Vedanta Limited VERSUS Odisha Electricity Regulatory Commission & Ors

Headnote:(A) Electricity Act, 2003 - Sections 61, 62, 63, 64, and 86(1)(b) and 86(1)(f) - Indian Contract Act, 1872 - Section 73 - Regulatory Commissions cannot rewrite a contract or agreement between parties - The Commission's role is to facilitate mutual consensus, not to impose its own terms - The last agreed position between parties must be adhered to. (Paras 41, 42, 44, 45, 46, 47)

(B) Contract Act, 1872 - Section 73 - Compensation for breach of contract - In case of non-supply of power, the remedy lies in the purchase of the same quantity by the procurer from marginal sources - Compensation is the additional price paid over and above the contracted price. (Para 19)

Facts of the case:
The appellant, an owner and operator of a thermal power plant, had a long-term PPA with a state power corporation. Disputes arose regarding non-payment of dues and short supply of power. A meeting resulted in an agreed compensation mechanism for shortfall, but the state regulatory commission later devised its own protocol, which was challenged. The commission also made observations regarding the utilization of linkage coal by the appellant.

Findings of Court:
The Tribunal held that once parties had agreed to a compensatory protocol, it became part of the PPA and could not be modified by the State Commission. The Commission's action of devising a new protocol amounted to rewriting the contract, which is impermissible. The observations regarding linkage coal were uncalled for and set aside.

Issues: The main issues were whether the State Commission could devise its own compensation protocol for short supply of power, contrary to the last agreed position of the parties, and whether the Commission's observations regarding utilization of linkage coal were sustainable.

Ratio Decidendi: The court held that regulatory commissions under the Electricity Act, 2003 cannot rewrite express terms of a contract or arrangement, even under the garb of their regulatory functions. The last agreed consensual decision between the parties must be given effect to.

Result: Appeal filed by the appellant allowed; appeal filed by the power corporation dismissed. Impugned order set aside; case remanded for execution of revised PPA as per mutual agreement. The corporation directed to release withheld payments to the appellant within three months. (Paras 59, 60, 61)

Legal Category Hierarchy

1. Dispute over compensation for short supply of power under a Power Purchase Agreement between a generator and distribution licensee. (Para 1 , 5 , 9 , 10 , 11 , 15 )

2. Generator argued Commission exceeded jurisdiction by devising a compensation protocol contrary to last agreed position; licensee argued for deterrence. (Para 21 , 22 , 23 )

3. Appeals disposed: Commission's order set aside, case remanded for revised PPA as per mutual agreement; generator's appeal allowed, licensee's dismissed. (Para 59 , 60 , 61 )

4. Can a State Electricity Regulatory Commission devise a compensation protocol for short supply of power under a PPA that deviates from the last agreed position between the parties?

No, the Commission cannot rewrite a contract or override the parties' mutual agreement; it must adhere to the last consensual position as recorded in the minutes of meeting. (Para 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 57 , 58 )

5. Are adverse observations by the Commission regarding utilization of linkage coal sustainable when made without proper enquiry and beyond the scope of the petition?

No, such observations are uncalled for and liable to be set aside as they could expose the party to criminal liability without basis. (Para 50 , 51 , 52 , 53 , 54 , 55 , 56 )

6. What is the scope of a Regulatory Commission's jurisdiction when adjudicating a dispute under Section 86(1)(f) of the Electricity Act regarding execution of a revised PPA?

The Commission's role is to facilitate mutual resolution, not to impose new contractual terms or rewrite the parties' agreement. (Para 37 , 38 , 44 , 45 )

JUDGMENT

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. The legality and propriety of order dated 22.06.2020 passed by the Odisha Electricity Regulatory Commission (hereinafter referred to as “the Commission”) in case no.68/2018 is under challenge in this batch of two appeals. Since both these appeals arise out of the same impugned order as well as the same set of facts and circumstances, we propose to dispose off the two appeals vide this common judgment.

2. For the sake of convenience, the parties hereto are referred to by their names instead of appellants or respondents.

3. M/s Vedanta Limited (in short “Vedanta”) owns and operates a 2400MW (1x600MW IPP and 3x600MW Captive/CGP units) thermal power plant at Jharsuguda, Odisha which supplies power to GRIDCO Limited, apart from captively consuming the balance power for its Aluminum smelting units.

4. GRIDCO Limited is engaged in the business of bulk purchase and sale of power to four distribution companies in the State of Odisha.

5. Vedanta executed a Memorandum of Understanding dated 26.09.2006 with the Department of Energy, Govt. of Odisha whereunder the State Government has right to purchase upto 25% of power sent out from the thermal power plant through a nominated agency.

