The Supreme Court ruled that fixed charges must be reimbursed due to wrongful power diversion, emphasizing the contractual obligation and proportionate allocation principles under the Power Purchase Agreements.

JUDGMENT :

SANJAY KUMAR, J

1. A tortuous litigative journey since the year 2005, notwithstanding, the matter is before this Court yet again.

2. By way of these appeals filed under Section 125 of the ELECTRICITY ACT , 2003, Gujarat Urja Vikas Nigam Limited (GUVNL) assails the common judgment dated 21.03.2025 passed by the Appellate Tribunal for Electricity at New Delhi (APTEL) in Appeal Nos. 138 of 2021 and 201 of 2023. Appeal No. 138 of 2021 was preferred by GUVNL while Appeal No. 201 of 2023 was filed by Essar Power Limited (EPL). These appeals were directed against the order dated 27.12.2019 passed by Gujarat Electricity Regulatory Commission, Gandhi Nagar (GERC), in Petition No. 972 of 2009 filed by GUVNL.

3. Before considering the impact and effect of the past litigation between the parties and the orders passed therein, including by this Court, it would be apposite to note the factual narrative.

4. Shorn of unnecessary detail, relevant facts unfold thus: Gujarat Electricity Board (GEB), the predecessor-in-interest of GUVNL, entered into a Power Purchase Agreement (PPA) with EPL on 30.05.1996 for purchase of the electricity generated by EPL from its plant at Hazira for a period of 20 years. The total installed capacity of EPL’s plant was 515 MW and 300 MW thereof was to be supplied to GEB under the above PPA. EPL entered into a separate PPA with Essar Steel Limited (ESL), its sister company, on 29.06.1996 for sale and supply of the remaining 215 MW. In effect, the proportionate share of GEB and ESL in the electricity generated by EPL was in the ratio of 58.25:41.75, rounded off to 58:42.

5. The cause for grievance, laying foundation for the inception of this litigation in the year 2005, dates back long prior thereto. In breach of the agreed proportionate shares in the electricity generated by it, EPL started supplying more power to its sister company, ESL, from out of the allocated share of GEB. This issue was raised by GEB, contending that EPL had supplied over its proportionate share of electricity to ESL which should be treated as deemed supply of electricity by GEB itself and it should be compensated. EPL addressed letter dated 17.02.2000 to GEB, wherein it stated that if ESL drew more power than its allocated capacity, then GEB should charge ESL for the excess power drawn, as EPL’s deemed power supply to GEB, but in that case no deemed non-generation penalty should be imposed upon EPL. Eventually, GEB addressed letter dated 29.07.2004 to EPL about under-allocation of power to it and proposed recovery, on monthly basis, in terms of EPL’s letter dated 17.02.2000. GEB asked EPL to confirm the same to enable it to process the bill for the month of June, 2004 after adjusting the proposed recovery. There was further correspondence on the issue and GEB finally addressed letter dated 30.10.2004 to EPL, stating that a sum of Rs.64 Crores would be recovered from EPL’s pending monthly invoices for diverting GEB’s allocated share from EPL’s 515 MW plant to its sister company, ESL, by treating the same as deemed supply by GEB from April, 1998 till September, 2004. GEB further stated that recovery in respect of such diversion of energy from its allocated s