not be impacted and it would not require to be remanded to the Committee of Creditors for reconsideration.

Our Disputes Team Comprised Lead Partner – Amar Gupta, Partner – Divyam Agarwal, Senior Associate – Aniket Aggarwal and Associate – Mohit Sharma

Tags JSA, Leading Law Firm, Leading Lawyers, Nclat, YEIDA

Hon’ble Bombay High dismissed the writ petition challenging proceeding for eviction initiated against the petitioners under section 95A of MHADA Act 1976

JSA represented Saifee Burhani Upliftment Trust (SBUT) in a writ petition filed by the Mr. Abdul Rehman Shaikh, Mr. Abdul Sudhan Abrar Shaikh, Mr. Arshad Abrar Shaikh, Mr. Akhtari Abrar Shaikh and Mrs. Shaikh Salma Abdul Rehman (“Petitioners“) challenging the proceedings for eviction under section 95A the MHADA Act, 1976 (“MHADA Act“) in relation to building, Salamat House (“subject Building“).

SBUT is a public charitable trust which is undertaking a holisic redevelopment of Bhendi Bazar area free of cost to the tenants with the avowed object of rehabilitating approximately 3200 residential families and 1200 commercial businesses. The subject building forms part of the said project. The redevelopment is undertaken under Regulation 33(9) of the DCPR.

While rejecting the said writ petition, the Hon’ble High Court clarified that a plain reading of section 95A would indicate that it envisages three conditions (i) a proposal by the owner of the building backed by written consent of not less than 70% of the total occupiers of the building (ii) a NOC for such reconstruction by the Board; and (iii) the developer to make available to all the occupiers of such building alternate temporary accomodation. The Hon’ble Court clarified that if these conditions are satisfied, then it is obligatory on the part of the occupiers to vacate the premises for the purpose of redevelopment.

It was further clarified that section 95A of the MHADA Act does not warrant that the building to be redeveloped must be dilapidated or in dangerous condition.

Since the redevelopment was a cluster development scheme under Regulation 33(9) of the DCPR, the Hon’ble Court held that the ingredients of section 95A can be interpreted as under:

Where there is a composite development, the consent is to be computed qua all the occupants of the properties under development.
Under Section 33(9), in the matter of cluster development, all the plots covered under the Scheme shall stand amalgamated and the condition of the consent them related to occupants of all the plots.
The very purpose of cluster development would be defeated if the requirement of a separate NOC under section 95A(a) of the MHADA Act is insisted qua each building comprised under such cluster development.
NOC from the HPC for the entire cluster redevelopment would be sufficient satisfaction of requirement NOC from Board under Section 95A.

The Hon’ble Court in order to emphasis the importance of cluster redevelopment which is in public interest, have clarified that the object of cluster or composite redevelopment can only be achieved by ensuring that one or two dissenting members do not hold up the entire redevelopment project.

The Hon’ble Court in this judgment has not only clarified on the objects and keys ingredients of Section 95A of the MHADA Act but have also interpreted the conditions and clarified on its applicability for cluster redevelopment projects under Regulation 33(9) of DCPR.

Our Disputes Team Comprised Lead Partner – Varghese Thomas, Partner – Fatema Kachwalla, and Senior Partner – Ahsan Allana

Tags JSA, Leading Law Firm, Leading Lawyers, MHADA Act 1976

JSA Prism | Energy | May 2024

Please click here to download the Prism as PDF.

Supreme Court upholds the decision of APTEL directing that there is no statutory basis to levy additional reliability charge for uninterrupted power supply to bulk consumers.

The Hon’ble Supreme Court of India (“Supreme Court”), in Maharashtra State Electricity Distribution Company Limited v. M/s. JSW Steel Ltd. & Anr. (“Civil Appeal”)[1], has upheld the decision of the Appellate Tribunal for Electricity (“APTEL”) that the Maharashtra State Electricity Distribution Co. Ltd. (“Appellant”) had no statutory basis to impose an additional reliability charge for uninterrupted power supply to bulk consumers.

Brief Facts

In terms of the Tariff Order dated October 20, 2006, passed by the Maharashtra Electricity Regulatory Commission (“MERC”), the Appellant imposed an additional supply charge for uninterrupted power supply to its bulk consumers, including Respondent No. 1 / JSW Steel Ltd. (“JSW Steel”).
On June 20, 2008, MERC by its Tariff Order discontinued the imposition of additional supply charges and directed the Appellant to refund the additional supply charge collected during Financial Year (“FY”) 2006-07 and FY 2007-08 from bulk consumers. Pursuant to this, the Appellant preferred a petition before the MERC seeking approval for recovery of reliability charges for implementing ‘Zero Load Shedding’ in the Pen Circle area in Maharashtra.
On June 15, 2009, MERC by its order allowed the imposition of a reliability charge for the period June 16, 2009, till March 31, 2010, (“Order”) which was made payable by all the consumers in the Pen Circle area, including JSW Steel.
Aggrieved by the Order, JSW Steel challenged the said Order before APTEL in Appeal No. 135 of 2009. On December 14, 2009, APTEL by its Judgment inter alia set aside the Order. Subsequently, the Appellant challenged the Judgment of APTEL before the Supreme Court in the present Civil Appeal.
The Appellant contended that:
- The MERC has adequate powers to bring in schemes to improve the nature of Supply in a particular area in terms of Section 62(3) of the Electricity Act, 2003 (“Electricity Act”).
- Non-participation of JSW Steel in the public hearing held by MERC, despite consuming about 45% of the electricity in Pen Circle area, amounts to deemed consent given by JSW Steel to pay the reliability charges. Similar charges are being paid by the High Tension (“HT”) industrial consumers in other regions of Maharashtra.
JSW Steel contended that:
- JSW Steel, being a continuous process industry and a large-scale consumer, was not subjected to load shedding by the Appellant.
- JSW Steel was already paying higher tariffs compared to those for HT non-continuous process industries.

