Tata Power Trading Company Limited vs Karnataka Electricity Regulatory Commission & Ors.
- Court
- Appellate Tribunal For Electricity
Court-2
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO.45 OF 2018
Dated: 15.07.2026
Present: Hon’ble Ms. Seema Gupta, Officiating Chairperson
Hon’ble Mr. Virender Bhat, Judicial Member
In the matter of:
1. Tata Power Trading Company Limited
Through its Chief Financial Officer & Company Secretary)
Having its Corporate Office at
nd
B12/13, 2 Floor , Shatabdi Bhavan,
Sector 4, Noida, Uttar Pradesh – 201301 … Appellant
Versus
1. Karnataka Electricity Regulatory Commission
Through its Secretary
th th
No. 9/2, 6 & 7 Floor,
Mahalakshmi Chambers, M. G. Road,
Bengaluru - 560001
2. Power Company of Karnataka Limited
Through its Managing Director
th
Room No. 501, 5 Floor,
KPTCL Building, Kaveri Bhavan,
Bengaluru - 560009
3. State Load Despatch Center
Karnataka Power Transmission Corporation Limited
Through its Chief Engineer
No. 28, Race Course, Road,
Bengaluru
4. Bengalore Electricity Supply Company Limited
Through its Managing Director
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Appeal No.45 of 2018 Page 1 of 40
Corporate Office, BESCOM,
2nd Floor, K.R. Circle
Bengaluru – 560001
5. Mangalore Electricity Supply Company Limited
Through its Managing Director
Corporate Office, Paradigm Plaza,
A.B. Shetty Circle, Pandeshwara
Mangalore – 575001
6. Chamundeshwari Electricity Supply Company Limited
Through its Managing Director
Corporate Office, 927,
L.J. Avenue, New Kantharaja Urs Road,
Saraswathipuram, Mysuru – 570009
7. Hubli Electricity Supply Company Limited
Through its Managing Director
Corporate Office, HESCOM,
P.B. Road, Navnagar,
Hubli – 580025
8. Gulbarga Electricity Supply Company Limited
Through its Managing Director
Corporate Office, GESCOM,
Station Main Road,
Gulbarga – 585102
9. Shantha Projects Limited
Through its Managing Director
Corporate Office, S-9, 1st Floor,
Shantha Skyline Apartment,
M.J. Nagar, Hospet – 583203,
Bellary District, Karnataka … Respondent(s)
Counsel for the Appellant(s) : Shri Venkatesh
Shryeshth Ramesh Sharma
Kanika Chugh
Ashutosh Kumar Srivastava
Suhael Buttan
Priya Dhankar
Vineet Kumar
Surbhi Kapoor
Tanishka Khatana
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Appeal No.45 of 2018 Page 2 of 40
Punyam Bhutani
Nikunj Bhatnagar
Kunal Veer Chopra
Vedant Choudhary
Manav Bhatia
Drishti Rathi
Nihal Bhardwaj
Adarsh Singh
Siddharth Nigotia
Manu Tiwari
Abhishek Nangia
Mohit Mansharamani
Akash Lamba
Shivam Kumar
Kartikay Trivedi
Aashwyn Singh
Mohit Gupta
Harsh Vardhan
Aniket Kanhaua
Indu Uttara
Ananya Dutta
Counsel for the Respondent(s) : S. Sriranga, Sr. Adv.
Sumana Naganand
Garima Jain
Nidhi Gupta
Tushar Kanti Mohindroo
for Res. 2
S. Sriranga, Sr. Adv.
Balaji Srinivasan
Pratiksha Mishra
for Res. 4
S. Sriranga, Sr. Adv.
Sumana Naganand
Garima Jain
Nidhi Gupta
Tushar Kanti Mohindroo
for Res. 7
J U D G M E N T
PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
1. The appellant Tata Power Trading Company Limited has, in this
st
appeal, assailed the order dated 01.08.2017 passed by the 1
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Appeal No.45 of 2018 Page 3 of 40
respondent Karnataka Electricity Regulatory Commission (hereinafter
referred to as “the Commission”) passed in petition no.18/2015 whereby
the Commission has held the appellant liable to pay compensation to the
respondent no.4-8 for short supply of energy and also to pay UI
Charges. In addition, the Commission has also held that the appellant
had indulged in “gaming” and accordingly has directed it to pay further
compensation to the respondent nos.4-8 in this regard.
Introduction of the Parties:
2. The appellant is an incorporated company engaged in the
business of trading of electricity under the license issued by Central
Electricity Regulatory Commission under Section 14(c) of the Electricity
Act, 2003.
3. The respondent no.2 is a nodal agency responsible for
procurement of short-term and long-term power to bridge the demand
and supply gap in the State of Karnataka. It has been procuring power
on behalf of respondent nos.4-8 from various sources including
purchase of power through energy exchange as well as bilateral
transmissions. The respondent no.3 is the apex body to ensure
integrated operation of the power system in the State of Karnataka and
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Appeal No.45 of 2018 Page 4 of 40
is responsible for the real time load dispatch functions, operation and
maintenance of SCADA system as well as energy accounting.
4. The respondent nos.4-8 are the distribution licensees responsible
for supplying the electricity to the consumers in their respective licensed
area of supply in the State of Karnataka. They have entered into Power
Purchase Agreements with the appellant for short-term procurement of
power.
5. Respondent no.9 is a generating company and has set up a
thermal power generating plant of 10MW capacity. It had entered into
back-to-back agreement with the appellant for supply of electricity to
respondent nos.4-8, the electricity supply companies (in short ESCOMs)
in the State of Karnataka for the period from 11.11.2013 to 31.03.2014.
