Gujarat Urja Vikas Nigam Ltd vs Essar Power Limited

Reportable 2025 INSC 1160 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. 6581- 6582 OF 2025

Gujarat Urja Vikas Nigam Limited … Appellant

versus

Essar Power Limited and another … Respondents

JUDGMENT

SANJAY KUMAR, J

1. A tortuous litigative journey since the year 2005, notwithstanding,

the matter is before this Court yet again.

2. By way of these appeals filed under Section 125 of the Electricity

Act, 2003, Gujarat Urja Vikas Nigam Limited (GUVNL) assails the

common judgment dated 21.03.2025 passed by the Appellate Tribunal for

Electricity at New Delhi (APTEL) in Appeal Nos. 138 of 2021 and 201 of

2023. Appeal No. 138 of 2021 was preferred by GUVNL while Appeal No.

201 of 2023 was filed by Essar Power Limited (EPL). These appeals were

directed against the order dated 27.12.2019 passed by Gujarat Electricity Signature Not Verified Digitally signed by

Regulatory Commission, Gandhi Nagar (GERC), in Petition No. 972 of babita pandey Date: 2025.09.25 16:52:51 IST Reason:

2009 filed by GUVNL.

1 3. Before considering the impact and effect of the past litigation

between the parties and the orders passed therein, including by this Court,

it would be apposite to note the factual narrative.

4. Shorn of unnecessary detail, relevant facts unfold thus: Gujarat

Electricity Board (GEB), the predecessor-in-interest of GUVNL, entered

into a Power Purchase Agreement (PPA) with EPL on 30.05.1996 for

purchase of the electricity generated by EPL from its plant at Hazira for a

period of 20 years. The total installed capacity of EPL’s plant was 515 MW

and 300 MW thereof was to be supplied to GEB under the above PPA.

EPL entered into a separate PPA with Essar Steel Limited (ESL), its sister

company, on 29.06.1996 for sale and supply of the remaining 215 MW.

In effect, the proportionate share of GEB and ESL in the electricity

generated by EPL was in the ratio of 58.25:41.75, rounded off to 58:42.

5. The cause for grievance, laying foundation for the inception of this

litigation in the year 2005, dates back long prior thereto. In breach of the

agreed proportionate shares in the electricity generated by it, EPL started

supplying more power to its sister company, ESL, from out of the allocated

share of GEB. This issue was raised by GEB, contending that EPL had

supplied over its proportionate share of electricity to ESL which should be

treated as deemed supply of electricity by GEB itself and it should be

compensated. EPL addressed letter dated 17.02.2000 to GEB, wherein it

stated that if ESL drew more power than its allocated capacity, then GEB 2 should charge ESL for the excess power drawn, as EPL’s deemed power

supply to GEB, but in that case no deemed non-generation penalty should

be imposed upon EPL. Eventually, GEB addressed letter dated

29.07.2004 to EPL about under-allocation of power to it and proposed

recovery, on monthly basis, in terms of EPL’s letter dated 17.02.2000.

GEB asked EPL to confirm the same to enable it to process the bill for the

month of June, 2004 after adjusting the proposed recovery. There was

further correspondence on the issue and GEB finally addressed letter

dated 30.10.2004 to EPL, stating that a sum of ₹64 Crores would be

recovered from EPL’s pending monthly invoices for diverting GEB’s

allocated share from EPL’s 515 MW plant to its sister company, ESL, by

treating the same as deemed supply by GEB from April, 1998 till

September, 2004. GEB further stated that recovery in respect of such

diversion of energy from its allocated share to ESL from October, 2004

onwards would also be effected from the monthly invoices.

6. This was followed up by GEB’s letter dated 11.11.2004 informing

EPL of how the sum of ₹64 Crores was computed. The tabular statement

in this letter set out the details of the energy diversion to ESL from 1998

till September, 2004. The amount recoverable was worked out, on the

basis of HTP-1 Tariff Energy Charge @ ₹04.10 per kWh, and after

adjusting reimbursement of variable charges, the total recovery to be

made for that period was quantified at ₹64 Crores. It was made clear that 3 this recovery had been worked out without applying electricity duty and

that EPL would be informed about the amount recoverable on that count

after receipt of legal opinion. Notably, the letter ended with the caveat that

it was without prejudice to GEB’s rights under the provisions of the PPA.

7. In response, EPL addressed letter dated 30.11.2004 to GEB stating

that, with a view to close the discussion on the supply of power to ESL in

excess of allocated capacity, it accepted GEB’s claim for ₹64 Crores. EPL

thanked GEB officials for having closed the matter that was under

discussion for the past few years and concluded by stating that it trusted

that the methodology that had been finalized would be the basis adopted

for the future. However, by letter dated 31.12.2004, GEB informed EPL

that the amount of ₹64 Crores was not in final settlement of the issue nor

was the methodology final for charging for the energy diverted in excess

of the proportionate principle. GEB further stated that electricity duty was

chargeable on such recovery and it would work out the final recovery

amount and inform EPL accordingly.