Issue

The issues before the Supreme Court were to adjudicate:

Whether imposition of reliability charge by the Appellant was legal?
Whether JSW Steel was liable to pay the reliability charge?
Whether JSW Steel, being affected by the levy of the reliability charge, had a right to appeal against MERC’s Order under Section 111 of the Electricity Act?

Findings

While upholding the decision of APTEL in favour of JSW Steel, the Supreme Court observed that:

There is no statutory basis, either under Section 62(3) of the Electricity Act or the Rules and Regulations framed thereunder by the MERC, which supports the levy of reliability charges. Thus, the Appellant did not have any statutory basis for imposition of reliability charge.
Vidharba Industries Association, of which JSW Steel is a member, had already objected to the imposition of the reliability supply charge, thereby representing the interest of JSW Steel.
Section 111 of the Electricity Act provides for a statutory appeal against an Order of the Appropriate Commission. JSW Steel, being directly affected by the levy of the reliability charge, was a “person aggrieved” within the purview of Section 111 of the Electricity Act and hence was entitled to challenge the legality of the Order passed by MERC.
Nothing in the Electricity Act suggests that a consumer who does not participate in the Appropriate Commission’s public hearing and is aggrieved by an order of the Appropriate Commission is disentitled to prefer an appeal.
JSW Steel, being a continuous process industry on express feeder, had paid a higher tariff during the period from July 2009 till April 2010 to get supply without load-shedding. Thus, JSW Steel had already paid a higher tariff for uninterrupted supply, negating the need for an additional reliability charge.

Conclusion

The Supreme Court by the Civil Appeal has re-affirmed the law laid down by APTEL that charges cannot be levied by Distribution Companies on its consumers without any statutory basis under the Electricity Act. Bulk / Industrial consumers are already subjected to higher tariffs which negate the need for the imposition of an additional reliability charge for implementing ‘Zero Load Shedding’.

This Prism has been prepared by:

Anupam Varma
Partner

Aditya Ajay
Senior Associate

Akshata Sharma
Associate

For more details, please contact [email protected]

[1] Civil Appeal No. 8413 of 2009, dated May 17, 2024.

Tags APTEL, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

Delhi High Court: Arbitrators can calculate liquidated damages on the basis of “honest guesswork” and “rough methods” in case of insufficient evidence

Please click here to download the Prism as PDF.

By a recent judgment, the Division Bench of the High Court of Delhi (“Delhi HC”) in the case of Cobra Instalaciones Y Servicios v. Haryana Vidyut Prasaran Nigam Ltd.[1] upheld the Arbitral Tribunal’s quantification of liquidated damages on the basis of “honest estimations” and “rough methods” to arrive at a fair assessment of damages in a case where the quantification was complex and there was insufficient evidence on record.

Brief Facts

Haryana Vidyut Prasaran Nigam Ltd (“Respondent”) awarded a contract to Cobra Instalaciones Y Servicios (“Appellant”) to design, supply, and install sub-stations for the Haryana Power System Improvement Project (“Project”). The contract stipulated a 450 (four hundred and fifty) day deadline and included a clause for liquidated damages (“LD”) in case of any delays.

While the project commenced on time, there were delays in the contract which triggered the LD. The Respondent initially deferred the LDs. However, later imposed the same at the maximum permissible limit under the contract.

Aggrieved, the Appellant invoked arbitration under the contract. The central question for determination in the arbitration was the quantification of losses.

Upon assessment, the Arbitral Tribunal concluded that some delays were caused by the Appellant’s actions, while others resulted from issues with third-party vendors. Accordingly, the Arbitral Tribunal awarded the Respondent 50% of the imposed LDs based on the “rough and ready” methodology established by the Supreme Court in the case of Construction and Design Services v. Delhi Development Authority[2],.

Both parties filed an appeal challenging the award by preferring respective appeals under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Ld. Single Judge, set aside the award and remanded the matter back to the Arbitral Tribunal for fresh consideration. Aggrieved, the Appellant appealed under Section 37 of the Arbitration Act.

Issues

Whether time was of the essence of the contract and if so, what percentage of liquidated damages is the Appellant entitled to?