Brief conspectus of the facts of the case:
6. In the month of July, 2013, the respondent no.2 invited a tender on
behalf of respondent nos.4-8 for procurement of 500MW RTC power for
the period starting from 01.09.2013 to 30.06.2014 on short-term basis.
The Request for Proposal (RfP) clearly indicated that in case, the
bidders were traders, they were required to furnish the copy of Letter of
Intent (LoI) received from the generator along with documentary
evidence regarding commissioning of the power station issued by the
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Appeal No.45 of 2018 Page 5 of 40
competent authority as well as the back-to-back agreement entered into
with the generator.
7. The appellant participated in the tender and emerged as one of the
successful bidders. Accordingly, appellant was awarded contract for
supply of 57MW aggregated power from different generation sources.
Letters of Intent were issued to the appellant vide letters dated
30.08.2013, 08.11.2013 and 23.11.2013 by respondent no.2, the details
of which are given in the following table: -
“
LOI Date Generator Quantum Period
30.8.2013 Core Green Sugars 15 MW 2.9.2013
to
31.3.2014
8.11.2013 Shantha Projects
Ltd.
10 MW 11.11.2013
to
31.3.2014
23.11.2013 Hiranyakeshi
18 MW 1.12.2013
Sahakari Sakkare
Karkhane Niyamit
to
15.2.2014
23.11.2013 Vishwanath Sugars
14 MW 1.12.2013
Ltd.
to
31.3.2014
”
8. Consequently, the appellant executed Power Purchase Agreement
(PPA) dated 06.09.2013 with the ESCOMs for supply of contracted
quantum i.e. 57MW of power at the firm price of Rs.5.50/unit for the
entire contract period.
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Appeal No.45 of 2018 Page 6 of 40
9. In terms of the LoI dated 08.11.2013, the appellant was to source
10MW of power from respondent no.9 for onward supply to respondent
nos.4-8 from 11.11.2013 to 31.03.2014 in terms of the PPA dated
06.09.2013. However, it appears that the respondent no.9 failed to
supply the requisite quantum of power to the appellant as per the said
LoI during the period of November-December, 2013 on account of some
purported grid disturbance and failure as well as tripping of 100MVA
transformer in Kushagti 220kV R/s KPTCL sub-station for 11 number of
instances. As a result, total scheduling of power under the PPA fell
below 85% of the contracted quantity in a month.
10. Despite various communications exchanged in this regard
between the appellant and the respondents, the respondents had raised
demand for compensation from the appellant for short-supply of power
as per the provisions of Article 6.2.4 of the PPA and also deducted the
compensation amount from the invoices raised by the appellant under
the subsequent PPAs executed between the parties for different
transactions.
11. On 01.04.2014, the respondent no.4 imposed a further penalty
upon the appellant on the ground that as per Article 3.1.2 of the PPA,
the appellant has failed to furnish the revised schedule, and therefore,
was liable to pay amount of Rs.1,10,55,000/- being excess amount paid
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Appeal No.45 of 2018 Page 7 of 40
towards scheduled energy. In addition thereto, the respondent no.4
claimed further amount of Rs.77,69,100/- on the ground that due to short
supply of power by the appellant, it has entered into short-term contract
to source power to meet the shortfall in power, at higher rate, and
therefore, appellant was liable to make good the loss suffered on this
count by the respondent no.4.
12. The respondent no.5 deducted a sum of Rs.8,17,855/- and
Rs.13,00,000/- from the invoices of the appellant in the month of March,
2014. Vide letters dated 22.04.2014 and 08.05.2014, the appellant
requested the respondent no.5 to remit the amount so deducted by it but
of no avail.
13. On 16.05.2014, respondent no.4 raised a further claim in the
amount of Rs.72,71,700/- against the appellant on the ground that UI
rate paid by the generator i.e. respondent no.9 to SLDC is less than the
agreed tariff under the PPA i.e. Rs.5.50/unit and accordingly, encashed
the Performance Bank Guarantee amount to Rs.67,79,520/- which had
been furnished by the appellant. Letter dated 02.06.2014 sent by the
appellant objecting to such encashment of Bank Guarantee to the
respondent no.4 to remit the said amount of Rs.67,79,520/- did not yield
any result.
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Appeal No.45 of 2018 Page 8 of 40
14. In the years 2014 and 2015, the respondent no.2 again invited
tenders for supply of 500MW and 250MW of power. The bid submitted
by the appellant in response to such tender was accepted and
thereupon, the appellant entered into PPA dated 14.11.2014 and
27.02.2015 with the respondent nos.4-8 for the capacity of 89.80 MW
and 17MW respectively. When the appellant raised monthly bill for the
month of December, 2014 under the PPA dated 14.11.2014, it received
a short payment from the respondent no.4.
15. Vide e-mail dated 26.02.2015, the respondent no.4 informed the
appellant that an amount of Rs.15,10,177/- is payable by the appellant in
respect of transactions covered under PPA dated 06.09.2013. Similarly,
the respondent no.3 also vide letter dated 11.03.2015 informed the
appellant that an amount of Rs.1,56,45,949 was due from respondent
no.9 towards payment of UI Charges as the respondent no.9 had
deviated from the schedule which resulted in huge UI charges. In
addition to the same, respondent no.2 also vide letter dated 23.03.2015
informed the appellant that an amount of Rs.1.56 crores was due from
respondent no.9 which will be deducted from the energy bills of the
appellant from the month of March, 2015.
16. Despite objections raised by the appellant to these demands from
respondent nos.2,3 & 4 vide letters dated 01.04.2015 and 07.04.2015,
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Appeal No.45 of 2018 Page 9 of 40
the respondent no.4 deducted a sum of Rs.1,56,44,949/- from the
energy bills submitted by the appellant for the month of March, 2015.
