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2016 (8) TMI 1495
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....ed the terms of Power Purchase Agreement dated 30th May, 1996 (PPA) and is justified in reversing the finding of the Commission based on interpretation of the said PPA and other documents on record.? Part II: Facts 3. The Appellant, Gujarat Urja Vikas Nigam Ltd. ('the GUVNL'), is the successor of the Gujarat Electricity Board and is a deemed licencee Under Section 2(39) read with Sections 12 and 14 of the Act. The Respondent, ESSAR Power Limited ('the EPL'), is a generation company within the meaning of Section 2(28) of the Act. The Appellant filed a petition before the Commission Under Section 86(i)(f) of the Act for adjudication of the dispute arising out of the Power Purchase Agreement ('the PPA'). The Appellant inter alia sought compensation for wrongful allocation of electricity by the EPL to its sister concern, Essar Steel Ltd. (ESL) in preference to the Appellant. 4. According to the Appellant, the EPL was required to allocate 300 MW out of the total 515 MW of electricity and the remaining 215 MW was to be allocated to ESL. In case the quantum of generation was less than 515 MW, the allocation was to be in the proportion of 300:215. Contrary ....
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.... bills on Essar Group Companies based on proportionate methodology. 6. The above claims were contested by the Respondent based on preliminary objections including the plea of limitation as well as on merits. Part III: Pleadings 7. As noticed in Para 4 above, the case of the Appellant in the petition filed before the Commission was that the Respondent had wrongly utilized the capacity of the generating station in favour of its sister concern, against the rights and interest of the Appellant in violation of the PPA, the Respondent allocated part of generating capacity required to be allocated to the Appellant to its sister concern. The Appellant had the obligation to pay annual fixed charges, variable charges, incentive etc. in relation to the specified allocated capacity and the sister concern of the Respondent was to pay proportionate annual fixed cost. The Agreement required the EPL to declare availability in the specified proportion even when generation was less than the total 515 MW capacity. Contrary to the said requirement, the Respondent allocated more electricity to ESL and offered proportionately less electricity to the Appellant. Thereby, not only the agreement wa....
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....215 MW for the period from 14th September, 2002 onwards. 12. The Commission on this aspect held as follows: 9.1 The PPA was executed on 30.5.1996 and effective for a period of 20 years. The relevant clauses of the PPA have been examined. It is quite clear that under the PPA, GUVNL has an obligation to pay an annual fixed cost for the allocated capacity, which is 300 MW. Having paid the annual fixed cost for the said capacity, GUVNL has a right for an equivalent amount of electrical output. The purpose of paying annual fixed cost is to ensure that GUVNL alone has the right to the said capacity and that no part of the same can be sold to any other party. It is true that 41 the normal industry practice is that unless the allocated capacity, for which fixed charges are being paid by the beneficiary is surrendered, the beneficiary has the ability to sell/negotiate any transaction for utilisation of such allocated capacity. In this context, reference is also made to the CERC (Terms and Conditions of Determination of Tariff) Regulations, 2004. 9.2. The question that arises for consideration is whether GUVNL can claim allocation on a proportionate basis i.e. to say, th....
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....that the transaction is a 'licence' and the other that it is a 'lease'. The intention to be gathered from the document read as a whole has, quite obviously, a direct bearing. (Underline Supplied). Also, the Hon'ble Supreme Court has held in State of Andhra Pradesh v. Kone Elevators India Ltd. (2005) 3 SCC 386: It is a settled law that the substance and not the form of the contract is material in determining the nature of the transaction. Therefore, it is necessary to read the PPA as a whole in order to give a correct interpretation to the terms therein contained. The definition of 'Allocated Capacity' in the PPA has to be read in conjunction with Article 3.1. Article 3.1 clearly records the allocation of capacity between two entities i.e. GUVNL as well as Essar Steel. 9.5. From the reading of the Article 3.1 of the PPA as also the corresponding Articles in the PPA with Essar Steel, it is clear that the intention of the parties was that the capacity of the generating plant will be shared between the two beneficiaries only. The fact that Article 3.1 of the present PPA records the capacity allocated to the Essar ....