8. Thereafter, GUVNL came into existence on 01.04.2005 upon the

unbundling of GEB. On 14.09.2005, GUVNL filed a claim before GERC

under Section 86(1)(f) of the Electricity Act, 2003, which came to be

numbered as Petition No. 873 of 2006, seeking a declaration that it was

entitled to adjust from the tariff payable by it to EPL all such amounts that

were received by EPL as a result of wrongful allocation of electricity. This 4 petition was disposed of by GERC, vide order dated 18.02.2009,

concluding thus:

1) that, EPL was obligated at all times under the PPA dated 30.05.1996 to declare the capacity from its entire generating station, as provided in Schedule VI of the PPA;

2) that, once such declared availability was made known, GUVNL was entitled to issue dispatch instructions in accordance with the terms of the PPA;

3) that, supply of electricity was to be made by EPL in proportion to the allocated capacity of 300 MW:215 MW, in accordance with the dispatch instructions;

4) that, the claims of GUVNL prior to 14.09.2002, on account of adjustment of Deemed Generation Incentive and diversion of allocated electricity (except to the extent of settlement of ₹64 Crores for diversion of electricity by EPL to ESL, in excess of 215 MW, from 1998 to September, 2004), was barred by limitation;

5) that, for the period after 14.09.2002, whenever EPL failed to declare the entire capacity of the plant, the supplies made by it to ESL in excess of the proportionate principle, as set out, was liable to be held as supply of electricity by GUVNL to ESL and GUVNL was entitled to be compensated for such supply at the prevailing HTP-1 Tariff, less variable costs, as was previously accepted by the parties for the diversion of electricity in excess of 215 MW;

6) that, after 14.09.2002, if GUVNL did not schedule energy to the extent allocated under the proportionate principle, even though EPL had declared the capacity for the entire generating station in terms of Schedule VI of the PPA, then EPL was entitled to supply the additional power that was available to ESL upon reimbursing the proportionate annual fixed charges to GUVNL;

7) that, GUVNL was entitled to recover Deemed Generation Incentive from EPL for the period 14.09.2002 to 29.05.2006.

5

9. Aggrieved by this order, both GUVNL and EPL preferred appeals

before the APTEL. Appeal No. 77 of 2009 was GUVNL’s appeal while

Appeal No. 86 of 2009 was filed by EPL. By judgment dated 22.02.2010,

the APTEL reversed in part the order dated 18.02.2009. The appeal filed

by GUVNL was dismissed and the appeal of EPL was partly allowed. The

APTEL held that EPL was not required to declare the capacity of the entire

plant of 515 MW. It further held that non-declaration of available capacity

on proportionate basis was not shown to have resulted in any loss to

GUVNL and it was, therefore, not entitled to any compensation on that

score. Lastly, the direction of GERC for reimbursement of annual fixed

charges, whenever GUVNL did not secure electricity to the extent

allocated under the proportionate principle, was held to be incorrect and

the APTEL opined that no such refund was liable to be made.

10. This common judgment was subjected to appeal before this Court

by GUVNL. Civil Appeal No. 3454 of 2010 was filed by it in relation to the

APTEL’s confirmation of GERC’s finding on limitation, restricting its claims

to three years prior to the filing of its petition on 14.09.2005. However, the

said appeal was dismissed by this Court on 02.09.2011. The more

substantial issue of diversion of its allocated electricity along with the

consequences thereof was raised by GUVNL in Civil Appeal No. 3455 of

2010. The decision of this Court in the said appeal, delivered on

09.08.2016, is reported in Gujarat Urja Vikas Nigam Limited vs. Essar 6 Power Limited1. Thereby, this Court set aside the judgment passed by

the APTEL and restored GERC’s order dated 18.02.2009. However, as

the actual working out, based on the said order, was to be made by the

GERC and GUVNL had already filed its claim in relation thereto in Petition

No. 972 of 2009, this Court left it open to GERC to proceed in the light of

the findings recorded in its decision. Petition No.972 of 2009 was decided

by GERC on 27.12.2019. That order was challenged by both sides by way

of separate appeals. APTEL’s judgment dated 21.03.2025 in those

appeals forms the fulcrum for the present set of appeals by GUVNL.

GERC’s order dated 27.12.2019 and the APTEL’s appellate judgment

dated 21.03.2025 will be analysed and discussed hereinafter.

11. At this stage, it may be noted that in this round of litigation, leading

to the filing of the present appeals, GERC as well as the APTEL

proceeded on the premise that the decision of this Court in Gujarat Urja

Vikas Nigam Limited (supra) settled most of the issues. These appeals,

therefore, turn upon what was held by this Court in the aforestated

decision. Surprisingly, GUVNL and EPL place strong reliance on the said

decision and both assert that the findings therein are in its favour. Correct

understanding and application of that decision is, therefore, called for.

Such hermeneutics would raise a substantial legal question, as rival

1 (2016) 9 SCC 103

7 interpretations are sought to be placed by both parties on the aforestated

decision. The maintainability of these appeals, therefore, stands settled.

12. Though both sides have taken us through the aforestated decision

and relied upon particular paragraphs therein to assert a claim that this

Court had decided the issues, presently under consideration, in its favour,

we are of the opinion that such disjointed reading of specific paragraphs

or even sentences, out of context, would not be the proper approach to

understand the import of the decision. It must, necessarily, be read as a

whole and in its entirety to glean the findings and ratio decidendi laid down

therein.