17. Aggrieved by such recoveries/deductions made by the respondent
ESCOMs, the appellant approached the Commission by way of petition
no.18/2015 with the following prayers: -
“(a) Admit the Petition;
(b) Declare that the recovery of Rs.1,56,44,949/- made
by the Third Respondent on 7.5.2015 from the amount
payable to the Petitioner against its invoice is illegal,
contrary to law and against the terms of the Power
Purchase Agreements dated 14.11.2014 and 27.2.2015;
(c) Direct the Third Respondent to refund the sum of
Rs.1,56,44,949/- deducted / recovered from the
Petitioner along with surcharge at 15% per annum;
(d) Declare that recovery of Rs.1,42,00,422/- made by
the Respondents from the amounts payable to the
Petitioner is illegal, contrary to law and against the terms
of the Power Purchase Agreement dated 6.9.2013;
(e) Direct the Third to Seventh Respondents to refund
the sum of Rs.1,42,00,422/- deducted / recovered from
the Petitioner along with surcharge at 15% per annum;
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Appeal No.45 of 2018 Page 10 of 40
(f) Direct the Third to Seventh Respondents to refund the
sum of Rs.49,91,937/- recovered as compensation
charges for the period November, 2013 and December,
2013 when there was a force majeure event resulting in
short supply;
(g) Declare that the Third to Seventh Respondents are
not entitled to recover any sums from the Petitioner for
the power sourced by the Petitioner other than the
deductions permitted under the Power Purchase
Agreements between the parties;
(h) Award cost of this Petition; and
(i) Pass any such other and further orders / directions as
this Hon’ble Commission may deem fit in the facts and
circumstances of the case.”
18. The Commission framed following issues for its consideration: -
“(1) To what extent the Intra-State ABT Order dated
20.6.2006 passed by this Commission or UI Regulations,
2009 is applicable in the present case?
(2) What are the liabilities of the Petitioner under the
terms of the PPA for the variation between the
Scheduled Energy and the actual energy delivered, i.e.,
for short-delivery of energy?
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Appeal No.45 of 2018 Page 11 of 40
(3) Whether there was force majeure event during the
months of November and December, 2013 as contended
by the Petitioner? If so, for what duration and for what
reliefs the Petitioner is entitled to?
(4) Whether the contesting Respondents have proved
that, the conduct of the Petitioner in not taking timely
steps for revising the energy schedule (Dispatch
Instructions) amounted to „gaming‟ in the present case?
(5) If Issue No.(4) above is answered in the affirmative,
what should be the compensation payable to the
contesting Respondents?
(6) Whether the deductions made by the ESCOMs
(Respondents - 3 to 7) and the encashment of the Bank
Guarantee by the 3rd Respondent (BESCOM) are valid
in law?
(7) Whether the deduction of Rs.1,56,44,949/- made by
the 3rd Respondent (BESCOM) from the payments to be
made to the Petitioner against its energy Bill for March,
2015, relating to the subsequent PPA, is valid in law?
(8) What Order?”
19. On issue no.1, the Commission held that the Intra-State ABT order
or UI Regulations, 2009 is not applicable in its entirety in the present
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Appeal No.45 of 2018 Page 12 of 40
case but the UI principles, as understood in the said order/regulations,
should be made applicable. On issue no.2, the Commission has held the
petitioner liable to pay: -
“(i) the UI charges for the variation between the
scheduled energy and the actual energy injected, as per
Article 4.2.3 of the PPA;
(ii) the Liquidated Damages, as per Article 6.2.4 of the
PPA; and
(iii) the Open Access charges to the extent of the
quantum of the shortfall in energy supplied, in excess of
the permitted deviation, not availed by the Procurer, as
per Article 6.2.4 of the PPA.”
20. On issue no.3, the Commission has concluded that the case of the
appellant falls under clause (iii) of Article 7.1 (force majeure clause) of
the PPA and has held that the contracted power will be treated as
“deemed reduction” for a period of six hours in each of the months of
November and December, 2013.
21. On issue no.4, the Commission has held that the charge of
“gaming” has been established against the appellant and accordingly
has, under issue no.5, held the appellant liable to pay compensation to
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Appeal No.45 of 2018 Page 13 of 40
the ESCOMs to the extent of the difference between the price for the
quantum of short-supply of energy at the agreed tariff and the amount
received towards UI charges as well as the liquidated damages.
22. The issue no.6 has also been answered by the Commission in
affirmative while finding no fault in the actions of the ESCOMs in
deducting the amounts due to them from the amounts payable to them
on any count.
23. On issue no.7, the Commission did not find anything wrong on the
th
part of the 4 respondent BESCOM in deducting UI charges upon the
rd
request of 3 respondent SLDC. However, the Commission further held
that deduction towards backup power supply charges and the interest
payable thereon to be not valid and gave the concerned ESCOM liberty
to take such action for recovery of the same against the respondent
no.9, as provided under the law.
24. Accordingly, under issue no.8, the Commission directed the parties
to settle the accounts in terms of these findings on issue nos.1-7 in
respect of the energy supplied in terms of the PPA dated 06.09.2013
and to make necessary payments for adjusting their rights and liabilities.
25. These findings of the Commission and the final order passed
thereon have been assailed by the appellant in this appeal.
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Appeal No.45 of 2018 Page 14 of 40
26. We have heard Mr. Shri Venkatesh, learned counsel for the
appellant, as well as Mr. S. Sriranga, learned senior counsel for the
respondent nos.2-7. We have also perused the written submissions filed
by the learned counsels.