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....contrary to the terms of Schedule VI of the PPA. This submission is contrary to the procedure prescribed in the PPA as well as the normal industry practice. Once the capacity of the generating station as a whole is available, the allocation of capacity has to take place in the proportion that is contracted. Also, the submission of EPL that the Petitioner's only concern, under terms of the PPA, is that it must get electricity in accordance with its Dispatch Instructions, within the limits of allocated capacity is not entirely correct. The Petitioner has a right to be supplied electrical output proportionate to the declared capacity of the generating plant in terms of the PPA. EPL cannot ignore its obligation of declaring the entire capacity. Once the entire capacity of the generating plant is declared, the proportionate principle of allocation of capacity will become applicable and as a natural consequence, the electrical output will be allocated and supplied between the two beneficiaries on proportionate basis, in accordance with the dispatch instructions. It appears that EPL is avoiding its obligation to declare the entire capacity. The ability to recover deemed non generation....
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....e that the each condition is either in the nature of additional concessions/modification that were sought by EPL or alleged defaults on the part of GUVNL, which was not agreed to by GUVNL. 9.11. However, if GUVNL does not take the power declared available by EPL in terms of the aforesaid ratio, EPL will have the right to sell the power to its sister concern subject to reimbursement of the proportionate of the annual fixed charges. GUVNL cannot make a submission that although it will not purchase such power as declared available by EPL, EPL cannot sell the same to its sister concern. Such a submission would defeat the purpose of the Electricity Act, 2003 and the National Electricity Policy which promotes generation and encourages sale of surplus capacity. If GUVNL does not Schedule the power to the extent of availability declared by EPL of the entire plant in terms of the PPA, it cannot complain if the power is sold to EPL's sister concern and the proportionate of the annual fixed cost is reimbursed. 9.12. The Commission is of the view that GUVNL is entitled to claim compensation for the energy diverted to Essar Steel from the capacity allocated to GUVNL under ....
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....e breach of the terms of PPA and consequently the Appellant is liable to compensate the Electricity Board (R-1)..... 15. The Tribunal upheld the stand of the EPL. It was held that Articles I and III of Schedule VI to the PPA did not require the EPL to declare the capacity in the ratio of 300:215 MW. As regards letters dated 17th February, 2000 and 4th October, 2001 by which the Respondent accepted its liability, it was held that the GUVNL never accepted or complied with its obligations and therefore, the Respondent was not bound by the stand in the said letters. It was further observed that the claim for the period from 1st July, 1996 stood settled in view letter dated 13th October, 2006 of the GUVNL to accept Rs. 64 crores for diverting electricity to ESL. Non-declaration of available capacity on proportionate basis was not shown to have resulted in any loss or damage to GUVNL. GUVNL had not proved any actual loss. It was observed that on the principle of Section 35 of the Sale of Goods Act, 1920, there was no obligation to deliver in absence of dispatch instructions. Further, the ESL supplied fuel to EPL for conversion into electricity but for supply to the GUVNL, the EPL had ....
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....er generated by the EPL to its sister concern, EPL is liable to compensate the Electricity Board for the same by treating such power which sold by EPL to Essar Steel Ltd. as if it was sold by the Electricity Board itself to Essar Steel Ltd. after purchasing the same from the EPL. 50. On the basis of letters dated 17.02.2000 and 04.10.2001, it is contended on behalf of the Electricity Board (R-1) that EPL has conceded to its proportionate theory basis and as such it cannot go back. This contention is not tenable. EPL in those letters merely expressed its willingness to agree to the proportionate theory basis subject to the condition that Electricity Board should commit default in making the payment of dues payable under the PPA-1 to EPL and also subject to the condition that the Electricity Board shall comply with other conditions of the PPA-1. 51. Admittedly, the stipulated conditions in those letters were neither accepted nor complied with by the Electricity Board. Hence the offer made by the EPL to the Electricity Board for agreeing to the proportionate theory basis would not be construed to be conceding and as such it is binding on it. 52. In the secon....