Findings and Analysis

On the issue of whether time was of the essence, the Delhi HC observed that although stricto sensu time was not of the essence, the Respondent’s repeated reminders of timely completion of works under the contract established that delays had consequences in the contract, and it could not be assumed that the Respondent had not suffered a loss.
It was further held that the burden of the resultant loss cannot be mulcted solely on the Appellant as more than 1 (one) contractor was involved in executing the project.
With respect to the apportionment of the LDs, the Delhi HC concluded that the LD clause did not represent a genuine pre-estimate of damages and the exact contribution of loss attributable to each contractor was not possible.
Upholding the award, the Delhi HC affirmed that arbitrators have the authority to use “rough and ready” or “honest guesswork” methods while quantifying damages when the exact loss cannot be ascertained.
The Delhi HC recognized that such computation method was a tool available to the arbitrator which has received the imprimatur not only of the Supreme Court of India but also of other courts, even before the case of Construction and Design Services (supra).
The Delhi HC explained that the rationale behind this approach is that even when the evidence of loss exists, the absence of precise details shouldn’t prevent an award on damages and the arbitrators can use reasonable estimations to arrive at a fair assessment.

Conclusion

The “honest guesswork” approach offers a practical solution for arbitrators when precise damage calculations are difficult, particularly in public projects with non-monetary benefits. It further saves time and resources by eliminating the need for extensive evidence gathering. However, this flexibility comes with potential drawbacks as estimates can be inaccurate, or biased, leading to unfair outcomes for one party or the other. Furthermore, a lack of transparency may even undermine the legitimacy of the arbitration process.

In view of the above, clear guidelines from the Supreme Court of India can standardize the use of estimates, which should be used as a last resort only when determining damages is truly impossible, and not simply when it is improbable. This will achieve a balance between efficiency and fairness in the assessment of damages during arbitration and strengthen the legitimacy of the arbitration process.

This Prism has been prepared by:

Dheeraj Nair
Partner

Vishrutyi Sahni
Principal Associate

Muskaan Gupta
Associate

For more details, please contact [email protected].

[1] Cobra Instalaciones Y Servicios v. Haryana Vidyut Prasaran Nigam Ltd., 2022: DHC: 1479

[2] (2015) 14 SCC 263

Tags Delhi High Court, Dispute Resolution, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

JSA successfully represented Sundew Properties Limited (K Raheja Corp) before Supreme Court against conditional grant of distribution licence under the Electricity Act, 2003

In a landmark Judgment on the interplay of SEZ Act, 2005 and the Electricity Act, 2003, on 17.05.2024, Supreme Court passed its Judgment holding that Distribution of Electricity Licence (Additional Requirements of Capital Adequacy, Creditworthiness and Code of Conduct) Rules, 2005 (Capital Adequacy Rules) issued under the Electricity Act, 2003 do not apply to developers of SEZs who are recognised as deemed distribution licensees under Proviso to Section 14(b) of the Electricity Act. Thereby, Supreme Court reversed two negative rulings by APTEL and TSERC.

The Supreme Court’s Judgment puts to rest a decades old controversy of Electricity Regulatory Commissions applying additional regulatory stipulations while identifying deemed distribution licensees. The Judgment clarifies the role of Regulatory Commissions in identifying such deemed licensees and the scrutiny required while processing such applications.

It provides an impetus to expeditious operationalizing of distribution licensee status by SEZ developers, and therefore providing a choice of supplier to consumers in SEZs. In Telangana and Andhra Pradesh, no SEZ had operationalized their deemed distribution licensee status due to this overhang, which now stands resolved. SEZ developers (and the units in such SEZs) now gain a significant competitive edge since the incumbent non-SEZ distribution licensee’s tariff is typically higher.

Sundew Properties Limited (Sundew) is a developer of a Special Economic Zone under the SEZ Act, 2005. For ensuring consistent and high-quality power supply to these SEZ units, a Notification was issued under the SEZ Act, 2005 deeming an SEZ Developer to be a distribution licensee under the Electricity Act, 2003. Sundew had filed an application before the Telangana Commission seeking identification as a deemed distribution licensee.

Telangana Commission accorded such status to Sundew, however, this was made conditional on Sundew also satisfying requirements of Capital Adequacy Rules. Hence, Sundew was directed to infuse additional equity capital from its promoters by way of account payee cheques. This was challenged before APTEL which upheld Telangana Commission’s Order. Sundew challenged APTEL’s Judgment vide C.A. No. 8978 of 2019 before Supreme Court. Supreme Court vide Judgment dated 17.05.2025 accepted Sundew’s position and held that:

Although SEZ developers under SEZ Act, 2005 are deemed distribution licensees under the Electricity Act, 2003, they are required to apply to the relevant Electricity Regulatory Commission for verification and acceptance of their deemed licensee status. Further, 6th proviso to Section 14 is not applicable to such deemed licensees.
Capital Adequacy Rules are not applicable to deemed distribution licensees under the SEZ Act, 2005. Therefore, Sundew is not required to infuse additional capital as directed by Telangana Commission.

Our Litigation Team Comprised Partner – Abhishek Munot, Partner – Kunal Kaul, Principal Associate – Malcolm Desai, and Senior Associate – Samikrith Rao Puskuri.