Our Analysis:
27. We note that in terms of the impugned order dated 01.08.2017 of
the Commission, following damages/charges have been levied upon the
appellant on account of shortfall in supply of power under the PPA dated
06.09.2013:
“
Sr. No. Particulars Amount
(Rs.)
1 Compensation charges/liquidated
2,02,98,740
damages under Article 6.2.4 of the
PPA
2 Unscheduled interchange charges
1,16,89,303
due from Shantha Projects Ltd.
(Respondent No.9) payable to State
Load Despatch Centre (“SLDC”)
3 Penalty for ‘gaming’ (for short supply
73,10,369
of power i.e., difference between the
price for quantum of short supply at
agreed tariff and amount towards UI
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Appeal No.45 of 2018 Page 15 of 40
charges and liquidated damages
under Article 6.2.4 of the PPA)
4 Open access charges for short
95,34,183
supply (@39.74 paise / Kwh)
Total 4,88,32,595
”
In re:- Gaming
28. At the outset, we feel of the opinion that the Commission has fallen
into error not only in holding the appellant guilty of “gaming” but also in
holding it liable for compensating the respondent ESCOMs on this count.
29. The Commission has itself noted in the Paragraph 12(a) of the
impugned order that in the context of present case, the term “gaming”
shall be construed to mean “intentional act” in not taking timely steps by
the appellant for revising the energy schedule, in order to make an
undue commercial gain.
30. The Commission has then proceeded to record that the appellant
did not inject energy as per the schedule. The energy scheduled in a
month and actual energy supplied to the grid in different months have
been given in the following table: -
“
M/s/ Tata Power Trading Company Limited
SHANTHA PROJECTS (Period from Nov-13 to Mar-14)
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Appeal No.45 of 2018 Page 16 of 40
Particulars Nov-13 Dec-13 Jan-14 Feb-14 Mar-14
Energy scheduled to
ESCOMs (MUs)
2438375 3447500 549000 4514000 7440000
Actual Energy
pumped to Grid (as
per JMR) in MUs
1614200 2693900 0 3123200 5584500
Short generation in
MUs
824175 753600 549000 1390800 1855500
% Deviation to
ESCOMs w.r.t.
Scheduled energy
Vs Actual energy
33.80 21.86 100.00 30.81 24.94
”
31. It is true that in case, scheduled energy is revised within a
reasonable time, the deviation is accounted for as per the prevailing UI
charges. However, if there is an intentional lapse on the part of the
seller to take steps for revision of the scheduled energy within a
reasonable time duration, it would lead to an inference of “gaming” by
the seller. It cannot be disputed that the percentage of deviation, as
reflected in the above given table, cannot be termed to be within normal
limits. However, the Commission has failed to consider that the
appellant is not a power generator but a trading licensee. It was for the
generator i.e. the respondent no.9 to provide revised schedule when it
felt that it was unable to supply power according to the scheduled
capacity. This aspect of the matter has nowhere been discussed by the
Commission in the impugned order. Even the respondent no.2 had, in
its statement of objections filed before the Commission, stated that it
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Appeal No.45 of 2018 Page 17 of 40
was the generator i.e. respondent no.9 that had not revised the
schedule. The Commission has misdirected itself in not appreciating the
fact that the allegation of the respondent nos.2&3 qua “gaming” were
primarily against the generator i.e. the respondent no.9 and not against
the appellant.
32. Even if it be assumed for the sake of arguments that the appellant
had indulged in “gaming”, then also the Commission ought not to have
held the appellant liable to pay compensation on this count to the
respondent ESCOMs in these proceedings in which the impugned order
has been passed. The Commission was dealing with a petition filed by
the appellant claiming wrongful recoveries/deductions made by the
respondent ESCOMs from its energy bills. No counterclaim had been
filed by the respondent ESCOMs seeking compensation from the
appellant on account of “gaming”. Thus, there was no prayer at all on the
part of the respondent ESCOMs for compensation from the appellant on
account of “gaming”. It is a well settled legal principle that a judgment of
a court or a judicial tribunal has to be based upon the pleadings of the
parties before it and the prayers made before it. A court is precluded
from granting any relief which has not been specifically prayed or sought
for by the parties before it. It is clear that in this case, the Commission
has traversed beyond the pleadings of the parties in passing the
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Appeal No.45 of 2018 Page 18 of 40
directions which were never sought by the respondent ESCOMs against
the appellant in so far as the compensation on account of “gaming” is
concerned.
33. Hence, the findings of the Commission on this aspect in the
impugned order and the consequent directions cannot be sustained and
are liable to be set aside.
In re:- Compensation/liquidated damages in the sum of
Rs.2,02,98,740/- under Article 6.2.4 of the PPA.
34. Referring to Articles 6.2.4 of the PPA on this aspect, the
Commission has, in the impugned order held that in case deviation from
the seller side is more than 15% of the contracted energy, the seller
shall pay compensation to the procurer at 20% of the tariff per kWh for
the quantum of shortfall in excess of the permitted deviation of 15% in
the energy supplied and has rejected the contention of the appellant that
such compensation has to be computed on the difference between the
scheduled energy and the actual energy injected into the grid.
35. It is argued by learned counsel for the appellant that the
respondent ESCOMs had levied the liquidated damages under Article
6.2.4 of the PPA on the basis of difference between the scheduled
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Appeal No.45 of 2018 Page 19 of 40
energy to the ESCOMs and the actual energy injected into the grid but
the Commission, without any prayer or pleadings to that effect on behalf
of the respondent ESCOMs, has revised the calculation of liquidated
damages from the said basis adopted by the ESCOMs. It is submitted
that it was for the respondent ESCOM to plead and prove that they had
suffered loss in order to be compensated under Article 6.2.4 and the
Commission could not have enhanced the quantum for compensation
beyond what has been provided in the said clause of the PPA. It it
argued that the Commission has erred in interpretation of the Article
6.2.4 of the PPA.