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.... their letter dated 13.10.2006, the Electricity Board accepted to receive Rs. 64 crores for diverting the electricity to the Essar Steels Ltd. 56. Under those circumstances, it is clear that the claim of the Electricity Board against the EPL with respect to the alleged diversion of power by the EPL to Essar Steels Ltd. for the period from 01.07.96 had already been settled by the payment and this settlement is final, conclusive and binding on the parties. As correctly observed by the State Commission, the same is not liable to be reopened at this stage. 57. Admittedly, it is not established that there is any breach of the contract as the part of the Appellant under PPA-1 on account of non-declaration of available capacity to the Electricity Board on proportionate basis. The compensation can be claimed only when there is a breach and due to the same there was a loss or damage caused by the said breach of contract. This has to be pleaded and proved. Unless this is done, no compensation can be claimed. This is a settled law as held by the Supreme Court in (1974) Vol-2 SCC 231-Raman Foundry v. Union of India. 58. In the present case, the Electricity Board has ....
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....t. The Essar Steels Ltd. supplies fuel to EPL for conversion into electricity, whereas the Electricity Board is under no obligation to supply fuel to EPL. Admittedly, the EPL has to procure fuel from outside and use it for generating electricity for sale to the Electricity Board. 75. The PPA-1 is a contract between the EPL and the Electricity Board containing reciprocal promises. In consideration of EPL supplying electricity to the Electricity Board up to the allocated capacity in accordance with the Despatch Instructions, the Electricity Board had agreed and undertaken to pay the EPL the tariff as mentioned in the PPA-1. It is an admitted fact that the Electricity Board has committed default in making payment when due to be made to the EPL under the PPA-1. In fact, the EPL, the Appellant has produced materials to show that at one point of time in March 2008, the aggregate amount due to EPL was to the tune of Rs. 519 crores. EPL has produced documents to show that the Electricity Board is a defaulter in making payment of its due under the PPA-1 right from the inception of it. 76. It is also an admitted fact that EPL had written several letters to the Electricity B....
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....Respondent. 18. Learned Counsel for the Appellant submitted that the Tribunal had ignored the implications of Article 3 of the PPA. The true import of the PPA clearly casts an obligation on the EPL to allocate electricity in ratio of 300:215 MW. This interpretation was accepted by the EPL in its letters dated 17th February, 2000, 4th March, 2000 and 4th October, 2001. Issues of non payment of money due or not opening the letter of credit and not making advance payment of fuel stood settled by Supplementary Agreement dated 18th December, 2003 and letter dated 19th December, 2003. Thus, the Tribunal erroneously assumed that amount of Rs. 519 crores was outstanding. Moreover, there is an error in the order of the Tribunal in observing that GUVNL had not proved suffering of any damage. Para 23 of the petition expressly asserted the damage. There is further error in interpretation of Schedule VI in regard to the obligation to declare the availability of generating power upon which the dispatch instructions could be issued. In absence of such declaration, the dispatch instructions could not be issued. Finding that the Appellant accepted Rs. 64 crores by way of settlement was against r....
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....Companies; and 192 MW to the Board. b) During Combined Cycle mode: 215 MW to the Essar Group of Companies; and 300 MW to the Board The Company undertakes that, subject to the provisions and during the term of this Agreement, it will fuel and operate the Generating Station to meet the requirements of electrical output that can be generated corresponding to the allocated capacity, in accordance with its Dynamic Parameters so as to comply with the Operating Characteristics except to the extent: (i) as anticipated under the Maintenance Programme during the period of Scheduled Outage. (ii) That to do so would not be in accordance with Good Industry Practice; (iii) That may be necessary due to circumstances relating to Safety (of personnel or plant apparatus); (iv) that to do so would be unlawful; (v) That may be necessary for reasons of Force Majeure Natural or Non-Natural. 3.2. Delivery of Active Energy The Company shall deliver Active Energy and Reactive Energy to the Board at the Delivery Point in accordance with Dispatch Instructions issued by the Board under the Dispatch procedures as specified in Schedule VI. All Active Energy delivered by the Company....
