2026 Supreme(Online)(CERC) 322

CENTRAL ELECTRICITY REGULATORY COMMISSION
Jishnu Barua, Chairperson, Ramesh Babu V., Member, Harish Dudani, Member, Ravinder Singh Dhillon, Member
Damodar Valley Corporation – Appellant
Versus
BSES Yamuna Power Limited – Respondent
Petition No. 319/MP/2019

In the absence of a specific contractual clause, a long-standing, mutually accepted payment appropriation methodology established through the conduct of parties constitutes a binding agreement that cannot be unilaterally altered. Such arrangements prevail unless superseded by subsequent statutory regulations.

Headnote:(A) Electricity Act, 2003 - Section 79(1)(f) - Indian Contract Act, 1872 - Sections 59, 60, and 62 - Power Purchase Agreement - Payment appropriation mechanism - Silent contract - Dispute over priority of adjustment between principal dues and surcharge - Held, parties had established a mutually agreed course of conduct through joint reconciliation statements where payments were first adjusted to principal dues - This practice cannot be unilaterally altered by one party - Doctrine of past practice and estoppel by conduct apply - Contractual novation requires mutual consent. (Paras 27, 31, 39, 41, 55, 58)

(B) Regulatory Compliance - Electricity (Late Payment Surcharge) Rules, 2021/2022 - Applicability - New rules regarding appropriation order (Surcharge first) do not apply retrospectively to mutually agreed payment arrangements in place prior to notification - Rules are applicable from the date of their commencement. (Paras 42, 59)

Facts of the case:
A generator and a distribution licensee entered into a power purchase agreement which was silent on the priority of payment appropriation. For nearly eleven years, the parties followed a consistent methodology where payments were adjusted against principal dues before late payment surcharges. In 2018, the generator attempted to unilaterally change this methodology to adjust late payment surcharges first, citing judicial precedents concerning decretal amounts. The distribution licensee objected, maintaining that the original methodology was binding based on mutual agreement and past practice.

Findings of Court:
The Commission found that the generator’s reliance on judicial precedents regarding decretal amounts was misplaced as the present case involved contractual dues. The joint reconciliation statements signed by both parties evidenced a binding mutual arrangement. Unilateral alteration of this arrangement without consent constitutes a novation of contract, which is impermissible. However, this mutual arrangement is superseded by statutory rules regarding payment appropriation which took effect in 2021.

Issues: The primary issues were whether the generator could unilaterally alter the long-standing payment appropriation methodology and whether judicial precedents regarding decretal amounts were applicable to contractual power purchase agreements.

Ratio Decidendi: Where a contract is silent on payment appropriation, a consistent course of conduct mutually agreed upon and acted upon by parties for an extended period creates a binding arrangement that cannot be unilaterally rescinded by one party. Such an arrangement constitutes a valid contractual practice under the Law of Contracts, and statutory rules cannot be applied retrospectively to invalidate prior mutual agreements.

Result: Petition disposed of with the direction to settle dues based on the original methodology until the notification date of the relevant statutory rules and thereafter in accordance with the new rules.