36. Per contra, learned counsel for the respondent ESCOMs pointed
out that in Para 37 of the written submissions filed by the appellant, the
appellant has admitted its liability to pay liquidated damages to the tune
of Rs.1,25,28,038/- but the calculation upon which said amount has
been arrived at is erroneous and the appellant is liable to pay Rs.2.02
crores towards liquidated damages for short supply from the contracted
capacity.
37. Article 6.2.4 of the PPA dated 06.09.2013 executed between the
appellant and the ESCOMs is extracted hereinbelow: -
“6.2.4 In case deviation from Seller side is more than
15% of contracted energy for which open access has
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Appeal No.45 of 2018 Page 20 of 40
been allocated on monthly basis, Seller shall pay
compensation to Procurer at 20% of Tariff per KWh for
the quantum of shortfall in excess of permitted deviation
of 15% in the energy supplied and pay for the open
access charges to the extent not availed by the
Procurer.”
38. A bare perusal of this clause in the PPA would reveal that where
there is any deviation on the part of the seller to the extent of more than
15% of the contracted energy, compensation to the tune of 20% of the
tariff per kWh would be payable by the seller on the quantum of shortfall
in excess of permitted deviation of 15% in the energy supplied. In other
words, for the purpose of computing the compensation payable by the
seller to the procurer under this clause of the PPA at 20% of the tariff per
kWh, the quantum of shortfall in excess of permitted deviation of 15% in
the energy supply has to be taken into consideration. Therefore, we do
not find any error in the impugned order of the Commission where the
Commission has held that the difference between 85% of the contracted
capacity and the energy actually injected into the grid should be taken
into consideration for the purpose of calculation of liquidated damages
under Article 6.2.4 provided the open access has been allocated on
monthly basis for the 85% of the contracted capacity.
39. It is, thus, manifest that the impugned order of the Commission on
this aspect is absolutely in consonance with the relevant clause in the
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Appeal No.45 of 2018 Page 21 of 40
PPA. It is true that the respondent ESCOMs had initially levied the
liquidated damages under Article 6.2.4 on the basis of the difference
between the scheduled energy to the ESCOMs and the actual energy
injected into the grid. However, the same, being contrary to the Article
6.2.4 of the PPA, could not have been accepted by the Commission in
the impugned order. It is not that the Commission has erred in
interpretation of Article 6.2.4 of the PPA. To the contrary, the
computation of liquidated damages had been done erroneously by the
respondent ESCOMs due to wrong interpretation of the said clause of
the PPA.
40. There is no basis for the claim of the appellant that the seller is
liable for the shortfall between 85% of the contracted energy and the
energy scheduled by the seller, as was canvassed by its counsel. This
argument is patently in conflict with the provisions of Article 6.2.4 of the
PPA which we have extracted and discussed hereinabove, and
therefore, cannot be accepted.
41. In view of the same, we concur with the findings of the
Commission on this issue.
In re:- UI Charges
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Appeal No.45 of 2018 Page 22 of 40
42. The Commission in the impugned order has held the appellant
liable to pay an amount of Rs.1,16,89,303/- as Unscheduled Interchange
(UI) Charges.
43. Learned counsel for the appellant submitted that the appellant,
being only an intermediary trader cannot be held liable to pay UI
Charges for variation in power generation from the schedule of energy.
It is argued that there is a clear link between the generator and the
procurer i.e. ESCOMs in this regard and the appellant would not take
upon itself the financial as well as commercial risks. It is submitted that
the Commission has overlooked the fact that the actual injection in the
grid is beyond the control of the appellant and any consequence on
account of variation from the generation schedule is to the account of
the generator. The learned counsel would further point out that despite
noting in the impugned order that the respondents have given up their
claim towards UI Charges and Open Access Charges, the Commission
has proceeded to allow these charges to the respondent ESCOMs
illegally and in contravention to the settled legal position. It is, further
argued that despite holding that ABT order is not applicable to the
appellant, appellant could not have been made liable for UI Charges
under ABT order. He placed reliance upon the judgment of this Tribunal
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Appeal No.45 of 2018 Page 23 of 40
dated 04.11.2011 in Appeal No.15/2011 Lanco Power Limited v. HERC
& Ors. in support of his submissions.
44. In his arguments, learned counsel for the respondent ESCOMs
has justified the impugned order of the Commission upholding levy of UI
Charges against the appellant. He submitted that the contentions raised
on behalf of the appellant against the levy of these charges are
untenable and contrary to the CERC UI Regulations, 2009.
45. We have considered the rival submissions of the learned counsels
on this issue.
46. In Paragraph no.13(b) at page 42 of the impugned order, the
Commission has very clearly recorded that the contesting respondents
have given up their claim towards UI Charges and Open Access
Charges but have retained the liquidated damages calculated on
difference between scheduled energy and the actual energy injected.
For the sake of convenience, we extract the said Paragraph of the
impugned order hereunder: -
“(b) The compensation for “gaming” may be awarded on
the basis of the losses suffered by the contesting
Respondents due to short-supply of energy, apart from
the Liquidated Damages provided under the PPA. The
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Appeal No.45 of 2018 Page 24 of 40
contesting Respondents are entitled to receive the
Unliquidated Damages, which would represent the
compensation towards the other consequences of the
short-supply of energy, which is suffered in the usual
course of business. The contesting Respondents have,
in essence, claimed compensation for the short-supply of
energy, at the agreed tariff. They have given up their
claim towards the UI charges and the Open Access
charges, but have retained the Liquidated Damages
calculated on the difference between the scheduled
energy and the actual energy injected.”