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....o be determined in terms of Section 7.2 c) Incentive Payment to be determined in terms of Section 7.3. 7.1.1. Annual Fixed Charges: Computation and payment The Annual Fixed Charge shall be computed on the following basis: a) Interest on Debt: It shall be computed on the Debt as per the Financial Plan approved by the Board. Interest on Debt shall also include lease rentals payable in respect of lease assistance obtained by the Company towards financing the Capital Cost. If the Financing Plan envisages variable rates of interest on any component of Debt, the Interest on Debt shall be recomputed by applying the prevailing rates of interest during the month on each such Debt. In respect of interest on Foreign Debt, the interest liability on the applicable Foreign Debt shall first be computed in the applicable foreign currencies and thereafter be converted to Rupees by adopting the Base Exchange Rate and such amount shall be adopted for the purposes of computing Interest on Debt. A Supplementary Invoice shall be raised for an amount equal to the difference between the amount of interest liability on Foreign Debt as determined on the basis of Base Exchange Rate an....
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.... end of each Quarter in an Accounting Year, for an amount equal to the difference between the amount of ROFE determined on the basis of Base Exchange Rate and the amount of ROFE as at the end of each Quarter computed on the basis of the then prevailing exchange rate. If the amount payable to the Company is determined to be less, on account of foreign exchange variation than the amount paid by the Board at the Base Exchange Rate, such difference shall be re-paid to the Board within 14 days from the date of the determination. f) Interest on Working Capital: The amount of working capital on the Allocated Capacity shall be computed on the basis of annual estimated level of generation adopting the following norms: i) Fuel Cost for liquid fuels only for one month; ii) Operation & Maintenance expenses (Cash) for one month; iii) Maintenance Spares at actual but not exceeding one year's requirement, less value of One Fifth of initial spares already capitalized; and iv) Receivable equivalent to two months' average billing for sale of electricity. The Interest on Working Capital shall be computed by applying the rate of interest as applied by the Company's ban....
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....ity could not be accepted. The EPL was under obligation as per Schedule VI to declare weekly Schedule of the capacity available and the dispatch instructions were to be issued on the basis of the said declaration. It could not thus be said that the EPL had no obligation to declare the capacity and the obligation of GUVNL to issue dispatch instructions was not dependent on declaration of the available capacity by the EPL. Contrary view of the Tribunal is clearly erroneous. In paras 45 and 46 and elsewhere in its judgment, the Tribunal erred in holding that there was no obligation to declare available capacity on proportionate basis. The finding of the Commission in paras 9.5 to 9.12 of its order quoted above is the correct interpretation of the Agreement. We hold accordingly. Re: (ii): 23. The Commission in this aspect observed: 8.4 In the present case, the PPA was executed on 30.5.1996 and remains operational for a period of twenty years. Under the terms of the PPA, the generating company i.e. EPL is required to declare availability and supply of electricity for the entire duration of the PPA, while the Petitioner GUVNL has an obligation to purchase electricity and p....
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....spondent had no obligation to allocate available power in the ratio of 58: 42 under the terms of the Agreement and in terms of correspondence between the parties. Apart from this, the Tribunal held that the Appellant had claimed Rs. 64 crores by way of full and final settlement (para 55) and that the Appellant was in default in not opening letter of credit and not paying Rs. 519 crores. In doing so, the Tribunal has ignored clear stipulation in the letter of the Appellant dated 13th December, 2004 referred to in para 8.14 of the Commission that the amount of Rs. 64 crores was not accepted by way of final settlement. Similarly, the Tribunal has ignored the supplementary agreement between the parties dated 18th December, 2003 followed by letter dated 19th December, 2003 (page 337 and 341, Vol. V) under which amount of Rs. 289.40 crores was paid to the Respondent by way of settlement for the delayed payment charges and other heads. Thus, the Tribunal was not justified in observing in para 75 that the Appellant had defaulted in making payment of Rs. 519 crores which was a breach of promise on the part of the Appellant, thereby absolving the Respondent of its obligation to supply power ....
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....tine matters in several judgments to which reference may be made. 31. In L. Chandra Kumar v. Union of India (1997) 3 SCC 261, in the course of considering the constitutional validity of exclusion of jurisdiction of the High Courts in service matters against the orders of the Central Administrative Tribunal, this Court observed that the manner in which justice is dispensed with by the Tribunals left much to be desired. The remedy of appeal to this Court from the order of the Tribunals was too costly and inaccessible for it to be real and effective. Furthermore, the result of providing such remedy was that the docket of this Court was crowded with decisions of the Tribunals and this Court was forced to perform the role of a first appellate court. It was necessary that High Courts are able to exercise judicial superintendence over decisions of the Tribunals. With these observations this Court directed that "all" decisions of the Tribunals will be subject to High Court's writ jurisdiction Under Article 226/2271. It was further observed that the then existing position of direct appeal to this Court from orders of Tribunal will stand modified2. 32. In Madras Bar Association v. ....
