Clp India Pvt. Ltd. vs Gujarat Urja Vikas Nigam Ltd. & Anr.

Electricity Supply Act, 1948 – s.43(A) – Gujarat Electricity Board (Gujarat Urja) entered into a power purchase agreement (PPA) with CLP on 03.02.1994 – In terms of the PPA, Gujarat Urja was under an obligation to purchase and CLP was under corresponding obligation to supply electricity – A supplementary agreement was executed between the parties on 05.12.2003 – CLP stated that the amount, i.e Rs. 53.90 crores was in fact due as a loan – If it was deemed as a loan, then interest was payable on the basis of normative repayment of principal amount during the period of the loan, i.e. the loan would not remain as a constant – Gujarat Urja resisted this claim – The GERC rejected the CLP’s argument on a plain reading of the clause in the supplementary agreement, which stated that the agreement too recognized Rs.53.9 crores as own Capital for which the cost of Own Capital @ 14% was to be a pass through – The effective date for such recognition was from 01.07.2003 to 31.03.2009 and no amounts were due and payable as interest after that date – This excluded any liability on part of Gujarat Urja for the past period, i.e. December 1997 – The CLP Limited was aggrieved by that portion of GERC’s order which rejected its claim on the deemed loan component prior to the period 2003 – The APTEL concurred with the decision of GERC – On appeal, held: The clear agreement between the parties was that interest on the sum of Rs.53.90 crores was payable for the specified period 01.07.2003 to 31.12.2009 – Therefore, CLP’s claim that any amount was payable, for any period prior to 01.07.2003, was not tenable – Had CLP wished so, nothing prevented it to claim for it during negotiations and have it included as a term of the contract – Once having settled for a specified sum, on an amount Rs.53.90 crores that was only fictionally a loan - and treated as such, for purpose of fixing interest payable, considering the equity infused, in excess of the tariff regulations, the absence of any like item, such as interest for prior period, precludes a claim – The findings of the lower authorities are therefore, sound and reasonable. Dismissing the appeals, the Court

HELD: 1. The submissions of parties are with respect to two notifications dated 30.03.1992 and 06.11.1995. These Notifications were under Section 43(A) of the Supply Act. Concededly, these notifications are statutory and are binding on the parties. Any PPA between a generating company and the purchaser of electricity is subject to such statutory notifications; parties by agreement cannot override statutory provisions, or such notifications, as far as they relate to matters of tariff. Therefore, the rights and obligations of the parties under the PPA have to be read subject to the statutory provisions. The provisions of the PPA, if they are contrary to the statutory provisions, cannot be given effect to. [Paras 19 and 20][611-D-F]

2. In view of the fact that the notification amended on 06.11.1995 was a statutory one, there cannot be any doubt that it was binding upon the parties. Therefore, the earlier notification which left it free to the parties to negotiate on various aspects, including on the incentive payable, stood amended by Note 2, which was added to clause 1.6 of the tariff. The effect of this statutory incorporation by way of amendment was that incentive no longer became payable. The arguments by the CLP, in the opinion of the Court, that the parties were bound only by the terms of the agreement and that the amendment notification being prospective, could not have altered the terms of the tariff, especially the incentive payable, are insubstantial and have no force. The concurrent findings on this aspect, therefore, are sound and do not call for interference. Likewise, the change of law provision (Clause 6.5 of the PPA) clearly contemplated that any amendment to the prevailing tariff notification (dated 30.03.1992) would bind the parties. Since Note (2) was an amendment, which dealt with the issue of incentive, it cannot now be said that it was inapplicable. The findings of the lower authorities, therefore, are correct; no interference is called for. [Para 25][614-D-F; 615-A-B]