(Emphasis supplied)
47. It is, thus, manifest from the perusal of the above noted Paragraph
of the impugned order that the respondent ESCOMs had given up their
claim towards UI Charges. Therefore, it is inexplicable as to how the
Commission proceeded to hold the appellant liable to pay UI Charges
despite the respondent ESCOMs having given up their claim towards
these charges.
48. Further, the Commission has in Paragraph no.9(a) at page 17 of
the impugned order also noted that the provisions of ABT order or the UI
Regulations, 2009 cannot be made applicable, in their entirety in order to
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Appeal No.45 of 2018 Page 25 of 40
determine the rights and liabilities of the parties in this case. Therefore,
we concur with the submissions of the learned counsel for the appellant
that the appellant ought not to have been made liable for UI Charges
under ABT order despite holding that the ABT order is not applicable to
the present case.
49. Appellant’s counsel had also argued that the appellant being only
an intermediary trader, cannot be held liable to pay UI Charges on
account of variation from generation schedule which ought to be to the
account of the generator. He has relied upon the previous judgment of
this Tribunal in Lanco Power Ltd v. HERC & Ors. in Appeal No.15/2011
decided on 04.11.2011, the relevant portion of which is extracted
hereunder: -
“20. Unlike the generation, transmission, wheeling and
retail sale, there is no tariff determination for trading. The
trading is based on margin only. Thus, the trading being
a purchase of electricity for re-sale, the trader would get
a margin to be determined by the Central Commission
under Section 79(1)(j) of the Act or by the State
Commission under Section 86(1) (j) of the Act. Section
66 of the Electricity Act provides for the development of
the market. The same reads as below:
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Appeal No.45 of 2018 Page 26 of 40
“66. Development of market .
The Appropriate Commission shall endeavour to
promote the development of a market (including
trading) in power in such manner as may be
specified and shall be guided by the National
Electricity Policy referred to in Section 3 in this
regard”
21. So, the combined reading of the above provisions
brings out the scheme of the Act. A trader is treated as
an intermediary. When the trader deals with the
distribution company for re-sale of electricity, he is doing
so as a conduit between generating company and
distribution licensee. When the trader is not functioning
as merchant trader, i.e. without taking upon itself the
financial and commercial risks but passing on the all the
risks to the Purchaser under re-sale, then there is clearly
a link between the ultimate distribution company and the
generator with trader acting as only an intermediary
linking company.”
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Appeal No.45 of 2018 Page 27 of 40
50. We are unable to find any flaw or lacuna in these observations of
this Tribunal in the above noted judgment. A trader of electricity only
acts as an intermediary or conduit between the generating company and
the distribution licensee while indulging in sale and purchase of
electricity. A trader cannot be treated as an agent of the power
generator. However, it is only when the trader is not functioning as a
merchant trader i.e. without taking upon itself the financial and
commercial risks but passing on all the risks to the purchaser under re-
sale, it can be said that there is a clear link between the generator and
the ultimate distribution company with the trader acting only as
intermediary. That is not the case herein. Perusal of the PPA dated
06.09.2013 executed between the respondent ESCOMs and the
appellant reveals that there is no provision in the entire PPA showing
that the appellant did not take upon itself the financial and commercial
risks and passed on all such risks to the purchaser i.e. the respondent
ESCOMs. To the contrary, there is Article 4.2.3 in the PPA which reads
as under: -
“4.2.3 Variation between scheduled energy and actual
energy at the Delivery Point shall be accounted for
through UI as per the provisions of the Grid Code and
UI regulations from time to time.”
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Appeal No.45 of 2018 Page 28 of 40
51. In view of the said Article in the PPA, it is manifest that UI charges
payable on account of short-supply of energy due to variation in the
scheduled energy and actual energy supply has to be borne by the
appellant itself.
52. Having said so, we reiterate that since the respondent discoms
had given up their claim towards UI Charges during the proceedings
before the Commission, the appellant ought not to have been held liable
to pay such charges to them. Therefore, this issue is decided
accordingly.
In Re: - Open Access Charges
53. In the impugned order, the Commission has held the appellant
liable for payment of Rs.95,34,183/- towards Open Access Charges for
short supply of power. We note that none of the prayers made by the
appellant in the petition before the Commission relate to the Open
Access Charges. There was no prayer in the petition that the
respondent ESCOMs have levied or are contemplating of levying Open
Access Charges against the appellant and they ought to be restrained
from doing so. There were no pleadings on this aspect before the
Commission. In fact, the Commission notes in Paragraph 10(d) at page
24 of the impugned order that the ESCOMs have not claimed any
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Appeal No.45 of 2018 Page 29 of 40
amount towards reimbursement of Open Access Charges. Similarly in
Paragraph no.13(b) at page 42 of the impugned order also, which has
already been extracted hereinabove, the Commission has recorded that
the respondent ESCOMs have given up their claims towards UI Charges
and Open Access Charges. It is ironical that despite noting so at two
places in the impugned order, the Commission has proceeded to
discuss the issue of Open Access Charges and has held the appellant
liable to pay such charges to the respondent ESCOMs. Therefore, the
Commission has evidently traversed beyond the pleadings of the parties
and the reliefs claimed by the appellant and has committed a blatant
error in holding the appellant liable to pay Open Access Charges to the
respondent ESCOMs.
54. Hence, the findings of the Commission on this issue cannot be
sustained and are liable to be set aside.
In Re: - Deduction Rs.1,56,44,949/- made by the Respondent No.4
(BESCOM) from the payments to be made to the appellant in
relation to subsequent PPAs dated 14.11.2014 and 27.02.2015.