13. The question of law framed by this Court in Gujarat Urja Vikas

Nigam Limited (supra) was whether the APTEL had correctly interpreted

the terms of the PPA dated 30.05.1996 and was justified in reversing the

findings of GERC, based on the interpretation of the PPA and other

documents. This Court, then, noted the underlying facts and, in particular,

the prayer of GUVNL in its Petition No. 873 of 2006, which reads as under:

"(a) hold that the petitioner is entitled to adjust in the tariff payable by the petitioner to the respondent for purchase of electricity all amounts received by the respondent as a result of wrong allocation of electricity; and deemed generation incentive when naphtha is proposed to be used as fuel;

(b) award cost of the proceedings in favour of the petitioner and against the respondent; and

(c) pass such other or further orders as may be deemed proper to give relief to the petitioner;

(d) continue to raise bills on Essar Group of Companies based on proportionate methodology."

8 14. This Court then noted the observation of GERC in its order dated

18.02.2009 that GUVNL had an obligation, under the PPA dated

30.05.1996, to pay annual fixed charges for the allocated capacity, i.e.,

300 MW, and upon paying such annual fixed charges for the said capacity,

GUVNL had a right to an equivalent amount of electrical output. GERC

had observed that the purpose of paying such annual fixed charges was

to ensure that GUVNL alone had the right to the said capacity and that no

part of the same could be sold to any other party. This Court also noted

the conclusion of GERC, upon a reading of Article 3.1 of the PPA dated

30.05.1996, that the entire capacity of the generating plant of EPL was to

be shared only by the two beneficiaries, i.e., GUVNL and ESL. Noting that

EPL’s PPA dated 29.06.1996 with ESL also recorded the allocation of

electricity to GUVNL, GERC had held that the allocation was intended to

be on a proportionate basis only between these two parties and, therefore,

EPL could not argue that the PPAs did not recognize the proportionate

principle. GERC’s finding, which is of significance presently, was that, if

the proportionate principle was acceptable for recovery of fixed charges,

it could not be abandoned for allocation of supply. This finding would have

to be kept in mind as the claim of GUVNL before us is with regard to

reimbursement of such fixed charges.

15. GERC had held, in no uncertain terms, that once the entire capacity

was allocated between the two parties in a particular proportion, EPL 9 could not violate the proportionate allocation for the benefit of any one

party. Having sold 300 MW to GUVNL and 215 MW to ESL, for which fixed

charges were paid by them in the said proportion, GERC opined that EPL

could not argue that it could sell power to ESL beyond the capacity

allocated to it. The obligation of EPL, as per GERC, was to clearly declare

the capacity of the generating plant as a whole on a weekly schedule and,

once the declared availability for the entire plant was made known, the

two beneficiaries were to issue dispatch instructions in accordance with

the terms of their PPAs. The argument of EPL that it did not have any

obligation to declare the capacity for the entire plant was, therefore,

rejected by GERC.

16. Further, GERC observed that once the capacity of the generating

plant as a whole was made available, the allocation of such capacity has

to take place in the proportion that is contracted, i.e., the electrical output

will be allocated and supplied between the two beneficiaries on

proportionate basis, in accordance with the dispatch instructions. GERC

noted that the obligation of EPL was to supply electrical output to GUVNL

up to the allocated capacity of 300 MW and it also had an obligation to

make payment of Deemed Non-generation Incentive and reduce annual

fixed charges on a pro rata basis. This, as per GERC, however, did not

negate the proportionate principle of allocation when EPL declared

availability less than the allocated capacity.

10

17. It was further held by GERC that if GUVNL did not take the power

declared available by EPL in terms of the aforesaid ratio, EPL would then

have the right to sell that power to ESL, its sister company, subject to

reimbursement of the proportionate annual fixed charges. In effect, if

GUVNL did not schedule the power to the extent of availability declared

by EPL of the entire plant, in terms of the PPA, it could not complain if that

power was sold to EPL’s sister company and the proportionate annual

fixed charges were reimbursed to it.

18. GERC further held that GUVNL would be entitled to claim

compensation for the electricity wrongly diverted to ESL from the capacity

allocated to GUVNL under the PPA dated 30.05.1996. The diversion, in

the circumstance, was directed to be computed on an hourly basis. As

regards the quantum of compensation payable on account of such

diversion, GERC noted that the PPA was silent. It then referred to the

settlement between the parties on account of such diversion between

1998 and September, 2004, by agreeing upon a particular methodology

for determining the compensation. The methodology adopted was that

GUVNL would be entitled to HTP-1 Tariff Energy Charge for such diverted

power, after excluding the variable costs. Observing that this appeared to

be a fair manner of determining the compensation that was to be paid for

the period after September, 2004 also, the GERC directed the parties to

reconcile the generation data and make a final calculation on the basis of 11 the said principle. As regards the remaining period of the PPA, GERC

observed that EPL had a legal obligation to declare availability for the

entire capacity and was not to divert any power to ESL, contrary to the

proportionate principle but, if GUVNL declined to purchase the power

allocated on proportionate basis, GERC held that EPL would have the

right to sell that power to ESL, subject to reimbursement of the

proportionate fixed charges.