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....nal constituted under the Telecom Regulatory Authority of India Act, 1997), the Tribunal exercises original jurisdiction to the exclusion of all courts and is located only at Delhi6. It may further be noted that normally tenure of office of the Chairman and members is of short duration of three to five years. Access to justice may not be, thus, available with the convenience with which it is available when jurisdiction is with the local civil courts sought to be substituted. Such provisions may need review in larger public interest and for providing access to justice. 35. Apart from the above aspect, further question is whether providing appeals to this Court in routine, without there being issues of general public importance, is not a serious obstruction to the effective working of this Court. 36. This issue has already been subject matter of debate. In an Article by Shri T.R. Andhyarujina former Solicitor General of India, titled "Restoring the Character and Stature of the Supreme Court of India (2013) 9 SCC (J) 43)" learned author states that it was necessary to restore the character and stature of the Supreme Court. The jurisdiction of the Supreme Court should by and larg....
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....oaded. On an average, in a year 80 cases are decided by Supreme Court of U.K., the Canadian Supreme Court and the Australian High Court. 38 cases are decided by Constitutional Court of South Africa in a year. Supreme Court of India is deciding large number of cases and the reports in the cases sometimes run upto 19 volumes in a year with only a few cases of real constitutional or of national importance. In Australia there is no appeal to the highest court as of right and the cases are entertained only if they are of public importance. They are to resolve difference of opinion in different courts. This was necessary to preserve efficiency and standing. Reference is also made to the expert opinion that no litigant should get more than two chances in litigation. It is further stated that "The Supreme Court of India must cease to be a mere court of appeal to litigants and a daily mentor of the Government, if it is to preserve its pristine character, dignity and stature comparable to the Supreme Court in other jurisdictions." The Article ends with observation "This requires a national debate by Judges, Lawyers, jurists and informed public." 37. In Mathai alias Joby v. George (2010) 4....
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....of arrears" 9. It was stated that: The law declared by the Supreme Court in Hindustan Commercial Bank Ltd. v. Bhagwan Dass AIR 1965 SC 1142 was that normally a party should approach the Supreme Court with a certificate of the High Court. Only in exceptional circumstances would the Supreme Court relax that requirement, is simply ignored. The exception has become the Rule now. The result is more and more unsuccessful people getting encouraged to have another go at it by approaching the Supreme Court. In most of the cases, what is sought is a simple second or third "guess on facts" or taking another plausible view of the matter. xxxx Coming to matters where the rights and obligations of the parties are purely founded upon a local law i.e. a law made by the legislature of a State, etc., I do not see any harm befalling the nation, if the judgment of the High Court is to become final. At least in these areas of litigation, the time worn cliche "we are not final because we are infallible, but we are infallible only because we are final" might as well be extended to the decisions of the High Courts which are equally constitutional courts. 40. While there may be no l....
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....l question of law which is not of national or public importance without affecting the constitutional role assigned to the Supreme Court having regard to the desirability of decision being rendered within reasonable time? III. Whether direct statutory appeals to the Supreme Court bypassing the High Courts from the orders of Tribunal affects access to justice to litigants in remote areas of the country? IV. Whether it is desirable to exclude jurisdiction of all courts in absence of equally effective alternative mechanism for access to justice at grass root level as has been done in provisions of TDSAT Act (Sections 14 and 15). V. Any other incidental or connected issue which may be considered appropriate. 44. We request the Law Commission to give its report as far as possible within one year. Thereafter the matter may be examined by concerned authorities. 45. Action taken by the Central Government, after its consideration, may be placed on record. List the matter in November, 2017 before an appropriate Bench, preferably of three Judges to consider the above issue. 46. Hon'ble Mr. Justice Adarsh Kumar Goel pronounced the judgment of the Bench co....