55. As noted by the Commission in the impugned order itself, this
amount of Rs.1,56,44,949/- consists of UI Charges as well as the
backup power supply charges as detailed in the following table: -
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Appeal No.45 of 2018 Page 30 of 40
“
1 UI Bills for (11.11.13 to
31.03.14)
Rs.1,06,56,414
2 Interest on UI Bills calculated
upto 28.02.15
Rs.10,32,889
3 Back-up power supply charges
for (Nov, 13 to Mar, 14)
Rs.35,19,668
4 Interest on Back-up power
supply calculated upto
28.02.15
Rs.4,35,978
Total amount due: Rs.1,56,44,949
(One Crore Fifty Six Lakhs
Forty Four Thousand Nine
Hundred and Forty Nine only)
”
56. In so far as backup of power supply charges and interest thereon
are concerned, the Commission has held the appellant not liable to pay
the same to the respondent ESCOMs. However, the Commission has
affirmed the action of the respondent ESCOMs in deducting UI Charges
in the sum of Rs.1,06,56,414/- from the invoices raised by the appellant
in respect of subsequent PPA on the following reasoning: -
“(c) The Petitioner has also contended that, the UI
charges was payable to the 2nd Respondent (SLDC)
therefore, the 3rd Respondent (BESCOM) could not
have recovered this amount by way of deduction from
the monthly tariff invoices of the Petitioner relating to a
different PPA. The contesting Respondents have stated
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Appeal No.45 of 2018 Page 31 of 40
in reply that, whatever charges are payable by the
Petitioner to the 2nd Respondent (SLDC), were in turn
payable to the ESCOMs by the 2nd Respondent (SLDC),
therefore the real beneficiaries for the UI charges were
the ESCOMs. Therefore, the contesting Respondents
have contended that, the deduction effected by the 3rd
Respondent (BESCOM) from the amounts payable by it
to the Petitioner towards the monthly tariff invoices
raised under the subsequent PPA is correct. We note
that, the ESCOMs are entitled to share the UI charges
collected by the 2nd Respondent (SLDC). Therefore, on
equitable principles, we find that, there is nothing wrong
on the part of the 3rd Respondent (BESCOM) in
deducting the UI charges, upon the request of the 2nd
Respondent (SLDC). We also note, the Petitioner or the
8th Respondent (Shantha Projects) had not paid the UI
charges and the back-up power supply charges, though
demanded by the contesting Respondents on several
occasions.”
57. Since, we have already held that the appellant ought not to have
been held liable to the UI Charges to the respondent ESCOMs, the
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Appeal No.45 of 2018 Page 32 of 40
deduction of such charges from any of the bills of the appellant cannot
be said to be valid and acceptable. When the respondent ESCOMs had
themselves given up their claim towards UI Charges, the Commission
ought not to have permitted deduction of such charges from the bills of
the appellant.
58. Even otherwise also, such a set-off was permissible only when the
cross demands of the parties arose out of the same transaction in view
of the law laid down by the Hon'ble Supreme Court in Jitendra Kumar
Khan v. Peerless General Finance & Investment Co. Ltd. (2013) 8 SCC
769. The relevant Paragraphs of the said judgment are extracted
hereinbelow: -
“11. On a reading of the aforesaid Rule it is noticeable
that certain conditions precedent are to be satisfied for
application of the said Rule. Two primary conditions are
that it must be a suit for recovery of money and the
amount sought to be set-off must be a certain sum. Apart
from the aforesaid parameters there are other
parameters to sustain a plea of set-off under this Rule.
As far as equitable set-off is concerned, it has been
enunciated in Clark v. Ratnavaloo Chetti ((1865) 2 Mad
HCR 296) that the right of set-off exists not only in cases
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Appeal No.45 of 2018 Page 33 of 40
of mutual debits and credits, but also where cross-
demands arise out of the same transaction. The said
principle has been reiterated by the Calcutta High Court
in G. Chishlom v. Gopal Chunder Surma [ILR (1889) 16
Cal 711].
12. In Bhupendra Narain Singha Bahadur v. Bahadur
Singh [(1952) 1 SCC 436: AIR 1952 SC 201] it has been
opined that a plea in the nature of equitable set-off is not
available when the cross-demands do not arise out of
the same transaction and not connected in its nature and
circumstances. It has been further stated therein that:
(AIR p. 204, para 8)
"8.... A wrongdoer who has wrongfully withheld moneys
belonging to another cannot invoke any principles of
equity in his favour and seek to deduct therefrom the
amounts that ... have fallen due to him. There is nothing
improper or unjust in telling the wrongdoer to undo his
wrong and not to take advantage of it."
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Appeal No.45 of 2018 Page 34 of 40
13. In Lakshmichand and Balchand v. State of A.P.
[(1987) 1 SCC 19] this Court has ruled that when a claim
is founded on the doctrine of equitable set-off all cross-
demands are to arise out of the same transaction or the
demands are so connected in the nature and
circumstances that they can be looked upon as a part of
one transaction.
14. In Union of India v. Karam Chand Thapar and Bros.
(Coal Sales) Ltd. [(2004) 3 SCC 504] while referring to
the concept of set-off, this Court has stated thus: (SCC
p. 511, para 15)
"15. 'Set-off' is defined in Black's Law Dictionary (7th
Edn., 1999) inter alia as a debtor's right to reduce the
amount of a debt by any sum the creditor owes the
debtor; the counterbalancing sum owed by the creditor.
