RADHEY SHYAM Vs STATE OF U.P. & ORS.
Bench: ANIL R. DAVE,L. NAGESWARA RAO
Case number: Writ Petition (crl.) 62 of 2000
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Non-Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1665 of 2015
MANGALORE ELECTRICITY SUPPLY COMPANY LIMITED
.... Appellant(s) Versus
M/S. AMR POWER PRIVATE LIMITED & ANR.
….Respondent(s)
J U D G M E N T
L. NAGESWARA RAO, J.
Mangalore Electricity Supply Company Ltd.
(MESCOM), the Appellant herein, is a distribution licensee.
M/s. AMR Power Private Limited, the First Respondent
herein, is a renewable power generator which has developed
and is operating a 24.75 MW run of the river mini hydel
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power project in the State of Karnataka. The Karnataka
State Electricity Regulatory Commission is the Second
Respondent in the present Appeal.
2. The Appellant and the First Respondent entered into a
Power Purchase Agreement (hereinafter referred to as ‘PPA’)
on 02.08.2006 for the supply of 24 MW of electricity. It was
mentioned in the PPA that the Government of Karnataka
accorded its sanction to the proposal of the First
Respondent for installation of a mini hydel electric power
generating station of 24 MW capacity across River
Netravathi, Dakshina Kannada District and that the
Appellant was permitted to enter into a PPA with the First
Respondent for purchase of electricity. Article 5 of the PPA
provides for payment of Rs 2.80 per kilowatt-hour for the
first 10 years for the delivered energy. From the 11th year
onwards, the PPA provides that the Appellant shall pay to
the company a rate determined by the Commission for the
energy delivered at the metering point. Article 6 of the PPA
deals with billing and payment, Article 9 covers the term,
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termination and default of the PPA. As per Article 9.1.1, the
PPA shall continue to be in force for a period of 20 years
from the commercial operation date and may be renewed for
a period of 10 years on such terms and conditions as may
be mutually agreed upon. Article 6 and Article 9 which fall
for consideration in this case will be dealt with in detail in
the subsequent paragraphs. On 04.08.2008, the First
Respondent increased the capacity from 24 MW to 24.75
MW.
3. The First Respondent started generating power and
commenced supply of electricity to the Appellant on
12.09.2009. The First Respondent approached the
Karnataka Electricity Regulatory Commission, the Second
Respondent herein, by filing O.P. No. 28 of 2009 for a
declaration that the PPA executed on 02.08.2006 was null
and void. A further relief for grant of open access was also
sought by the First Respondent. An interim order was
passed by the Second Respondent Commission on
27.08.2009 directing the Appellant to synchronize the plant
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and pay for the power at the rate of Rs. 2.80 per unit
pending final adjudication. The Second Respondent
Commission dismissed O.P. No. 28 of 2009 on 23.12.2010.
Pursuant to the observations made in the said order dated
23.12.2010, the First Respondent requested the Appellant
to revise the tariff which was not considered by the
Appellant. The First Respondent also filed a review of the
order passed in O.P. No. 28 of 2009 which was dismissed
on 22.12.2011.
4. The First Respondent by a letter dated 26.05.2011
served a Default Notice as provided in Article 9.3.2 of the
PPA and requested the Appellant to remedy the default.
The First Respondent referred to default in payment of
power bills, default in payment of interest for the delay
caused in payment of the power bills and default in opening
a Letter of Credit. Details of the default were annexed to
the said letter dated 26.05.2011. The Appellant responded
to the Default Notice by sending a letter dated 04.07.2011
in which it was stated that an attempt was being made to
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clear all dues towards power purchase to all the generators
without any delay. The Appellant also stated that the
payment of bills for the month of January, February and
March 2011 were delayed because of the inter-connection
approval not being produced by the First Respondent. It
was also stated that an endeavour would be made in the
future to make the payments without delay and that the
Letters of Credit would be opened. The First Respondent,
not being satisfied with the reply dated 04.07.2011, issued
a Notice of Termination of the PPA on 22.07.2011.
5. The First Respondent approached the Second
Respondent by filing O.P. No. 48 of 2011 seeking a
declaration that the PPA dated 02.08.2006 stood terminated
and was not subsisting. A further declaration for
intra-state open access was sought. The Second
Respondent Commission by an order dated 23.02.2012
passed an interim order for payment of tariff at the rate of
Rs. 2.80 per unit, pending disposal of O.P. No. 48 of 2011.
