New Delhi: The Supreme Court has ruled in favour of the Himachal Pradesh government in its legal dispute with JSW Hydro Energy Limited, restoring the state’s contractual right to receive 18 percent of free power from the company’s hydroelectric project. In a judgement delivered on Wednesday, the apex court set aside the Himachal Pradesh High Court’s May 2024 order that had capped the free power supply at 13 percent.
The earlier ruling had favoured JSW Hydro Energy Limited (JSWHEL), a material step-down subsidiary of JSW Energy Limited, by aligning the free power obligation with the Central Electricity Regulatory Commission’s (CERC) 2019 regulations.
JSW Energy disclosed the outcome in a regulatory filing on Wednesday, stating that the Supreme Court had allowed the appeal filed by the state government and reversed the High Court’s decision.
In its order, the Supreme Court clarified that the CERC regulations do not override the Implementation Agreement between JSWHEL and the Himachal Pradesh government. “We hold that CERC Regulations, 2019 do not prohibit respondent no. 1 from supplying free power beyond 13 percent to the appellant-State, and the Implementation Agreement does not stand overridden by the operation of these Regulations,” the bench comprising Justices Pamidighantam Sri Narasimha and Joymalya Bagchi observed.
The Court also ruled that the writ petition filed by JSWHEL before the High Court, seeking to realign its obligations under the Implementation Agreement with the CERC regulations and a CERC order dated 17 March 2022, was not maintainable.
“Once respondent no. 1’s prayer for relief was rejected by the CERC… it would not be open for respondent no. 1 to seek modification of the Implementation Agreement by way of a writ petition before the High Court,” the order said.
The contractual agreement between JSW Hydro Energy Limited and the state of Himachal Pradesh is based on an Implementation Agreement (IA) signed on November 18, 1999, when the project was originally awarded to Jaiprakash Industries Ltd. The hydropower project in question is 1,091-MW Karcham-Wangtoo hydroelectric project which was developed by Jaiprakash Industries but acquired by JSW Energy in 2015. Under the terms of this agreement, the company owning the project is obligated to supply 12 percent of the net electricity generated as free power to the state during the first 12 years following the commercial operation date (COD) of the project. This obligation increases to 18 percent for the subsequent 28 years, and is reaffirmed through Supplementary Implementation Agreements signed later.
However, the situation became contentious after the CERC introduced new tariff regulations in 2019, which capped free power supply at 13 percent of net generation. In March 2022, JSWHEL approached CERC requesting that tariffs be determined based on the 18 percent free power clause in its state-level contract. The CERC rejected this plea, stating that the 2019 regulations took precedence and that the tariff must reflect the 13 percent ceiling, effectively disregarding the IA terms.
Subsequently, JSWHEL filed a writ petition in the Himachal Pradesh High Court, which ruled in May 2024 in favour of the company. The court ordered that the implementation agreement be aligned with the CERC’s 2019 tariff regulations, limiting the free power obligation to 13 percent. This decision was challenged by the Himachal Pradesh government in the Supreme Court, which in its July 2025 ruling, reversed the High Court’s judgement. The apex court upheld that the CERC regulations do not override the terms of the Implementation Agreement, restoring the state’s right to 18 percent free power. The court further held that JSWHEL, having already exhausted its regulatory remedies before CERC, could not seek relief by way of a writ petition before the High Court.
This verdict reaffirms the enforceability of state-level contractual obligations over subsequent regulatory caps, signalling that agreements like the one between Himachal Pradesh and JSWHEL remain binding unless mutually renegotiated or explicitly overridden by law.