3. The next question is whether the GERC and APTEL fell into error in granting restricted refund calculable for the 3 year period prior to Gujarat Urja’s application. The concurred findings on this aspect, in the opinion of this court, are reasonable. There is merit in CPL’s submission that the earliest point in time, when the cause of action arose, was in May,1996, when Gujarat Urja rejected its contention that incentive was payable in terms of the PPA, notwithstanding the notification of 06.11.1995. Despite this stated position, meetings continued to be held and, what is more, incentive amounts, were paid to CLP. No doubt, no document conclusively stated that CLP’s claim was accepted. This Court does not find any merit in the submission of Gujarat Urja that the issue was kept alive, due to a series of communications. In this regard, APTEL’s findings about inapplicability of Section 18 of the Limitation Act, are correct. There was no admission on the part of CLP, at least of the kind, that extended the time for preferring an application for recovery of excess payments. It has been consistently ruled by this court that repeated letters, or exchange of communications, do not extend the period of limitation, provided by law. [Para 26][615-B-E]

4. The third, and last issue, is with respect to payment of interest on deemed equity. The debt-equity ratio in this case, was disturbed; accordingly Rs.53.9 crores was treated as “deemed” or normative loan, for which the parties had to agree the rate of interest payable, in accordance with the tariff notification. It was in the light of these developments that the supplementary agreement was entered into. [Para 28][616-B]

5. It is apparent, that the parties did not harbor any doubt about the period for which the specified interest was payable on such deemed loan. The rate of interest was fixed; likewise, the date from which payment obligations were to arise, too were known. Also, the date upto which the interest on such deemed loan payments were to be made, was known and fixed. In these circumstances, CLP’s claim that the payment of interest for a prior period was outstanding, and constituted Gujarat Urja’s liability, is insubstantial. In a recent judgment a similar issue had arisen. The court quoted from the decision in National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board where another previous decision was cited with approval on the issue that the express provision for something, in an agreement, meant that other similar matters stood excluded. [Para 29] [616-D-F]

6. In the present case, the clear agreement between the parties was that interest on the sum of Rs.53.90 crores was payable for the specified period 01.07.2003 to 31.12.2009. Therefore, CLP’s claim that any amount was payable, for any period prior to 01.07.2003, was not tenable. Had CLP wished so, nothing prevented it to claim for it during negotiations and have it included as a term of the contract. Once having settled for a specified sum, on an amount (Rs.53.90 crores) that was only fictionally a loan - and treated as such, for purpose of fixing interest payable, considering the equity infused, in excess of the tariff regulations, the absence of any like item, such as interest for prior period, precludes a claim. But it was really part of the equity component. Therefore, interest was per se not payable, but could be paid in terms of the tariff notification or the agreement. No claim on any other legal or equitable considerations could have been made. The findings of the lower authorities are therefore, sound and reasonable. [Para 31][619-E-G]

India Thermal Power Ltd. v. State of M.P. & Ors. (2000)

3 SCC 379 : [2000] 1 SCR 925; Binani Zinc Ltd. v. Kerala State Electricity Board (2009) 11 SCC 244 : [2009] 4 SCR 636; Tata Power Company Ltd. v. Adani Electricity Mumbai Ltd. & Ors. 2019 (7) SCALE 297 : [2019] 6 SCR 845; Damodar Valley Corporation v. Central Electricity Regulatory Commission & Ors. 2018

(15) SCALE 451 : [2018] 14 SCR 433 – relied on. Hari Shankar Singhania v. Gaur Hari Singhania (2006)

4 SCC 658 : [2006] 3 SCR 726; Sri Ram Mills Ltd. v. Utility Premises Ltd. (2007) 4 SCC 599 : [2007] 4 SCR 279; S.S. Rathore v. State of Madhya Pradesh (1989) 4 SCC 582 : [1989] 1 Suppl. SCR 43; Union of India v. Har Dayal (2010) 1 SCC 394 : [2009] 15 SCR 1126; Schlumberger Asia Services Ltd. v. Oil and Natural Gas Corporation Ltd. (2013) 7 SCC 562; Uttar Haryana Bijli Vitran Nigam Ltd. And Ors. v. Adani Power Ltd. & Ors. (2019) 5 SCC 325 : [2019] 4 SCR 487; National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board (2011) 5 SCC 580 : [2011] 11 SCR 651 – referred to.