19. This Court then noted the findings of the APTEL in its judgment

disposing of the appeals filed against GERC’s order dated 18.02.2009.

Having set out those observations and findings, this Court held that the

APTEL had committed an error in observing that GUVNL had not proved

suffering of any damage, as paragraph 23 of its petition expressly

demonstrated such damage. This Court also disagreed with the APTEL

on its finding that there was no obligation on EPL to declare the availability

of generated power for the entire plant, whereupon dispatch instructions

could be issued by both the beneficiaries. This Court categorically held

that the finding of the APTEL that GUVNL had accepted ₹64 Crores by

way of settlement was against the record. The points for consideration

were framed by this Court as under: -

“…..Points for consideration

20. The points which arise for consideration are:

20.1. (i) True interpretation of PPA to determine whether there is any obligation to declare availability of power in the ratio of 300:215;

12 20.2. (ii) Effect of letters dated 17-2-2000,4-3-2000 and 4-10-2001 on the rights of the parties;

20.3. (iii) Interpretation of Schedule VI to determine whether the obligation to issue dispatch instructions arose before declaration of availability.

20.4. (iv) Relief to which the appellant may be entitled to.”

20. On the first issue as to the true interpretation of the PPA, this Court

held that it clearly contemplated the proportion of allocation of capacity

between the two beneficiaries and EPL, necessarily, had to operate its

generating plant to meet the requirement of electrical output that could be

generated corresponding to the allocated capacity. This Court noted that

GUVNL had to pay annual fixed charges as determined in terms of Article

7.1.1 of Schedule VII of the PPA dated 30.05.1996 and EPL was under an

obligation to declare the weekly schedule of the capacity available so that

dispatch instructions could be issued on the basis of the said declaration.

The contrary view of the APTEL was held to be erroneous and GERC’s

finding was consequently held to be the correct interpretation of the PPA.

21. On the second issue, with regard to the effect of the correspondence

between the parties on their respective rights, this Court noted the

observation of GERC that, by its letter dated 17.02.2000, EPL had

unequivocally agreed to supply of power in the ratio of 58:42 to GUVNL

and ESL respectively. This Court held that the letters addressed by EPL

clearly acknowledged its liability to allocate the generated power to

GUVNL and ESL in the ratio of 58:42 and disagreed with the finding of the 13 APTEL that the said letters could not be relied upon to support the claim

of GUVNL that it was entitled to be allocated power in that proportion.

22. On the third issue, with regard to interpretation of Schedule VI to

determine whether the obligation to issue dispatch instructions arose

before the declaration of availability, this Court held that EPL was liable to

declare the weekly capacity available and it was only on that basis,

dispatch instructions were required to be issued. Again, the contrary view

taken by the APTEL was rejected.

23. On the last issue, with regard to the relief to be granted to GUVNL,

this Court observed that the amount of ₹64 Crores was not accepted by

GUVNL by way of a final settlement and held that the APTEL had erred in

observing that GUVNL had committed default in making payments,

amounting to a breach of promise on its part, thereby absolving EPL of its

obligation to supply power as per the PPA dated 30.05.1996. However,

upon being informed that these aspects had been examined by GERC in

a subsequent dispute and an appeal in that regard was pending before

the APTEL, this Court refrained from making further remarks and made it

clear that its observations would not be treated as affecting the decision

in the said appeal.

24. In summation, this Court held that the APTEL’s judgment was

erroneous and set it aside, explicitly restoring GERC’s order dated

18.02.2009. As GERC had left the actual working out of the loss suffered 14 by GUVNL to be worked out separately and, on that basis, GUVNL had

already filed a petition, this Court directed that the same could be revived

and considered in the light of its findings.

25. Pursuant to the decision of this Court and the restored GERC’s

order dated 18.02.2009, Petition No.972 of 2009 was disposed of by

GERC on 27.12.2019. GERC held that, in the light of the concurrent

finding on limitation, the claims of GUVNL for the period prior to

14.09.2002 were time-barred, except to the extent of ₹64 Crores paid by

EPL towards settlement of the claims for diversion of power during the

period from 1998 to September, 2004. As regards the diversion

computation, i.e., whether the same was to be made on hourly basis or

on half-hourly basis, GERC referred to the letter dated 21.02.2005 of the

Central Electricity Authority (CEA), based on EPL’s request in its letter

dated 24.01.2003, wherein the CEA recommended that recording of

meters should be on half-an-hour basis on the ESL load side and power

evacuation side. Noting that there was no written agreement amending

the PPA to that effect, in keeping with Article 12.1 thereof, GERC however

held that as the recommendation of the CEA, vide letter dated 21.02.2005,

had been accepted by both parties and had been acted upon by them with

effect from 23.02.2005, the same should be considered while calculating

the wrongful diversion of electricity by EPL with effect from 23.02.2005.

The computation by GUVNL on half-hourly basis was, therefore, taken to 15 be correct and not the hourly based computation submitted by EPL.

GERC, however, opined that GUVNL would be entitled to receive only the

Energy Charge of HTP-1 Tariff towards compensation for the diversion of

electricity by EPL to ESL. Therefore, EPL was held liable to pay the

difference at the rate of the Energy Charge of HTP-1 Tariff, after deducting

variable costs/charges, for the diversion of excess electricity to EPL in

violation of the proportionate principle of 58:42.

