Power tariff contract construed to include coal washing and project-site calorific value, while excluding extra contractual charges.

A commercial power purchase agreement was construed by its express tariff language, requiring monthly energy charges to reflect the actual cost of coal purchased, transported and unloaded at the project site. Washing costs, washing-related loss, and necessary road transportation were included because the contract contemplated usable coal delivered to the project. Gross calorific value was also to be measured at the project site, not the mine end, as the tariff formula linked the charge to coal supplied to and at the project. Ancillary claims for transit and handling losses, third-party testing charges, liaising charges, and interest were rejected as outside the contractual formula.

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Issues: (i) Whether, on construction of the power purchase agreement, the cost of coal in the monthly energy charge included washing cost, washing-related loss, and transportation from the mine end to the project site, including road transportation where rail connectivity was unavailable; (ii) Whether the gross calorific value of coal for the tariff formula was to be determined at the project site or at the mine end; (iii) Whether the appellant was entitled to ancillary claims such as transit and handling losses, third-party testing charges, liaising charges, and interest.

Issue (i): Whether, on construction of the power purchase agreement, the cost of coal in the monthly energy charge included washing cost, washing-related loss, and transportation from the mine end to the project site, including road transportation where rail connectivity was unavailable.

Analysis: The tariff formula had to be read as a commercial document according to its express language and business efficacy. The definition of monthly energy charges referred to the actual cost of purchasing, transporting and unloading coal most recently supplied to and at the project. The expression was construed distributively so that purchase related to acquisition of coal, transporting to movement to the project, and unloading to receipt at the project site. Since the project required washed coal and the bidder was asked to arrange washing, the coal cost for tariff purposes necessarily covered washing costs as part of the actual cost of usable coal delivered to the project site. Transportation could not be confined to rail alone where rail siding was incomplete and road carriage was necessary to reach the project.

Conclusion: The issue was decided in favour of the appellant. Washing cost, washing-related cost, and necessary transportation to the project site were held reimbursable under the tariff formula.

Issue (ii): Whether the gross calorific value of coal for the tariff formula was to be determined at the project site or at the mine end.

Analysis: The formula referred to coal most recently delivered to the project. The Court treated the project site as the relevant point for measuring gross calorific value, because the contract tied the energy charge to coal supplied to and at the project, not to coal at the mine pithead. The contrary reading would substitute the mine site for the project site and distort the contractual formula. The joint sampling and testing practice at the project site also supported that construction.

Conclusion: The issue was decided in favour of the appellant. Gross calorific value was directed to be taken at the project site.

Issue (iii): Whether the appellant was entitled to ancillary claims such as transit and handling losses, third-party testing charges, liaising charges, and interest.

Analysis: The tariff formula was confined to three identified components, namely purchasing, transporting and unloading. Claims outside that formula could not be read into the contract. As to interest, no such claim had been laid at any stage and the dispute was not one of admitted unpaid bills; the claimed restitutionary interest was therefore not accepted.

Conclusion: The issue was decided against the appellant. Ancillary claims and interest were rejected.

Final Conclusion: The contractual tariff was construed in a manner that extended reimbursement to the actual coal cost up to the project site and required project-site measurement of calorific value, while excluding extra-contractual coal-related charges and interest. The appeal succeeded only to that limited extent.

Ratio Decidendi: In a commercial contract, express tariff language must be construed objectively and, where the contract ties energy charges to coal supplied to and at the project, the reimbursable coal cost and quality parameters are to be determined at the project site and not by reference to the mine end.

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