6. On 28.09.2006, Vedanta entered into a long-term Power Purchase Agreement (PPA) with GRIDCO Limited whereunder it was under obligation to supply 25% of energy sent out from its thermal power plant to GRIDCO Limited at full tariff and an additional 7% or 5% (7% in the event coal block is allocated in the State of Odisha, or 5% in the event coal is being sourced from outside the State) at variable tariff. The PPA was submitted to the Commission for approval by way of case no.44/2006. The Commission, vide order dated 20.08.2009, directed certain modifications in the PPA. The modifications, as directed by the Commission, were caried out in the PPA and an amended PPA was executed between the parties on the same date i.e. 20.08.2009. Subsequently, the amended PPA was submitted to the Commission by way of case no.117/2009 for approval. Vide order dated 30.07.2010 passed in the said petition, the Commission directed further modifications and execution of a consolidated PPA with respect to all the four units of the power plant.

7. In pursuance to the said order dated 30.07.2010 passed by the Commission, a consolidated PPA dated 19.12.2012 was executed between Vedanta and GRIDCO Limited which came to be approved by the Commission vide order dated 12.06.2013 passed in the said case no.117/2009.

8. A modified Fuel Supply Agreement dated 27.08.2013 was executed between Vedanta and Mahanadi Coalfields Limited for unit-II of the power plant.

9. Subsequently, on 01.04.2015, Units-I, III and IV of the power plant were converted to captive generating plant. Accordingly, a petition bearing case no.21/2015 was filed by Vedanta before the Commission on 17.06.2015 seeking conversion of all the four units of the power plant to captive generating plants for the purpose of meeting the load requirement at its Aluminum smelter plant. Vide order dated 27.01.2016 passed by the Commission in the said petition, conversion of units-I, III and IV of the power plant from IPP to CGP was approved with effect from 01.04.2015 whereas unit-II was directed to remain as IPP and connected to the state grid. The relevant portion of the order is extracted hereinbelow: -

“35. In conclusion, the Commission issues the following directions:

a) Unit – II of the 4 x 600 MW power plant of Vedanta Ltd. will continue to remain as IPP and connected to the State Grid.

b) Quantum of power supply to GRIDCO towards State entitlement should be 25% (at full cost) and 7% / 5% (at variable cost) of total energy sent out from the power station (4 x 600 MW) as per the PPA in force. The Unit-II must remain connected to STU as State dedicated unit and accordingly supply to GRIDCO must be 25%+7%/5% of total energy sent out from the power station or total ex-bus generation from

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2025 Supreme(Online)(APTEL) 42

APPELLATE TRIBUNAL FOR ELECTRICITY
Vedanta Limited VERSUS Odisha Electricity Regulatory Commission & Ors
APPEAL No.107 2022

Regulatory Commissions under the Electricity Act, 2003 cannot rewrite a contract (PPA) by deviating from the last agreed position between the parties, as this amounts to impermissible rewriting of the contract.

Legal Category Hierarchy

Table of Contents

4. Can a State Electricity Regulatory Commission devise a compensation protocol for short supply of power under a PPA that deviates from the last agreed position between the parties?

5. Are adverse observations by the Commission regarding utilization of linkage coal sustainable when made without proper enquiry and beyond the scope of the petition?

6. What is the scope of a Regulatory Commission's jurisdiction when adjudicating a dispute under Section 86(1)(f) of the Electricity Act regarding execution of a revised PPA?

2025 Supreme(Online)(APTEL) 42

APPELLATE TRIBUNAL FOR ELECTRICITYVedanta Limited VERSUS Odisha Electricity Regulatory Commission & OrsAPPEAL No.107 2022

Regulatory Commissions under the Electricity Act, 2003 cannot rewrite a contract (PPA) by deviating from the last agreed position between the parties, as this amounts to impermissible rewriting of the contract.

Legal Category Hierarchy

Table of Contents

4. Can a State Electricity Regulatory Commission devise a compensation protocol for short supply of power under a PPA that deviates from the last agreed position between the parties?

5. Are adverse observations by the Commission regarding utilization of linkage coal sustainable when made without proper enquiry and beyond the scope of the petition?

6. What is the scope of a Regulatory Commission's jurisdiction when adjudicating a dispute under Section 86(1)(f) of the Electricity Act regarding execution of a revised PPA?

APPELLATE TRIBUNAL FOR ELECTRICITY
Vedanta Limited VERSUS Odisha Electricity Regulatory Commission & Ors
APPEAL No.107 2022