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Karnataka High Court
JINDAL THERMAL POWER COMPANY LIMITED, toranagallu DISTRICT, BELLARY - Appellant
Versus
KARNATAKA POWER TRANSMISSION CORPORATION limited, BANGALORE - Respondent
Decided On : 04-08-04
M.F.A. : 4795 of 2002
The Karnataka Electricity Regulatory Commission (KERC) is not a necessary and proper party to an appeal challenging its order fixing the tariff for electricity generated by an Independent Power Producer (IPP). The IPP had entered into a concluded contract with the Karnataka Power Transmission Corporation Limited (KPTCL) and the Government of Karnataka (GoK) prior to the enactment of the Karnataka Electricity Reform Act, 1999, which established the KERC. The terms of the contract, including the tariff rate, were agreed upon through negotiations between the parties. The KERC's order reducing the tariff was based on an erroneous interpretation of the contract and the application of irrelevant considerations. The IPP's claim that it is entitled to the tariff rate specified in the contract is supported by the doctrines of promissory estoppel and legitimate expectation.
Fact of the Case:
The appellant, Jindal Thermal Power Company Limited (JTPCL), is an IPP that entered into a contract with the KPTCL and the GoK in 1994 for the sale of electricity. The contract specified a tariff rate of Rs. 2.90 per unit, with an escalation of 5% per year. The KERC was established in 1999 and subsequently reviewed the tariff, reducing it to Rs. 2.36 per unit. JTPCL challenged the KERC's order, arguing that it was not a necessary party to the appeal, that there was a concluded contract between the parties prior to the enactment of the Karnataka Electricity Reform Act, 1999, and that the KERC's order was based on an erroneous interpretation of the contract and the application of irrelevant considerations.
Finding of the Court:
The court held that the KERC was not a necessary and proper party to the appeal because it was not a party to the contract between JTPCL, KPTCL, and the GoK. The court also held that there was a concluded contract between the parties prior to the enactment of the Karnataka Electricity Reform Act, 1999, and that the KERC's order reducing the tariff was based on an erroneous interpretation of the contract and the application of irrelevant considerations. The court further held that JTPCL's claim that it is entitled to the tariff rate specified in the contract is supported by the doctrines of promissory estoppel and legitimate expectation.
Issues: 1. Whether the KERC is a necessary and proper party to the appeal challenging its order fixing the tariff for electricity generated by JTPCL. 2. Whether there was a concluded contract between JTPCL, KPTCL, and the GoK prior to the enactment of the Karnataka Electricity Reform Act, 1999. 3. Whether the KERC's order reducing the tariff was based on an erroneous interpretation of the contract and the application of irrelevant considerations. 4. Whether JTPCL's claim that it is entitled to the tariff rate specified in the contract is supported by the doctrines of promissory estoppel and legitimate expectation.
Ratio Decidendi: 1. The KERC is not a necessary and proper party to the appeal because it was not a party to the contract between JTPCL, KPTCL, and the GoK. 2. There was a concluded contract between JTPCL, KPTCL, and the GoK prior to the enactment of the Karnataka Electricity Reform Act, 1999. 3. The KERC's order reducing the tariff was based on an erroneous interpretation of the contract and the application of irrelevant considerations. 4. JTPCL's claim that it is entitled to the tariff rate specified in the contract is supported by the doctrines of promissory estoppel and legitimate expectation.
Final Decision: The court allowed the appeal, set aside the KERC's order, and directed the KPTCL to comply with the tariff rate specified in the contract between JTPCL, KPTCL, and the GoK. The court also directed the KPTCL to repay the amounts recovered from JTPCL in pursuance of the interim order dated 19th November, 2002, and to pay amounts that become payable to JTPCL arising out of adjustments of the payments already made by JTPCL to KPTCL from 1st August, 2000 upto November 2002.
( 1 ) THE appellant, namely, Jindal Thermal Power Company Limited is a company incorporated under the provisions of the Companies Act, 1956 engaged in the generation and supply of power in the State of karnataka. Karnataka Power Transmission Corporation Limited (for short, 'the KPTCL'), the first respondent herein, is a Company estab lis hed under the provisions of the Companies Act, 1956 pursuant to the enactment of the Karnataka Electricity Reform Act, 1999 (for short, 'the Act'), whereunder the Karnataka Electricity Board ('the KEB', for short), was trifurcated into three Companies. Respondent 2 is government of Kamataka (Gok ).
( 2 ) PURSUANT to the notifications and the subsequent clarifications issued by the Government of India in March 1992 setting out the norms for determining the tariff payable to the generating Companies, by an order dated 7th March, 1994, approval was granted by Gok to the appellant for setting up a power project of 300 MW and selling power directly to industrial units, with the balance to KPTCL (the erstwhile keb ). As per the tariff fixed according to the norms laid down by government of India (Goi), the order stated various advantages of setting up of the power project in the region. The order laid down the guidelines and conditions on which approval was granted to the appellant. The Detailed Project Report (DPR) of the appellant, the order of Gok dated 7th March, 1994 and affidavit dated 10th October, 2001 of kptcl filed before the Karnataka Electricity Regulatory Commission, bangalore (for short, 'the Commission'), would bring out the acute power shortage in the State of Karnataka and show justification for securing needed power for the State grid. The DPR states that the project was set up to supply around 150 MW of power without break to its steel plant and 100 MW power to the State grid. As per the Goi policies dated 9th october, 1995; 6th November, 1996 and 9th December, 1997 distinction is made between Captive Power Plant (CPP) and an Independent Power plant (IPP ). The CPP has to be approved under Section 44 of the electricity (Supply) Act, 1948 (for short, 'the Supply Act'), whereas an ipp would be approved under Section 29 to Section 31 of the Electricity (Supply) Act, 1948 (for short, the 'supply Act' ). As per the appellant, its plant is an IPP as it has fully complied with the provisions of Sections 29 to 31 of the Supply Act for setting up of the Scheme and with the provisions of Section 43-A of the Supply Act for sale of electricity. KEB, in its letter dated 1st March, 1995 to the Central Electricity Authority (CEA) had clarified that the appellant is an IPP. On 30th March, 1995, the appellant and KEB signed Heads of Terms for a Wheeling, Banking and Grid support agreement. On 7th December, 1995 an Amended and restated Power Purchase Agreement was entered into by Jindal vijayanagar Steel Limited (JVSL) and the appellant for supply of power, which agreement was subsequently amended on 12th December, 2001. On 22nd December, 1995, Gok, in support of the project, conveyed its approval for allotment of land by KSIDC. On 23rd January, 1996 a wheeling and Banking Agreement was entered into by the appellant with the KEB whereunder as per Clause 2. 4, KEB agreed to Wheeling and Banking the energy generated by the appellant. Further, as per the terms of the said agreement, the appellant agreed to sell and KPTCL agreed to buy excess power on the terms to be agreed between parties and was also allowed the sale of excess surplus power to other industrial units in the State. Gok by its order dated 1st February, 1996 once again confirmed that the appellant is an IPP. By its order dated 13th February, 1996, Gok approved the modification of the capacity of the power plant from 240 MW to 260 MW. Further, Gok by its order dated 2nd March. 1996 gave its consent under Section 43-A of the Supply Act and Goi by its notification dated 30th March, 1992 accorded permission to the appellant t
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