The dictionary quotes Thomas W. Waterman from A
Treatise on the Law of Set-Off, Recoupment, and
Counterclaim as stating:
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Appeal No.45 of 2018 Page 35 of 40
'Set-off signifies the subtraction or taking away of one
demand from another opposite or cross-demand, so as
to distinguish the smaller demand and reduce the greater
by the amount of the less; or, if the opposite demands
are equal, to extinguish both. It was also, formerly,
sometimes called stoppage, because the amount to be
set-off was stopped or deducted from the cross-demand.’
15. Thereafter, the learned Judges referred to sub-rule
(1) of Rule 6 Order 8 and proceeded to opine thus:
[Karam Chand Thapar and Bros. (Coal Sales) Ltd. case
[(2004) 3 SCC 504], SCC p. 512. para 18]
"18.... What the rule deals with is legal set-off. The claim
sought to be set-off must be for an ascertained sun of
money and legally recoverable by the claimant. What is
more significant is that both the parties must fill the same
character in respect of the two claims sought to be set-
off or adjusted. Apart from the rule enacted in Rule 6
abovesaid, there exists a right to set-off, called equitable,
independently of the provisions of the Code. Such
mutual debits and credits or cross-demands, to be
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Appeal No.45 of 2018 Page 36 of 40
available for extinction by way of equitable set-off, must
have arisen out of the same transaction or ought to be so
connected in their nature and circumstances as to make
it inequitable for the court to allow the claim before it and
leave the defendant high and dry for the present unless
he files a cross-suit of his own. When a plea in the
nature of equitable set-off is raised it is not done as of
right and the discretion lies with the court to entertain
and allow such plea or not to do so."
16. From the aforesaid enunciation of law it is quite clear
that equitable set-off is different than the legal set-off;
that it is independent of the provisions of the Code of
Civil Procedure; that the mutual debits and credits or
cross-demands must have arisen out of the same
transaction or to be connected in the nature and
circumstances; that such a plea is raised not as a matter
of right; and that it is the discretion of the court to
entertain and allow such a plea or not. The concept of
equitable set-off is founded on the fundamental
principles of equity, justice and good conscience. The
discretion rests with the court to adjudicate upon it and
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Appeal No.45 of 2018 Page 37 of 40
the said discretion has to be exercised in an equitable
manner. An equitable set-off is not to be allowed where
protracted enquiry is needed for the determination of the
sum due, as has been stated in Dobson & Barlow Ltd. v.
Bengal Spg. & Wvg. Co. [ILR (1897) 21 Bom 126] and
Girdharilal Chaturbhuj v. Surajmal Chauthmal Agarwal
[AIR 1940 Nag 177].”
59. In the instant case, the claim of the respondent ESCOMs had
arisen out of the PPA dated 06.09.2013 executed by them with the
appellant whereas these charges have been deducted from the
bills/invoices raised by the appellant in relation to the subsequent PPAs
dated 14.11.2014 and 27.02.2015 executed between the parties. It is,
thus, manifest that the cross demands of the parties do not arise out of
the same transaction. These arose out of the totally distinct transactions
between the parties. In the above noted judgment, the Apex Court has
explained the distinction between the legal set-off and the equitable set-
off. Equitable set-off, which has been applied to this case, is
independent of the provisions of Code of Civil Procedure and cannot be
agitated as a matter of right. The discretion lies with the court to
entertain and allow such plea or not to do so. The concept of equitable
set-off is founded on the fundamental principles of equity, justice and
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Appeal No.45 of 2018 Page 38 of 40
good conscience. The discretion rests with the court to adjudicate upon
it. An equitable set-off is not to be allowed where protracted enquiry is
needed for determination of the sum due. In the instant case, the
respondent ESCOMs have themselves proceeded to deduct the UI
Charges under the PPA dated 06.09.2013 from the bills/invoices of the
appellant raised in relation to the subsequent PPAs, in the absence of
any adjudication in this regard from the Commission. Equitable set-off
not being a matter of right, the respondent ESCOMs could not have
deducted the UI Charges from the bills/invoices of appellant raised in
terms of a subsequent Power Purchase Agreement. There ought to have
been an adjudication in this regard from the Commission before such
deduction. The Commission has failed to note these principles in the
impugned order and has thus erred in saying that there is nothing wrong
on the part of respondent no.4 BESCOM in deducting UI Charges from
the bills/invoices of the appellant in relation to subsequent PPAs.
60. Therefore, the findings/observations of the Commission on this
aspect are also liable to be set aside.
Conclusion:
61. In view of the above discussion, we hold the appellant liable to pay
liquidated damages in the sum of Rs.2,02,98,740/- (Rupees two crore
two lakh ninety-eight thousand seven hundred and forty only) to the
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Appeal No.45 of 2018 Page 39 of 40
respondent ESCOMs as per Article 6.2.4 of the PPA. However, we
further hold that the appellant is not liable to pay any compensation to
the respondent ESCOMs for gaming. The appellant shall also not be
liable to pay UI Charges or Open Access Charges to the respondent
ESCOMs.
62. We further direct that in case any further amount, apart from the
liquidated damages in the sum of Rs.2,02,98,740/-, has been recovered
from the appellant by the respondent ESCOMs, the same shall be
refunded to the appellant along with applicable carrying cost within four
weeks from the date of this judgment. On this aspect, the matter is
remanded to the Commission for issuing consequential directions to the
parties after affording them reasonable opportunity of hearing.
63. The impugned order stands partly set aside and the appeal stands
partly allowed to the extent indicated hereinabove.
th
Pronounced in the open court on this the 15 day of July, 2026.
Virender Bhat
Judicial Member
(Seema Gupta)
Officiating Chairperson
✓
REPORTABLE / NON-REPORATBLE
tp
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Appeal No.45 of 2018 Page 40 of 40