On 22.03.2012, the First Respondent moved an application
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for withdrawal of O.P. No. 48 of 2011. The Second
Respondent Commission dismissed O.P. No. 48 of 2011 as
withdrawn. The First Respondent approached the Central
Electricity Regulatory Commission (CERC) by filing petition
No. 141/MP/2012 seeking permission for inter-state open
access to supply electricity to third parties. On 23.08.2012,
the Appellant filed O.P. No. 37 of 2012 before the Second
Respondent Commission seeking quashing of the
termination notice dated 22.07.2011 and for a declaration
that the PPA dated 02.08.2006 was valid and subsisting. A
further direction was also sought to the First Respondent to
act in accordance with the PPA dated 02.08.2006 and to
supply power in terms thereof. The CERC dismissed
Petition No. 141 of 2012 filed by the First Respondent for
grant of inter-state open access in view of the pendency of
O.P. No. 37 of 2012 before the State Commission in which
the validity of the PPA was challenged. The Second
Respondent Commission directed status quo to be
maintained on 23.08.2012 in O.P. No. 37 of 2012. The said
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interim order dated 23.08.2012 was challenged by the First
Respondent before the Appellate Tribunal for Electricity
(APTEL). The APTEL continued the interim arrangement
but clarified that the order of status quo passed by the
Second Respondent Commission would not mean that the
operation of the termination of the PPA was stayed. By an
order dated 14.08.2013 the Second Respondent
Commission dismissed O.P. No. 37 of 2012 upholding the
Termination Notice dated 22.07.2011 and declaring that the
Appellant was not entitled for a direction to the First
Respondent to act in accordance with the PPA dated
02.08.2006. Appeal No. 275 of 2013 filed by the Appellant
before the APTEL was dismissed on 17.10.2014, the
correctness of which is assailed in the present Civil Appeal.
6. The Second Respondent Commission framed two
issues for consideration. They are as follows:
“(1) Whether the termination of the PPA dated
02-08-2006 by the Respondent is illegal and invalid,
as contended by the petitioner?
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(2) Whether the petitioner has made out a case for a
direction by the Commission to the Respondent to act
in accordance with the PPA dated 02-08-2006 and
supply power in terms of the PPA, as prayed for?”
7. The Commission held that the Appellant in its reply to
the Default Notice did not deny the delay in payment. The
Commission further found that the Appellant made an
attempt to justify the delay and virtually admitted the delay.
The Commission also held that in response to the Default
Notice dated 26.05.2011 the Appellant should have cleared
all the pending bills including interest within the time
specified in the PPA for curing the defects. Issue No.1 was
held in favour of the First Respondent and the Termination
Notice dated 22.07.2011 was upheld. As a consequence,
Issue No. 2 pertaining to a direction to the Respondent to
act in accordance with the PPA was refused.
8. The APTEL after considering the submissions made by
the parties held that the Appellant failed to make out a case
of either res judicata or issue estoppel as the scope of the
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proceedings in the petitions filed by the First Respondent
was different. After a detailed consideration of the Default
Notice dated 26.05.2011, the reply to the notice dated
04.07.2011 and the Termination Notice dated 22.07.2011 in
the light of the provisions contained in the PPA, the APTEL
confirmed the order of the Tribunal.
9. Mr. V. Giri, learned Senior Counsel appearing for the
Appellant submitted that the First Respondent had
repeatedly made valiant efforts to wriggle out of the
obligations under the PPA. He submitted that the First
Respondent initially filed a petition for a declaration that
the PPA was void. Having failed in that attempt, the First
Respondent resorted to issuance of the Termination Notice
for delay in payments.
10. Mr. Giri urged that the First Respondent should not
have been permitted to take a defence justifying the
Termination Notice and seeking open access in O.P. No. 37
of 2012, particularly after O.P. No. 48 of 2011 was
withdrawn from the State Commission without seeking
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permission to initiate fresh proceedings. He submitted that
the withdrawal of O.P. No. 48 of 2011 by the First
Respondent before the State Commission would act as a bar
under Order 23, Rule 1 of the Code of Civil Procedure, 1908
and the Respondent should not be permitted to raise the
grounds in O.P. No. 48 of 2011 before any other forum. He
placed reliance upon the judgment of this Court in Sarguja
Transport Service v. State Transport Appellate Tribunal,
MP Gwalior and Ors. reported in (1987) SCC 5, wherein it
was held that a fresh Writ Petition was not maintainable
after withdrawal of a Writ Petition without permission to file
a fresh Petition in respect of the same subject matter. He
also submitted that there is no admission of any default in
his letter dated 04.07.2011. In any event, according to him,
the delay was not inordinate and there was no further delay
in making payments after May 2011. He also stated that
the First Respondent continued to supply power even after
the Termination Notice dated 22.07.2011 which amounts to
condoning the default, if there was any, in the payment of
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earlier bills. He also stated that the inter-connection
renewal was obtained by the First Respondent on
23.03.2011 and the First Respondent cannot complain of
any delay in payments made prior to that date.
