Full Judgment Text
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 706 OF 2014
M/S PENNA ELECTRICITY LIMITED
(NOW M/S PIONEER POWER LIMITED) ….APPELLANT(S)
VERSUS
THE TAMIL NADU ELECTRICITY
BOARD & ORS. ….RESPONDENT(S)
J U D G M E N T
Rastogi, J.
1. The instant appeal has been filed under Section 125 of the
Electricity Act, 2003(hereinafter being referred to as the “Act 2003”)
assailing the judgment and order of the Appellate Tribunal for
Electricity dismissing the appeal filed at the instance of the present
Signature Not Verified
Digitally signed by
Jayant Kumar Arora
Date: 2023.03.15
16:02:39 IST
Reason:
appellant.
1
2. The appellant initially filed a petition under Section 86(1)(f) of
the Act, 2003 and sought the following reliefs:
(a) direct the Respondent to make the payment of Rs.25.63
Crores towards fixed charges and Rs.8.10 Crores towards
payment due on the actual variable charges payable in
respect of the power generated and availed for 153.26
millions unit during the period 29.10.2005 to 30.06.2006 to
the Petitioner.
(b) direct the Respondents to make the payment to the
Petitioner of the sum of Rs.18.06 Crores towards under
recovered fixed charges in respect of operations of the
generating station of the Petitioner for the period 01.07.2006
to 15.06.2009.
(c) direct the Respondents to make the payment to the
Petitioner of the sum of Rs.12.77 crores towards under
recovered additional cost of generation (variable charges) in
respect of operations of generating Station of the Petitioner
for the period 01.07.2006 to 15.06.2009.
(d) direct the respondent to take immediate decisions on the use
of Naphtha or any other compatible fuel as alternate/
supplemental fuel to increase and maintain the PLF of the
plant as contemplated in the amending PPA dated
25.08.2004 in future thereby enabling the plant being
operated at optional level so as to ensure the advantage to
the Respondent and also the assured return to the
Petitioner. The permission to use of the Naphtha/other
compatible fuel should also contemplate dispatching the
plant under merit order under gas based tariff only. If the
Respondent desires otherwise, the Petitioner should be
assured of the fixed charges.
(e) For any reason if the Respondent were not to consider any or
all of the relief claimed above by the Petitioner, to direct the
Respondent to make the payments due to the Petitioner as in
prayer (a), (b) and (c) above and relieve the Petitioner from
the obligations of the amendment PPA dated 25.08.2004.
2
3. The Tamil Nadu Electricity Regulatory Commission thereby
th
disposed of the petition by order dated 30 December 2011,
rejecting the claim of the appellant relating to unpaid fixed charges
of Rs.18.06 under Combined Cycle Operation as well as the claim of
underpaid variable charges of Rs. 12.77 crores under Combined
st th
Cycle Operation for the period between 1 July, 2006 to 15 June,
2009.
4. This came to be challenged by the appellant in appeal before
the Appellate Tribunal for Electricity(hereinafter being referred to as
the “Tribunal”). After the matter came to be heard, taking into
consideration the material on record, the Tribunal returned a
finding in paras 35, 36 and 38(1) and (2), and dismissed the appeal
under the impugned judgment. The relevant paras are as under:
“35. We find that there is no provision for compensation for
capacity charges and variable charges due to the fact that the
plant was not able to maintain the normative availability/Plant
Load Factor on account of shortage of fuel in the Central
Commission’s Tariff Regulations, 2004 which were in vogue when
the amended PPA was entered into between the parties or in the
Sate Commission’s Tariff Regulations, 2005. Admittedly, the State
Commission’s Tariff Regulations were made effective subsequent to
the signing of the PPA. The State Commission could not intervene
3
in allowing amendment in the provisions of the PPA in this regard
which were voluntarily agreed by both the parties and which are
not in contravention to any provision of the Act or Rules or the
Regulations.
36. Therefore, there is no infirmity in the findings of the State
Commission in not agreeing to interfere with the provisions of the
PPA declaring the PPA unworkable with regard to compensation for
fixed charges for the above period due to shortage of supply of gas.
37. xxx xxx
38. Summary of Our Findings
i) The Appellant is not entitled to payment of full fixed charges
and actual variable charges in respect of supply of energy
between 1.7.2006 to 15.6.2009 when the operational
parameters were affected on account of shortage supply of
gas by M/s GAIL in view of non availability of any provision
in this regard in the PPA or Tariff Regulations.
ii) There is no infirmity in the findings of the State Commission
in not agreeing to interfere with the provisions of the PPA or
declaring the PPA unworkable with regard to compensation
for fixed and variable charges for the above period due to
shortage of supply of gas.”
