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SUPREME COURT OF INDIA
ARUN MISHRA, B.R. GAVAI, SURYA KANT, JJ.
M/s Adani Power (Mundra) Ltd. – Appellant
Versus
Gujarat Electricity Regulatory Commission and ors. – Respondents
Civil Appeal No.11133 of 2011
Decided on : 02-07-2019
(2013) 5 SCC 470; (2016) 4 SCC 126; (2018) 11 SCC 508; (1961) 3 SCR 1020: AIR 1961 SC 1285; (1976) 4 SCC 147; (2013) 8 SCC 131 - Relied upon
(2009) 1 WLR 1988 - Referred
(b) Interpretation of contract - Strict construction not applicable - In case of conflict between two clauses attempt should be made to harmonise the same. (Para 28)
AIR 1997 SC 1006 - Relied upon
© Interpretation of contract - Instantly Articles 3.1.2, 3.4.2 and 14.1, 14.2, 14.3 and 14.4. of the PPA need to be read harmoniously - Termination of agreement - Agreement terminable by either party - Under Article 3.4.2 termination can be effected only on breach of conditions in Article 3.1.2 - Articles 14.1 and 14.2 state grounds of defaults of seller and procurer respectively for terminating the agreement - These clauses need to be tread harmoniously - Forums below taking erroneous view that that termination can be effected under Article 3.4.2 only if there is an agreement with regard to non-compliance of condition under Article 3.4.2 by both the parties. (Para 30, 31)
(d) Interpretation of contract - Special Provision and general provision - Provisions under Article 14 are general - Provision under Article 3.4.2 being specific can only be invoked in case of non-compliance with any of the conditions as provided under Article 3.1.2 - Therefore the special provision in Article 3.4.2 will exclude applicability of general provisions contained in Article 14 of the contract. (Para 35)
AIR 1961 SC 1170; (1984) 4 SCC 27 - Relied upon
(e) Interpretation of contract - Appellant mentioning that basis of bid was commitment of GMDC for supply indigenous coal - Bid document forming a part of PPA - Everybody concerned aware of situation - GMDC resiling from its commitment and refusing to enter into FSA with the appellant - Appellant’s failure to produce FSA non-compliance of Condition No. (ii) in Article 3.1.2 - Held, appellant justified in invoking Article 3.4.2 of the PPA and terminate the agreement. (Para 37, 39, 41, 43, 44)
(1991) 1 SCC 533; (2001) 5 SCC 101; 2007 SCC On Line APTEL 107; (2017) 16 SCC 498 - Referred
(f) Electricity Act, 2003 - Section 62 - Compensatory tariff - Parties relegated to CERC for determination of compensatory tariff payable to the appellant from the date of termination of the PPA. (Para 50)
Facts of the case:
Respondent No. 2, namely, Gujarat Urja Vikas Nigam Ltd. (the procurer) on 01.02.2006, initiated the process of bidding for supply of power on long term basis, by issuing a Request For Qualification. Three separate bids for purchase of power were invited. The RFQ was followed by Request For Proposal on 24.11.2006. The present matter concerns bid No. 2 in respect of which the appellant was selected as a successful bidder.
The procurer issued a Letter of Intent in respect of bid no. 2, to the appellant on 11.01.2007 for supplying 1000 MW power at the rate of Rs. 2.35 per Kwh. Consequently, the Power Purchase Agreement came to be entered into between the procurer and the appellant, for purchase and sale of 1000 MW power from the appellant’s power project at Korba, Chhatisgarh, at the delivery point at Nani Khakhar in the State of Gujarat. Similarly, on 06.02.2007 another PPA came to be executed by the procurer with the appellant in respect of bid No. 1, which project was to be executed by using imported coal. The rate determined was Rs. 2.89 per unit in respect of bid No. 1.
On 12.02.2007, the appellant informed the procurer that it would supply power against bid No. 2, from Mundra Power Project in Gujarat instead of Chhattisgarh Project. Accordingly, a supplemental PPA was entered into between the appellant and the procurer on 18.04.2007, to off take the contracted capacity of 1000 MW against bid No. 2, from Mundra Power Project.
