2016 Supreme(SC) 626

SUPREME COURT OF INDIA
ANIL R. DAVE AND ADARSH KUMAR GOEL, JJ.
GUJARAT URJA VIKAS NIGAM LTD. – APPELLANT
VERSUS
ESSAR POWER LIMITED – RESPONDENT
CIVIL APPEAL NO. 3455 OF 2010
Decided On : 09-08-2016

IMPORTANT POINTS
Once the entire power generating capacity of the generating company by has been allocated in two parts in a particular proportion between the Utility and generating Company’s sister concern, the generating company could not sell power to its sister concern beyond the allocated capacity.
Understandings subsequent to the agreement should also be taken into consideration for interpreting the agreement.
Deluge of appeals from High Courts in all matters and direct appeal to Supreme Court from orders of the Tribunals converting the Supreme Court into a regular court of appeal. Law Commission advised to look into the matter.

Headnote:(a) Interpretation – Instruments – Power Purchase Agreement (PPA) – Article 3 and Schedule VI – Agreement contemplating proportion of allocation of capacity – Once the entire capacity has been allocated in two parts in a particular proportion, EPL could not sell power to ESL beyond the allocated capacity – Thus, EPL was obliged to declare the capacity and obligation of GUVNL to issue dispatch instructions was dependent on declaration of the available capacity by the EPL. (Para 22, 25)

       (b) Interpretation – Instruments – Power Purchase Agreement (PPA) – Subsequent development – Respondent acknowledging its liability of allocating the generated power to the appellant and to the ESL in the ratio of 58 : 42 – Tribunal’s non-reliance on referred letters of acknowledgment – Erroneous and without any basis – Liable to be set aside. (Para 24)

       (c) Administration of justice – Judicial propriety – Tribunal holding appellant in default for making payment of L 519 crores and it was breach of promise – Tribunal therefore holding respondent absolved from its obligation to supply power as per the agreement – Erroneous in the face of the records – Liable to be set aside. (Para 26, 27)

       (d) Constitution of India – Articles 323A and 323B – Establishment of various Tribunals – Administration of justice by Tribunals – Leaves much to be desired – Constitution thereof – Selection of Chairpersons and Members – Need for review of composition of Tribunals under the Electricity Act or other corresponding statutes emphasissed – Sections 113(b)(i) to (iii) and 113(3) read with Section 78, Sections 84, 85 and 125 of the Electricity Act and corresponding provisions of similar Acts need a fresh look – Jurisdiction of such tribunals require review. (Para 33)

       (1997) 3 SCC 261; (2014) 10 SCC 1 – Relied upon

       (e) Administration of justice – Constitution of India – Article 136 – Many statutes providing direct appeal to Supreme Court from the decisions of the tribunals – Converting Supreme Court into a regular court of appeal – Straying from its original character as a constitutional court and the apex court of the country – Looking into the issue by Law Commission suggested. (Para 36, 37, 41, 43)

       (2010) 4 SCC 358; (1986) 4 SCC 767 – Relied upon

       Facts of the case:

       Correct interpretation of the terms of Power Purchase Agreement is the issue in this case.

       The appellant, Gujarat Urja Vikas Nigam Ltd. (`the GUVNL'), is the successor of the Gujarat Electricity Board and is a deemed licencee. The respondent, ESSAR Power Limited (`the EPL'), is a generation company. The appellant filed a petition before the (Regulatory) Commission 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.

       The Commission upheld the plea of limitation raised by the respondent to the extent that the appellant was held entitled to its claims only for three years preceding the filing of the petition, i.e., from 14th September, 2002, the petition having been filed on 14th September, 2005.

       The (Appellate) Tribunal upheld the said finding.

       The Tribunal also upheld the order of the Commission accepting the claim of the appellant under the head of a Deemed Generation Incentive and the respondent has not challenged this aspect.

       The Tribunal held that the PPA did not require the EPL to declare the capacity in the ratio of 300: 215 MW.

       The Tribunal also held that non-declaration of available capacity on proportionate basis was not shown to have resulted in any loss or damage to GUVNL. The Electricity Board (R-1) cannot claim that by reasons of it's making payment for the Annual Fixed Charges up to the allocated capacity, it was always obligatory on the part of the EPL to supply power to the extent of 58% to the Electricity Board and that since EPL has sold a part of Electricity Board's share in the power 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.

       The Tribunal held that the direction given by the State Commission with reference to reimbursement of Annual Fixed Charges to the Electricity Board when the Electricity Board has not secured energy to the extent allocated under the proportionate principle is not correct.

       Finding of the Court:

       Impugned judgment of the Tribunal is erroneous.

       Result: Appeal allowed.