Compensation under Section 70 of the Contract Act is payable for energy injected under an unenforceable PPA.

The Appellants (APSPDCL and others) challenged an order dated 05.07.2021 passed by the Andhra Pradesh Electricity Regulatory Commission (APERC).

Respondent No. 2, M/s Chaitanya Projects Ltd., commissioned a 0.8 MW wind project on 29.03.2017 and executed a Power Purchase Agreement (PPA) with Appellant No. 1 on 30.03.2017.

While the State Commission declared the PPA invalid for lacking mandatory statutory approval under Section 86(1)(b) of the Electricity Act, 2003, it invoked Section 70 of the Contract Act, 1872, to direct the Appellants to compensate Respondent No. 2 for energy injected into the grid from 2017 until disconnection in 2020 at a rate of ₹2.93 per unit.

The Appellants appealed against this specific direction for compensation.

1. Whether a power generator can be awarded compensation under Section 70 of the Indian Contract Act, 1872, for energy injected into a grid system under the aegis of an unapproved and legally unenforceable PPA?

2. Whether the appellate court should exercise discretionary powers under Order XLI Rule 33 of the CPC to modify the rate of compensation in the absence of a cross-appeal by the Respondent?

The court applied Section 86(1)(b) of the Electricity Act, 2003, regarding the necessity of Commission approval for power purchase costs.

It primarily relied on Section 70 of the Indian Contract Act, 1872, which creates an obligation for a person enjoying the benefit of a non-gratuitous act to compensate the provider.

Procedurally, the court invoked Order XLI Rule 33 of the Code of Civil Procedure (CPC), 1908, which grants appellate courts the power to pass any decree to do complete justice, as interpreted in Choudhary Sahu v. State of Bihar and K. Muthuswami Gounder v. N. Palaniappa Gounder, emphasizing that this power is discretionary and must be exercised with caution.

The Tribunal noted that the factual and legal matrix was identical to a previous judgment (Appeal Nos. 11 and 468 of 2022) involving Vibrant Greentech India Private Limited (VGIPL), where the Tribunal had upheld the applicability of Section 70 of the Contract Act for energy injected without a valid PPA.

Although the Tribunal had remanded the VGIPL case for a fresh determination of the compensation rate (due to a cross-appeal by the generator), it distinguished the present case.

Here, Respondent No. 2 failed to appear or file any submissions or cross-appeal.

While Order XLI Rule 33 of the CPC allows the court to grant relief to a non-appealing party in exceptional cases to avoid inconsistent decrees, the Tribunal determined that such discretionary power should be used sparingly.

Since Respondent No. 2 showed no interest in the proceedings, the Tribunal declined to remand the matter for a higher rate of compensation.

Regarding the second issue, the Tribunal declined to modify the rate of ₹2.93 per unit or remand the matter, citing the Respondent's absence and lack of cross-appeal.

The Appeal No. 456 of 2022 was dismissed, and the State Commission's order was upheld.