The appellant terminated the PPA with the procurer.
The procurer filed an application before the Gujarat ERC which was allowed holding that the termination of the PPA was illegal and directed the appellant herein to supply the power to the procurer at the rate determined in the PPA.
The appeal by the appellant was dismissed by the Appellate Tribunal for Electricity.
Finding of the Court:
Appellant was justified in invoking Article 3.4.2 of the PPA and terminate the agreement.
Result: Appeal allowed.
JUDGMENT :
B.R. GAVAI, J.
1. The appellant has approached this Court being aggrieved by the judgment and order passed by the Appellate Tribunal for Electricity (“the Appellate Tribunal” for short) in Appeal No. 184 of 2010 dated 07.09.2011 thereby dismissing the appeal filed by the present appellant and confirming the judgment and order passed by the Gujarat Electricity Regulatory Commission (“the Commission” for short) dated 31.08.2010.
2. The facts in brief giving rise to the present appeal are as under.
Respondent No. 2, namely, Gujarat Urja Vikas Nigam Ltd. (hereinafter referred to as “the procurer”) is a holding company engaged in the business of bulk purchases from the power generators and supply to the distribution companies in the State of Gujarat. On 01.02.2006, the procurer initiated the process of bidding for supply of power on long term basis, by issuing a Request For Qualification (“RFQ” for short). Three separate bids for purchase of power in accordance with the provisions of Section 63 of the Electricity Act, 2003 were invited. Each of the three bids envisaged purchase of power to the maximum extent of 2000 Mega Watt (“MW” for short). The RFQ was followed by Request For Proposal (“RFP” for short) on 24.11.2006. The present matter concerns bid No. 2 in respect of which the appellant was selected as a successful bidder.
3. On being successful in the bidding process, the procurer issued a Letter of Intent (“LOI” for short) in respect of bid no. 2, to the appellant on 11.01.2007 for supplying 1000 MW power at the rate of Rs. 2.35 per Kwh. Consequently, the Power Purchase Agreement (“PPA” for short) came to be entered into between the procurer and the appellant, for purchase and sale of 1000 MW power from the appellant’s power project at Korba, Chhatisgarh, at the delivery point at Nani Khakhar in the State of Gujarat. Similarly, on 06.02.2007 another PPA came to be executed by the procurer with the appellant in respect of bid No. 1, which project was to be executed by using imported coal. The rate determined was Rs. 2.89 per unit in respect of bid No. 1.
4. On 12.02.2007, the appellant informed the procurer that it would supply power against bid No. 2, from Mundra Power Project in Gujarat instead of Chhattisgarh Project. Accordingly, a supplemental PPA was entered into between the appellant and the procurer on 18.04.2007, to off take the contracted capacity of 1000 MW against bid No. 2, from Mundra Power Project.
5. The appellant contended that, the bid submitted by it in respect of bid No. 2 was on the basis of the assurance given by Gujarat Mineral Development Corporation (“GMDC” for short) to supply 4 million tonnes of coal. It also contended that, the GMDC was not abiding by the said assurance. So it addressed a communication to the Government of Gujarat on 21.05.2007 to find out a solution. Since the Fuel Supply Agreement (“FSA” for short) could not be executed, as contemplated between the appellant and the GMDC; the appellant informed the procurer that the FSA between it and the GMDC had not yet been finalized. Again, a communication came to be addressed by the appellant on 01.05.2008 to the Government of Gujarat, requesting it to impress upon the GMDC to adhere to its assurance and supply the coal from the coal blocks allocated to the GMDC. The procurer, thereafter, in the month of June, 2008, addressed a communication to the appellants stating that, since it had not complied with certain conditions stipulated in the PPA and as such, it should furnish an additional performance bank guarantee. The appellant addressed another communication to the procurer on 17.01.2009, reiterating its inability to supply the power to the procurer in the absence of FSA with GMDC. It also informed that it had no other option except to terminate the PPA. On 27.02.2009, the Government of Gujarat wrote to the GMDC, asking it to supply coal to the appellant from Naini block.
6. It appears that there was a dispute between the appellant and t
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