IMPORTANT POINT
In interpreting a contract plain meaning of the language employed, commercial parlance test and surrounding circumstances have to be considered.

JUDGMENT

NAVIN SINHA, J.

The controversy for determination in the present appeal is, whether the word ‘fuel’ as used in clause 1.1.27 of the Power Purchase Agreement (hereinafter referred to as ‘PPA’) means “natural gas only” or includes Regasified Liquefied Natural Gas (hereinafter referred to as ‘RLNG’) also.

2. The Andhra Pradesh Electricity Regulatory Commission (hereinafter referred to as “the Commission”), in O.P. No. 20 of 2013 dated 08.08.2013, preferred by the respondent, held that the term ‘fuel’ as used in the PPA meant natural gas only in its natural form, and did not include RLNG. Simply because the physical composition of natural gas and RLNG are similar, it does not automatically entitle the respondent to generate power with RLNG, which was more expensive and not domestically available, affecting the per unit supply of power generated by it, as ultimately the consumer would have to pay more.

3. In Appeal No. 222 of 2013 preferred by the respondent, the Appellate Tribunal by the impugned order dated 30.06.2014 held that use of the word “only” after “natural gas” in the PPA dated 02.05.2007 had to be understood in context of the deletion of other alternate fuel such as Naphtha etc. incorporated in the earlier PPAs, and it was never intended to restrict the meaning of the word natural gas to exclude RLNG, which was a variant of natural gas and did not come in the category of an alternate fuel. It further held that the higher price of RLNG could not be a determinative factor to exclude it from the agreement as any increase in price of gas was an accepted risk, especially in view of the non-availability of natural gas from the KGD6 basin. The use of RLNG had also been permitted on earlier occasions without any amendment to the PPA.

4. The predecessor of the appellant, the Andhra Pradesh State Electricity Board, in May, 1995 invited bids for establishing short gestation gas/Naphtha/fuel oil based power stations to bridge the demand supply gap of power in the State of Andhra Pradesh. Pursuant to the same, a PPA was executed between the parties on 31.03.1997 under which Naphtha was the primary fuel and gas an alternate fuel. Considering the high price of Naphtha, in March 2000, the Government of Andhra Pradesh decided to make gas the primary fuel. The Ministry of Petroleum on 05.06.2000 allotted 1.64 MMSCMD of natural gas to the respondent from the KGD6 Basin sourced through the Gas Authority of India Ltd (GAIL), leading to a gas supply agreement dated 31.08.2001 between the respondent and the latter. The PPA was accordingly amended on 18.06.2003 making gas the primary fuel and Naphtha an alternate fuel. The PPA underwent further amendment on 02.05.2007, restricting the term ‘fuel’ to “natural gas only”. A comparative status of the three PPA’s can beneficially be set out as follows:

PPA dated 31.03.1997	Amendment Agreement to the PPA dated 18.06.2003	Amendment Agreement dated 02.05.2007
“1.1.27) “Fuel means gas, Naptha, low sulphur heavy stock or furnace oil, and the like, that is intended to be used as primary fuel, by one or more units of the Project to generate power from the Project or in case of unavailability of Naptha any of the above as alternate fuel.”	1.1.27) “Fuel : means Natural Gas that is intended to be used as primary fuel by one or more units of the project to generate or in case of unavailability of primary fuel Naptha or Low Sulpur heavy stock and the like as alternate fuel.”	1.1.27) “Fuel means Natural Gas only”

5. GAIL having been unable to supply gas under the agreement due to prioritisation of other sectors, the respondent was permitted to purchase natural gas from M/s. Reliance Industries Ltd (RIL) at GAIL prices. The respondent, on 07.08.2012 and 27.08.2012, sought permission to allow use of RLNG as fuel for generating power. Th