Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-006581-006582 – 2025 |
| Diary Number | 21070/2025 |
| Judge Name | HON’BLE MR. JUSTICE SANJAY KUMAR |
| Bench |
HON’BLE MR. JUSTICE SANJAY KUMAR HON’BLE MR. JUSTICE ALOK ARADHE |
| Concurring or Dissenting Judges | HON’BLE MR. JUSTICE ALOK ARADHE (concurring) |
| Precedent Value | Binding authority on PPA interpretation and compensation/reimbursement in electricity regulation disputes |
| Overrules / Affirms | Affirms GERC’s 18.02.2009 order and 2016 SC decision; overrules APTEL’s 2010 finding denying fixed‐charge reimbursement |
| Type of Law | Electricity Regulatory Law; Contract Law |
| Questions of Law |
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| Ratio Decidendi | The PPA’s proportionate‐allocation principle compels the generator to declare weekly availability of its full capacity and dispatch 58% to GUVNL and 42% to ESL. Wrongful diversion of GUVNL’s share entitles GUVNL to (a) compensation at the HTP-1 energy tariff (less variable charges) and (b) separate reimbursement of proportionate fixed charges for the shortfall in supply. Metering and diversion must be computed half-hourly pursuant to the CEA’s 2005 recommendation, which the parties adopted. The generator cannot pocket fixed charges paid by both beneficiaries on the diverted quantum. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court | GEB (later GUVNL) and Essar Power Ltd. entered PPAs in 1996 for 300 MW/215 MW supply. Essar diverted GUVNL’s 58% share to its sister company, ESL, triggering claims since 2005. GUVNL’s petitions under Section 86(1)(f) were heard by GERC, APTEL and this Court in multiple rounds. GERC (2009) held GUVNL entitled to recover tariff-based compensation for diversion and fixed-charge reimbursement for shortfall; APTEL (2010) denied reimbursement; SC (2016) restored GERC; GERC (2019) computed tariff compensation, DPC and DG-incentive refund, but disallowed fixed charges; APTEL (2025) confirmed but remanded minor calculation issues. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All regulatory commissions, APTEL and subordinate courts in electricity tariff and PPA disputes |
| Persuasive For | High Courts in commercial‐contract and regulatory interpretation cases |
| Overrules | APTEL’s 22.02.2010 decision denying fixed‐charge reimbursement |
| Follows | SC’s 09.08.2016 ruling in GUVNL vs. Essar Power Ltd. |
What’s New / What Lawyers Should Note
- The Supreme Court confirms entitlement to separate reimbursement of proportionate fixed charges for the shortfall arising from wrongful diversion, in addition to tariff‐based compensation.
- Half-hourly accounting of diverted energy—adopted per CEA’s 21.02.2005 recommendation—is binding for computation of excess supply, despite unamended PPAs specifying hourly blocks.
- PPA letters from 2000–2004 constitute binding admissions of the 58:42 supply ratio.
- Generators cannot retain fixed‐charge proceeds from both beneficiaries on diverted quantum—double recovery is barred.
- Delayed Payment Charges (DPC) and refund of Deemed Generation Incentive post-Sep 2002 remain payable; calculation issues may be addressed on remand.
Summary of Legal Reasoning
- PPA Proportionate Principle: Articles 3.1, Schedule VI and Article 7.1.1 establish 58%:42% split and weekly declaration by generator, enabling dispatch instructions in that ratio.
- Letters as Admissions: 17.02.2000–30.11.2004 correspondence unequivocally acknowledged 58:42 allocation.
- Fixed‐Charge Reimbursement (Para 9.11 GERC 2009): Shortfall in supply triggers restitution of fixed charges paid but not due under PPA; affirmed by SC and restored GERC.
- Tariff‐based Compensation (Para 9.13 GERC 2009): Wrongful diversion entitles procurer to HTP-1 Energy Charge less variable costs; affirmed for post-2004 period.
- Metering Methodology: CEA’s 21.02.2005 recommendation to meter half-hourly on ESL load and evacuation side—accepted by parties—governs diversion computation.
- Remand Directions: Minor discrepancies on DGI quantum, invoice deductions and interest type to be settled by GERC on remand.
Arguments by the Parties
Petitioner (GUVNL):
- PPA mandates weekly declaration of full capacity and dispatch in 58:42 ratio.
- Entitled to HTP-1 tariff compensation for diverted supply and proportionate fixed‐charge reimbursement for shortfall.
- CEA’s half-hourly metering adoption binds diversion computation method.
- DPC and DG Incentive refund cover Sep 2002–May 2006.
Respondent (Essar Power Ltd.):
- PPA’s unamended hourly‐block definition precludes half-hourly computation unless formal amendment.
- GERC’s 2019 refusal of fixed‐charge reimbursement stands; para 9.13 restricts compensation to energy tariff.
- Disputes quantum of Deemed Generation Incentive (₹34.42 Cr vs ₹36.62 Cr) and total deductions (₹157.88 Cr vs ₹234.60 Cr).
- DPC should be simple interest only; compound interest not warranted absent PPA clause.
Factual Background
From 1996, GEB (now GUVNL) contracted 300 MW to itself and 215 MW to Essar Steel Ltd. (ESL) from Essar Power Ltd.’s 515 MW plant. Essar diverted GUVNL’s share to ESL from 1998. GEB/GUVNL issued letters in 2000–2004 demanding recovery and filed before GERC in 2005. GERC’s 2009 order allowed tariff compensation and fixed-charge reimbursement; APTEL (2010) reversed on reimbursement; SC (2016) restored GERC. GERC’s 2019 computation awarded only HTP-1 compensation and DPC/DG refund; APTEL’s 2025 judgment confirmed and remanded calculation issues. SC’s 2025 decision resolves entitlement to fixed‐charge reimbursement and metering methodology.
Statutory Analysis
- Electricity Act 2003: Section 86(1)(f) for GERC jurisdiction; Section 125 for SC appeals.
- PPA Provisions:
- Article 1: “Availability Period” defined as 60-minute blocks.
- Article 3.1 & Schedule VI: Full capacity sharing in 58:42.
- Article 5 (Billing): Monthly invoices—1/12 of annual fixed charges; variable charges monthly; incentives monthly.
- Article 7.1.1–7.3 (Tariff): Annual fixed charges, variable charges, deemed generation incentive.
- Article 12.1: Written amendment requirement (ignored in practice post-2005).
- CEA Letter (21.02.2005): Recommended half-hourly metering; adopted by parties over PPA wording.
Alert Indicators
- 🚨 Breaking Precedent – Overturns APTEL’s 2010 view on fixed‐charge reimbursement.
- ✔ Precedent Followed – Upholds SC’s 2016 decision reinstating GERC.
- 🔄 Conflicting Decisions – Resolves divergence between GERC (hourly) and post-adoption half-hourly methodology.