26. As regards the claim of GUVNL for reimbursement of fixed charges

for the diversion of energy, along with penalty, GERC held that GUVNL

was only entitled to compensation in terms of its earlier order dated

18.02.2009, which had approved and affirmed the methodology followed

by the parties for computing the compensation, culminating in the

settlement for ₹64 Crores. As that compensation methodology did not

include fixed charges or penalty and as its order dated 18.02.2009 stood

restored after being upheld by this Court, GUVNL was held disentitled to

seek review of the same and claim something more. GERC affirmed that,

as the component of fixed charges and penalty for drawal in excess of

contract demand, had not been considered or factored in while

determining the compensation earlier, the same could not be allowed in

the present proceedings as it would amount to review of the earlier order.

27. GERC, accordingly, computed the compensation payable based on

the HTP-1 Tariff Energy Charge, duly adjusting the variable charges 16 therefrom. EPL was held not liable to pay fixed charges and penalty for

excess drawal of electricity. On the issue of Delayed Payment Charges

(DPC), which had not been considered in the earlier round by GERC,

APTEL and this Court, GERC held that GUVNL was entitled to Delayed

Payment Charges from September, 2002 to March, 2019. Deemed

Generation Incentive paid by GUVNL to EPL between September, 2002

and May, 2006, quantified at ₹36.62 Crores, was also held liable to be

refunded. Delayed Payment Charges were directed to be paid by EPL, as

per the PPA, at the rate of 2% over the average interest rate charged by

GUVNL’s bank on working capital loans during the preceding 12 months.

28. GUVNL and EPL assailed GERC’s order dated 27.12.2019 in

separate appeals before the APTEL. By the common judgment dated

21.03.2025, presently under scrutiny, the two appeals were disposed of.

Therein, on the issue of whether computation of diverted energy should

be on hourly or half-hourly basis, the APTEL disagreed with the view taken

by GERC. According to it, once the earlier GERC’s order dated

18.02.2009 recorded that the diversion should be computed on hourly

basis and the same stood confirmed by this Court, GERC ought not to

have held to the contrary. It was also noted that the PPA dated 30.05.1996

had not been amended and the unamended PPA spoke only of hourly

based computation. On the claims of GUVNL arising from diversion of

electricity by EPL to ESL, in the light of the earlier orders, the APTEL noted 17 that GUVNL would be entitled to compensation for the diverted supply of

power by EPL to ESL in excess of the proportionate principle and,

therefore, GERC had correctly worked out the units for compensation as

the difference between the units actually supplied to ESL and its

proportionate share in the entire plant availability. The APTEL also

confirmed that the methodology for computation of the compensation was

correctly applied as the HTP-1 Tariff Energy Charge. The order of GERC

holding to this effect was, therefore, found to be free of infirmity. As

regards the recovery of ₹36.62 Crores by GUVNL towards Deemed

Generation Incentive, EPL contended that only a sum of ₹34.42 Crores

had been paid towards such incentive and not ₹36.62 Crores. A dispute

was, therefore, sought to be raised as regards the difference of ₹2.2

Crores. On the other hand, GUVNL contended that this aspect was never

raised before GERC, though the data was presented by GUVNL in that

regard and was accepted by GERC. It was also pointed out that the issue

was not even raised in the appeal filed by EPL but was belatedly

introduced in its rejoinder to GERC’s reply. However, the APTEL opined

that, as the matter was being remanded to GERC for re-computation of

the amounts due under various heads, this aspect could also be

considered. Similarly, another issue raised by EPL with regard to the

actual amount that had been deducted by GUVNL from its invoices, that

is, whether it was ₹234.60 Crores or ₹157.88 Crores, was also left open 18 to be considered by GERC. On Delayed Payment Charges, the APTEL

noted that GERC had applied simple interest on such payment though

EPL, in relation to its claims made against GUVNL on the count of delayed

payment, had contended in another pending appeal that it was entitled to

compound interest. APTEL noted that the issue of Delayed Payment

Charges had not been determined in GERC’s earlier order dated

18.02.2009. Observing that GERC had determined Delayed Payment

Charges on simple interest basis, as per Article 5.3.4 of the PPA, the

APTEL rejected the claim for compound interest. A caveat was, however,

added that in the event EPL secured an order in its pending appeal for

payment of compound interest on delayed payments, the same benefit

should be given to GUVNL also. GERC’s order was, accordingly,

confirmed subject to the above modifications. GERC was directed to give

both parties a reasonable opportunity of hearing and pass orders afresh

in accordance with law and in terms of the directions issued. We are

informed that GERC is presently seized of this exercise.

29. Though an argument was advanced on behalf of GUVNL for

payment of compensation on the parameters laid down in Section 73 of

the Indian Contract Act, 1872, and more particularly, illustration (j) therein,

we are of the opinion that, in the light of para 9.13 in GERC’s order dated

18.02.2009 which was affirmed by this Court in the earlier round, it is not

open to GUVNL to agitate its claim for compensation beyond what was 19 determined as just and acceptable in the said para and was accepted and

confirmed by this Court, while restoring the order of GERC. This Court, no

doubt, also affirmed that there was no settlement between the parties as

to the finality attaching to the sum of ₹64 Crores, but the fact remains that

GEB and, thereafter, GUVNL never raised any further claim for

compensation against EPL for the period covered by that settlement, i.e.,

April, 1998 to September, 2004. The imprimatur of this Court as to the

methodology that formed the basis for the computation of ₹64 Crores for

the diverted electricity from 1998 till September, 2004, and the edict that

it would hold good even for the period after September, 2004, is binding

on the GUVNL and there is no possibility of reopening that issue.

