2004 (4) TMI 636 - HC - Companies Law

Successful Appeal: KPTCL vs. KERC Decision Reversed, Tariff Dispute Resolved

Jindal Thermal Power Company Ltd. Versus Karnataka Power Transmission Corporation Limited and Ors.

The appeal was allowed, and the impugned orders were set aside. The Karnataka Electricity Regulatory Commission (KERC) was struck out as a party ... - Issues Involved:1. Whether the Karnataka Electricity Regulatory Commission (KERC) can be added as a party respondent to the appeal and whether it is entitled to defend the impugned order on merits.2. Whether there existed a binding contract between the appellant and the KPTCL on the tariff prior to the commencement of the Karnataka Electricity Reform Act, 1999.3. Whether the status of the appellant is that of an Independent Power Producer (IPP) or Captive Power Plant (CPP).4. Whether the impugned orders are perverse, arbitrary, and passed without application of mind.5. Whether the Commission has failed to appreciate the appellant's rights grounded on the principles of promissory estoppel and legitimate expectation.Detailed Analysis:Point No. 1:The appellant did not initially implead the KERC as a party respondent. The Court directed the appellant to serve notice to the KERC for the interim application for stay. The Court later considered whether the KERC is a necessary or proper party to the appeal. The appellant argued that the KERC, being a quasi-judicial authority, should not contest its own orders. The Court agreed, stating that the KERC should not take sides and should leave the validity of its order to be determined by the Court. The KERC was struck out as a party respondent, as it was not necessary for the appeal.Point No. 2:A 'concluded contract' in terms of Explanation to Section 19 and proviso to Section 27(2) of the Act need not be in writing or in any particular form. The Court concluded that there existed a 'concluded contract' between the appellant, KPTCL, and GoK before the Act commenced on 01.06.1999. This conclusion was based on several documents and circumstances, including government orders, letters, and negotiations that took place before the Act came into force. The Court held that all essential terms and conditions were agreed upon before 01.06.1999, making the contract binding and deemed to have been approved by the Commission under the Act.Point No. 3:The appellant complied with the requirements of the Supply Act for establishing a generating company, setting up a scheme, and selling electricity, making it an IPP, not a CPP. The Court noted that the appellant's plant was designed to supply power to the grid and guaranteed continuous supply, which is characteristic of an IPP. The Court rejected the respondents' contention that the plant was a CPP, stating that the plant's design and approvals indicated it was an IPP.Point No. 4:The Court found that the impugned orders suffered from errors apparent on their face. The Commission wrongly calculated fixed charges and incentive payment charges, which, if corrected, would increase the tariff. The Commission also unilaterally applied two-part tariff elements to a single-part tariff, which was arbitrary. The Court noted that the Commission took into account irrelevant considerations and left out relevant ones, making the orders perverse and arbitrary.Point No. 5:The Court held that the doctrines of promissory estoppel and legitimate expectation were applicable. The appellant performed its part of the contract based on promises made by KPTCL and GoK. The Commission failed to appreciate the appellant's rights under these doctrines. The Court emphasized that the Government and public authorities must honor their statements and treat citizens fairly, which was not done in this case.Conclusion:The appeal was allowed, and the impugned orders were set aside. The KPTCL was directed to comply with the tariff rate specified in the GoK order dated 12th May 1999 and repay the amounts recovered from the appellant as per the interim order dated 19th November 2002. The parties were directed to bear their respective costs.