5. Mr. Parag P. Tripathi, learned senior counsel for the appellant
submits that in the absence of any clause/provision under the
th
amended Power Purchase Agreement dated 25 August,
2004(hereinafter being referred to as the “PPA”) in reference to
payment of fixed charges, it was incumbent upon the Tribunal to
have considered that the short supply of gas was due to the
diversion of gas to other generating stations and on this account the
4
Tamil Nadu Electricity Board (hereinafter being referred to as the
“Board”) could not have made the appellant to suffer by citing the
terms of the PPA. However, the Tribunal omitted to note the
unimpeachable evidence and it has not been disputed before the
Tribunal that the short supply of gas was due to the diversion of
gas to the generating stations of Board and the appellant has
suffered financial losses due to the diversion of gas to the other
generating stations.
6. Learned counsel further submits that there was sufficient
evidence on record regarding the communication between Gas
Authority of India Limited(GAIL) and the Board in reference to the
diversion of gas to other generating stations and this has seriously
impaired the functionality and efficiency of the appellant company.
7. Learned counsel further submits that it cannot be disputed
that the generating station of the appellant is capable of achieving
the technical parameters and 85% of Plant Load Factor(hereinafter
referred to as the “PLF”). In the aforesaid premise, the Board
cannot be allowed to take benefit due to its own wrong at the cost of
the appellant Company.
5
8. Learned counsel further submits that the amended PPA dated
th
25 August, 2004 was not approved in terms of Section 86(1)(b) of
the Act 2003 still it is a binding document between the parties inter
se and since the electricity was sold to the Board otherwise than as
a gratuitous act, Board needs to pay for the same on the principle
of Quantum Meriut . In support of his submissions, learned counsel
has placed reliance on the judgment of this Court in
State of West
1
Bengal Vs. B.K. Mondal and Sons ; Union of India Vs. Sita Ram
2
and
Jaiswal Food Corporation of India and Others Vs. Vikas
3
Majdoor Kamdar Sahkari Mandli Limited .
9. Learned counsel further pressed that even in the absence of
PPA not been approved and enforceable, still the compensation
payable to the appellant ought to be computed as per the tariff fixed
by the Commission for open market purchases by Board, or at least
in accordance with the relevant regulations and this being the
manifest error which the Tribunal has committed in rejecting the
claim of the appellant needs to be interfered by this Court.
1
1962(Suppl) 1 SCR 876
2
1976(4) SCC 505
3 2007(13) SCC 544
6
10. Per contra, learned counsel for the respondents, while
supporting the concurrent finding returned by the Commission and
confirmed by the Tribunal under the impugned judgment submits
that the appellant has failed to meet the PLF as agreed to under the
PFA apart from the fact that admittedly PPA was not approved
under the Act 2003. That apart, there is no clause in the PPA
which provides for payment of full fixed cost, even when generator
fails to meet the PLF. Any compensation by way of deemed
generation or relaxed heat rate due to partial loading of machine
due to shortage of fuel supply is the sole responsibility of the
appellant.
11. Learned counsel further submits that the shortfall in PLF and
increase in tariff heat rate was due to two factors, (i) poor efficiency
of the power plant; and (ii) short supply of natural gas by fuel
st
supplier(GAIL). Further, during the period between 1 July, 2006
rd
and 23 October, 2007, sufficient quantity of natural gas was
available to the appellant in order to operate the power at 52.8 MW
(the contracted capacity) but tariff heat rate of the plant was always
more than 1980 Kcal/Kwr due to its poor efficiency of the plant.
7
The PLF achieved by the appellant’s power plant for the period
st st
between 1 July, 2006 and 1 July, 2009 is as under:
| Period Concerned | PLF Achieved |
|---|---|
| 1st July, 2006 to 30th June,<br>2007 | 80.82% |
| 1st July, 2007 to 30th June,<br>2008 | 73.20% |
| 1st July, 2008 to 1st July, 2009 | 67.09% |
12. In the given circumstances, the respondents cannot be held
responsible to meet the short supply of gas to the appellant. Thus,
issue of short supply of gas as alleged is an issue between GAIL and
the appellant. It was submitted that the inability of the appellant to
achieve 85% of the PLF is not due to any Force Majeure as claimed.
More so, the appellant never initiated any proceedings under the
clause of Force Majeure as per procedure provided under the PPA.
13. In addition, learned counsel further submits that PPA was
entered into between the parties based on notification of
th
Government of India dated 6 November, 1995. Therefore, claim of
compensation by way of deemed generation due to shortage in fuel
8
supply is the responsibility of the generator and not applicable in
th
terms of PPA dated 25 August, 2004. Therefore, the State
Commission’s refusal to allow claim of underpaid charges and
variable charges is well founded and rightly confirmed by the
Tribunal under the impugned judgment.