30. That being said, we may note that payment of fixed charges by

GUVNL, in terms of the PPA dated 30.05.1996, is traceable to Article 7.1.1

in Schedule 7 thereof. ‘Tariff’, as defined by Article 7.1 therein, reads to

the effect that it should be determined on the basis of annual fixed

charges, in terms of Article 7.1.1, along with variable charges, in terms of

Article 7.2, and incentive payment, in terms of Article 7.3. The annual fixed

charges under Article 7.1.1 were to be computed on the basis of Interest

on Debt, Operation and Maintenance Expenses, Depreciation, Tax on

Income, Return on Equity, Interest on Working Capital and Base Foreign

Debt Repayment Adjustment Amount. The invoicing of fixed charges was

to be made on a monthly basis, based on the annual fixed charges 20 computed in terms of Article 7.1.1. Variable charges under Article 7.2 were

to be calculated monthly on the basis of Quantity of Fuel and Cost of Fuel

per kWh. Incentive payments under Article 7.3 included the Deemed

Generation Incentive. Article 5 of the PPA dealt with billing and payment

and Article 5.2 therein provided for the monthly invoice being submitted

by EPL, consisting of the amounts to be paid as per the tariff computed in

accordance with Schedule VII. Article 5.3.2 provided for payment and

stated that variable charges would be payable in each month, within the

due date, while fixed charges in each month would be the equivalent of

1/12th of the annual fixed charges and shall be adjusted at the end of the

accounting year in the event the level of generation achieved by EPL

during that accounting year was less than the allocated capacity.

Incentives were also payable on a monthly basis from the month during

which the level of generation exceeded the allocated capacity.

31. The issue before us is as to the total amount that can be claimed by

GUVNL for the electricity diverted by EPL to ESL from out of its allocated

share, that is, 58% of the available electricity for the entire plant declared

on a weekly basis. In that context, what emerges now from the

adjudication by GERC and the APTEL, presently under scrutiny, is that

‘compensation’ could only be claimed by GUVNL for such wrongful

diversion by EPL on the basis of HTP–1 Tariff Energy Charge, as this was

what was found to be an appropriate method for computing compensation 21 on the basis of the earlier settlement arrived at by and between the parties

for the period April, 1998 to September, 2004. However, neither GERC

nor the APTEL took note of what was stated earlier by this Court and

GERC with regard to ‘reimbursement’ of fixed charges. This Court had

explicitly recorded that the PPA dated 30.05.1996 provided for the

‘proportionate principle’ for recovery of fixed charges and, therefore,

applied the same to allocation of available electricity also, noting the fact

that there were only two beneficiaries for the electricity generated by EPL.

This Court observed that once EPL sold 300 MW of the generated power

to GUVNL and the remaining 215 MW to ESL, for which both parties paid

fixed charges in the said proportion, EPL could not argue that it could sell

more power to ESL. It was also noted that the intention of EPL was to

recover the fixed charges only from these two beneficiaries in proportion

to their allocated capacity.

32. As GUVNL was required to assess the fixed charges on an annual

basis and adjust the same on a monthly basis, by paying 1/12th thereof,

any shortfall in the supply of electricity from its allocated 58% obviously

meant that the fixed charges proportionate to such shortfall were liable to

be reimbursed. Even if GUVNL did not accept the electricity declared

available by EPL, in terms of the proportionate principle, and EPL could

sell that power to ESL, it was subject to reimbursement of proportionate

annual fixed charges. This was pointed out by GERC in para 9.11 of its 22 order dated 18.02.2009 which was affirmed by this Court. The para reads

as under: -

‘9.11. However, if GUVNL does not take the power declared available by EPL in terms of the aforesaid ratio, EPL will have the right to sell the power to its sister concern subject to reimbursement of the proportionate of the annual fixed charges. GUVNL cannot make a submission that although it will not purchase such power as declared available by EPL, EPL cannot sell the same to its sister concern. Such a submission would defeat the purpose of the Electricity Act, 2003 and the National Electricity Policy which promotes generation and encourages sale of surplus capacity. If GUVNL does not schedule the power to the extent of availability declared by EPL of the entire plant in terms of the PPA, it cannot complain if the power is sold to EPL's sister concern and the proportionate of the annual fixed cost is reimbursed.’ (emphasis is ours)

33. Significantly, in its judgment dated 22.02.2010, the APTEL had

disagreed with GERC’s order dated 18.02.2009 on the reimbursement of

fixed charges and held that no such reimbursement was to be made.

However, that finding was reversed by this Court when the APTEL’s

judgment was set aside and GERC’s order dated 18.02.2009 was

restored. Therefore, reimbursement of fixed charges was separately dealt

with by this Court and EPL was held liable to refund such fixed charges

proportionately for the shortfall in the supply of electricity to GUVNL from

its allocated share of 58% of the declared available electricity which had

been diverted by EPL to ESL. Though para 9.11 of GERC’s order dated

18.02.2009 spoke of a situation where this happened due to GUVNL not

opting to purchase its share of the declared available electricity, the same 23 principle would apply even when EPL wrongfully diverted GUVNL’s share

of electricity to ESL without its knowledge. Further, and most significantly,

the PPA envisaged adjustment of the fixed charges at the end of the

accounting year if EPL’s generation during that year was less than the

capacity allocated to GUVNL. Therefore, payment of fixed charges by

GUVNL was pegged to the actual supply of its allocated share of electricity

and reimbursement of such fixed charges was to be made proportionately

in the event of any shortfall.

34. In addition to such reimbursement of fixed charges as a separate

component, in terms of what was held by this Court, GUVNL was also held

entitled to ‘compensation’ in accordance with para 9.13 of GERC’s order

dated 18.08.2009, which reads as under: -

‘9.13. As regards the quantum of compensation payable on account of diversion, the PPA is silent on the same. The parties in the settlement for dues on account of diversion for the period between 1998 and September, 2004 agreed on a particular methodology for determining such compensation. The parties had agreed that GUVNL is entitled to the HTP 1 energy tariff after excluding the variable cost. The diversion in the circumstance should be computed on an hourly basis. This appears to be a fair manner of determining the compensation that is to be paid for the period after September, 2004. The parties are required to reconcile the generation data and make final calculation on the basis of the aforesaid principle.’

35. Needless to state, the very connotation of ‘compensation’ would

imply the payment to be made to one party to make good the loss or

damage suffered by it owing to a breach or violation of an obligation by 24 the other. Reimbursement of fixed charges flowed from the provisions of

the PPA itself and was not traceable only to the breach by EPL, in terms

of the diverted capacity which fell to GUVNL’s share. That was only one

of the scenarios in which such reimbursement stood triggered apart from

those envisaged by the provisions of the PPA. The misconceived notion

that ‘fixed charges’ were also to be included in the ‘compensation’ to be

claimed by GUVNL, resulted in arguments being advanced before GERC

and the APTEL to that effect and the rejection thereof by both the fora, in

this round of litigation, relying on para 9.13 of GERC’s order dated

18.02.2009. However, neither GERC nor the APTEL took note of what was

stated by this Court, in the preceding paragraphs, referring to the GERC’s

earlier order with regard to reimbursement of fixed charges in the event

the corresponding power was not supplied to GUVNL, as per its allocated

proportionate share in the declared available capacity.

36. At this stage, we may make it clear that we are not building up a

new case for GUVNL contrary to its pleaded case. It is a well settled

proposition of law that parties would be bound by their pleadings and the

case put forth by them on the strength thereof and it is not for the Court to

substitute its own notion of what that case should be. However, as already

noted supra, this case entirely turns upon the earlier decision of this Court.

Each of the parties has its own take on how that decision is to be

interpreted to suit its own interest, even if mistakenly so. We are merely 25 giving effect to the clear findings of this Court in that earlier decision,

irrespective and independent of how the parties understood them and how

they formulated their cases on the basis of such understanding. This Court

cannot be a mute spectator when its judgments and findings are

misconstrued or misunderstood by the parties and are projected

erroneously in a subsequent round of litigation.

37. In any event, it is not open to EPL to claim fixed charges twice over,

by appropriating the excess fixed charges paid by GUVNL for electricity

that was never supplied to it from its allocated proportionate share, on the

one hand, and also pocketing the fixed charges paid by ESL for the extra

electricity that was supplied to it from out of GUVNL’s share. In this regard,

we may note that the PPA dated 29.06.1996 between EPL and ESL also

provided for similar fixed charges being paid by ESL for the electricity

supplied towards its proportionate share. Once that proportion was not

adhered to and excess power was supplied to ESL, EPL would obviously

collect fixed charges from ESL for such excess power supply also.

38. The finding of GERC and the APTEL that GUVNL is not entitled to

reimbursement of fixed charges is, therefore, unsustainable. Once

GUVNL did not receive the electricity for which such fixed charges had

been computed and paid on a monthly basis, it was entitled to

reimbursement thereof, not as compensation, but on the principle of

restitution as such payment was not at all due from it. The argument to 26 the contrary by EPL, which was accepted by GERC and the APTEL, on

the strength of the methodology to be adopted for computing

compensation under para 9.13 of GERC’s order dated 18.02.2009,

therefore, cannot be accepted. GUVNL was entitled to reimbursement of

the fixed charges, in relation to the diverted electricity from out of its

allocated share, in addition to the compensation payable for such wrongful

diversion, computed on the basis of HTP-1 Tariff Energy Charge.

39. As regards the computation of the electricity diversion being made

on hourly or half-hourly basis, we find that the PPA dated 30.05.1996

executed by and between GEB and EPL provided under Article 1 thereof

that ‘Availability Period’ would mean ‘each of the 24 consecutive periods

of 60 minutes in each day’. Similarly, the PPA dated 29.06.1996 between

EPL and ESL provided under Article 1 that the ‘Availability Period’ would

mean ‘each of the 24 consecutive periods of 60 minutes in each day’.