14. We have heard learned counsel for the parties and with their
assistance perused the material available on record.
15. From the facts, it manifest that the appellant is an
Independent Power Producer(IPP) operating and maintaining a
Combined Cycle Gas Turbine Power Generating station in Tamil
Nadu with a generating capacity of 52.8 MW and the said
generating station is dedicated to the Board and the entire power
generated by the appellant is to be supplied to the Board.
th
16. It is not disputed that the PPA dated 25 August, 2004 was
not approved under Section 86(1)(b) of the Act 2003. That apart,
there is no clause in the PPA which provides for full fixed cost, even
when appellant fails to meet the PLF. PPA between the parties was
th
entered based on notification of Government of India dated 6
November, 1995 and in terms of clause 4.3 of the said notification,
9
the responsibility of the fuel linkage would be that of the
independent power producer and any fuel supply risk would have to
be shared between the power and fuel producer/supplier and not
by the Board to indemnify.
17. There is a bipartite agreement executed between appellant
and the GAIL, to which the respondent Board is not privy, and if
any default has been committed by GAIL in supply of natural gas to
the appellant, the respondent Board is not supposed to indemnify,
that apart, there is nothing on record to show that any remedial
action was taken by the appellant against the gas supplier on
account of short supply of gas, if permissible under the law.
18. At the same time, the appellant has not been able to
demonstrate any provision either under the Act, 2003 or under the
PPA although has not been approved by the competent authority
under the Act, 2003 which may protect the right and interest of the
appellant. That apart, no clause of the PPA has been pointed out
indicating if there is a short supply of gas due to diversion of gas to
the other generating station of the Board, the respondent Board has
to indemnify the appellant.
10
19. The thrust of submission of learned counsel for the appellant
that it is the respondent Board who have sent letters to the GAIL to
divert the gas to other generating units of the Board, at least on this
account, the Board could not have made the appellant to suffer by
citing the terms of the PPA. There is no dispute that the project
th
was taken over on the basis of the notification dated 6 November,
1995 issued by Government of India and in terms of para 4.3 of the
notification, the fuel of the power project was either fuel oils or
natural gas. The said clause of the Notification is as under:
“4.3 The responsibility of either indigenous or imported fuel
linkage would be that of the Independent Power Producer(IPP) and
any fuel supply risks would have to be shared between the
IPP/Fuel suppliers. The State Electricity Board will not take any
fuel supply risk.”
20. In terms of the notification referred to above, it is clear that
the responsibility of fuel linkage either heavy fuel or natural gas
would be that of the appellant to the generator. If there is any risk
in the supply, the same has to be shared between the generator and
the fuel supplier. The notification has classified that the Board will
not take any fuel supply risk and is not supposed to indemnify in
the given situation.
11
21. It is also not disputed that there is no clause in PPA which
provides for payment of full fixed cost to the generator, even when
generator fails to meet the PLF. In the given circumstances, any
compensation by way of deemed generation or released heat rate
due to partial loading of machine, arising due to shortage to fuel
supply which is the sole responsibility of the appellant, is not
th
applicable as per the amended PPA dated 25 August, 2004.
Furthermore, there is no provision for compensation by way of
deemed generation or partial norms due to operation of the power
plant at partial load due to shortage of fuel in Central Government’s
Tariff Regulations, 2004 which admittedly were in force when the
agreement was entered into between the parties.
22. The submission made by learned counsel for the appellant
that because of the diversion of gas to the other generating stations
of the Board, at least on this account, the Board could not have
made the appellant to suffer by citing the terms of PPA, on the first
blush appears to be attractive but has no legs to stand for the
reason that in the absence of there being any provision for
compensation for capacity charges and variable charges due to the
12
fact that the plant was not able to maintain the normative
availability/PLF on account of shortage of fuel in terms of the
Central Government’s Tariff Regulations, 2004, at least the
respondent Board cannot be said to be at fault and that was the
reason prevailed upon the Commission to arrive at the conclusion
that the appellant was not entitled to payment of fuel fixed charges
and actual variable charges in respect of supply of energy between
st th
1 July, 2006 and 15 June, 2009 during the period when partial
parameters were rejected because of shortage of supply in view of
the provision in PPA or tariff regulations.
23. We find no infirmity in the finding returned by the Tribunal in
the impugned judgment which may call for our interference.
24. Consequently, the appeal fails and is accordingly dismissed.
No costs.
25. Pending application(s), if any, shall stand disposed of.
…………………………….J.
(AJAY RASTOGI)
13
…………………………….J.
(C.T. RAVIKUMAR)
NEW DELHI;
MARCH 15, 2023
14