Therefore, there was no difference in the two PPAs as to the computation

methodology. While so, it appears that EPL itself addressed letter dated

24.01.2003 to the CEA seeking its advice under Section 73 of the

Electricity Act, 2003, with regard to the metering scheme and installation

of a circuit breaker for its 515 MW plant at Hazira. The CEA noted that

EPL had set up a 515 MW Power Plant at Hazira in the year 1996-97 and

had entered into two separate PPAs, one for 300 MW with GEB and the

other for 215 MW with ESL. However, as GEB wanted to install a circuit 27 breaker in the main bus bar, EPL had addressed letter dated 24.01.2003

raising certain queries for the advice of the CEA. EPL had voiced the

concern that installation of a circuit breaker may jeopardize the safety of

its plant as it needed to be connected with the grid in all conditions.

Thereupon, vide its letter dated 21.02.2005, the CEA made certain

recommendations, one of which was that recording of meters should be

on half-hourly basis on ESL load side and power evacuation side.

Admittedly, based on this recommendation, GUVNL, EPL and ESL acted

upon and carried out the metering on the load side and power evacuation

side of ESL on half-hourly basis.

40. The recommendation of the CEA was on 21.02.2005. It was shortly

thereafter that GUVNL filed its first petition before GERC. Prior to that,

GEB also calculated the diversion of energy up to 21.02.2005 on hourly

basis and it was only thereafter that the computation was made on

half-hourly basis. As the power diversion, for which GUVNL has to be paid

compensation, is for the supply made by EPL to ESL, over and above its

allocated share, and as it was at the behest of EPL itself that this

half-hourly computation methodology was adopted, pursuant to the

recommendation of the CEA, there is no reason why the very same

methodology should not be used for computing the electricity diversion so

as to quantify the compensation payable to GUVNL for the excess power

supply made to ESL by EPL from out of GUVNL’s allocated share. 28

41. Reference made by EPL, in this regard, to the grounds of GUVNL

before the APTEL, in Appeal No. 77 of 2009, is misconceived. The ground

raised was apropos the allocated share of 58:42 of the 515 MW capacity,

i.e., 300 MW:215 MW, and in that context, GUVNL stated that in

accordance with the above ratio, EPL was obligated to declare availability

from the 515 MW capacity generating station for supply to GEB/GUVNL

and the ESL maintaining the proportion of 58%:42% for each time block

which for the purpose of the PPA is one hour. This passing reference to

the PPA methodology of one hour is not sufficient in itself to negate the

admitted adoption of the methodology recommended by the CEA on the

application made by EPL itself. Having invited that methodology for supply

of power so as to avoid installation of a circuit breaker, EPL cannot fight

shy of the same methodology being adopted for computation of the

excess power diverted by it to ESL from out of the allocated share of

GUVNL. GERC was, therefore, correct in adopting this methodology but

the APTEL reversed the same on the technical ground that the PPA had

not been amended. Even if both PPAs were not amended by way of

written agreements, as provided in Article 12.1 thereof, the irrefutable fact

remained that GUVNL, EPL and ESL accepted, adopted and acted upon

the recommendation of the CEA in its letter dated 21.02.2005 and

converted the ‘Availability Period’ from hourly basis to half-hourly basis on

ESL load side and power evacuation side. It is not open to EPL to secure, 29 at its own behest, such a modification, act upon it, and then argue that

though the same was adopted for supply of electricity by it to ESL, it ought

not to be adopted for computing the excess electricity supplied by it to ESL

from out of the allocated share of GUVNL. Significantly, this aspect was

not even in issue during the first round and the mere statement by GERC

in its order dated 18.02.2009 that the diversion should be computed on an

hourly basis, in ignorance of the CEA’s recommendation to the contrary

and its acceptance by the parties, cannot be said to be binding even if the

GERC’s order was restored by this Court thereafter.

42. GUVNL objects to the remand of certain issues by the APTEL, which

were not raised initially by EPL, on the ground that it was not open to EPL

to raise such new grounds at the appellate stage. However, we may note

that GUVNL itself did not raise the issue of hourly/half-hourly computation

before the APTEL or this Court, in the earlier round of litigation, though

GERC had referred to it in its order dated 18.02.2009. Despite the same,

we have entertained that ground in this round of litigation as it is not open

to EPL, which acted contrary to its obligations under the PPA, to claim

such protection and seek undue advantage. Similarly, in the event GUVNL

actually paid a lesser amount towards Deemed Generation Incentive and

is now claiming ₹2.2 Crores more than what is due and payable to it, that

is an aspect that can be looked into by GERC. So too is the case with the

actual deductions made by GUVNL, as that would be a matter of record 30 and can be easily verified and determined by GERC. We are, therefore,

not inclined to interfere with those directions of the APTEL. However, the

order dated 27.12.2019 passed by GERC and the judgment dated

21.03.2025 passed by the APTEL shall stand modified to the extent

indicated hereinabove.

43. The appeals are disposed of in the aforestated terms. Parties shall

bear their own costs.

……………………...J [SANJAY KUMAR]

.……………………...J [ALOK ARADHE]

New Delhi;

September 25, 2025.

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