11. Mr. Basava Prabhu S. Patil, learned Senior Counsel
appearing for the First Respondent submitted that it is clear
from the reply to the default notice that the Appellant
admitted the delay in payments. He stated that the
Appellant did not deal with the Letter of Credit at all in the
said reply to the default notice. He also submitted that the
defects were not cured within a period of 30 days, as the
payment for the months of Jan 2011 and Feb 2011 which
were due on 18.02.2011 and 18.03.2011 were made only on
25.05.2011. No interest for the delayed payment was paid
as provided for in the agreement. A Letter of Credit was not
opened even after the default notice. Mr. Patil stated that
the inter-connection approval was only an excuse for
non-payment and that it was not a condition precedent for
payment of tariff invoices. He relied upon an earlier
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judgment of the APTEL in Appeal No. 152 of 2012.
Countering the argument of the Appellant on Order 23,
Rule 1, Mr. Patil stated that withdrawal of a petition without
liberty to file a fresh petition would not bar the First
Respondent from taking a defence in another round of
litigation. He relied upon a judgment of this Court in
Kandapazha Nadar & Ors. v. Chitraganiammal & Ors.
reported in (2007) 7 SCC 65.
12. In reply, Mr. Giri submitted that no time limit is
prescribed for payment of bills in Article 9.2.2. Letters of
Credit would not fall within the purview of the words
“payments default” in Clause 9.2.2. He also submitted that
the right to terminate the contract ought not to have been
exercised by the First Respondent for non-opening of a
Letter of Credit which was not a fundamental default of the
conditions of the PPA. He further stated that the Appellant
is a public utility and any order against the Appellant would
have a huge impact on public revenue.
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13. The point for determination in the present appeal
pertains to the validity of the Termination Notice dated
22.07.2011 and the entitlement of the Appellant to seek a
declaration that the PPA is valid and binding on Respondent
No.1. It would be necessary to examine the relevant Articles
in the PPA for a proper adjudication of the lis in this case.
Article 6.3 of the PPA provides for payment of penal interest
at the rate of SBI Medium Term Lending Rate per annum in
case of delay in payment by the Appellant. Clauses 9.2 and
9.3 are also relevant and they are as follows:
“9.2 Events of Default 9.2.1 Company’s Default [. . .]
9.2.2 MESCOM Default: The occurrence of any of the following at any time during the Term of this
Agreement shall constitute an Event of Default by
Corporation:
1. Failure or refusal by MESCOM to perform its
financial and other material obligations under this
Agreement.
2. In the event of any payment default by the
MESCOM for a continuous period of three months, the
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Company shall be permitted to sell electricity to third
parties by entering into a wheeling & banking
agreement with the MESCOM for which it shall pay
transmission and other charges to the MESCOM at the
rates applicable from time to time and as approved by
the Commission.
9.3 Termination. 9.3.1 Termination for Company’s Default. [. . .]
9.3.2 Termination for MESCOM’s Default: Upon the occurrence of an event of default as set out in
sub-clause 9.2.2 above, Company may deliver a
Default Notice to the MESCOM in writing which shall
specify in reasonable detail the Event of Default giving
rise to the default notice, and calling upon the
MESCOM to remedy the same.
At the expiry of 30 (thirty) days from the delivery of
this default notice and unless the Parties have agreed
otherwise, or the Event of Default giving rise to the
Default Notice has been remedied, Company may
deliver a Termination Notice to MESCOM. Company
may terminate this agreement by delivering such a
Termination Notice to MESCOM and intimate the same
to the Commission. Upon delivery of the Termination
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Notice this Agreement shall stand terminated and
Company shall stand discharged of its obligations.”
14. Article 9.2.2 contemplates that the failure of the
Appellant in performing its financial and other material
obligations under the PPA would constitute an event of
default on its part. The said Article also provides for the
First Respondent being permitted to sell electricity to third
parties in the event of payment default by the appellant for
a continuous period of three months. The procedure
prescribed in Article 9.3.2 for termination for the
Appellant’s default is that the First Respondent should
deliver a Default Notice giving details in the event of default
and asking the Appellant to remedy the same. If the
Appellant does not remedy the defaults within the
prescribed period of 30 days or any extended period as
mutually agreed upon, the First Respondent may issue a
Termination Notice.
15. The Default Notice dated 26.05.2011 refers to default
in payments of bills, non-payment of interest for the delayed
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payments and non-opening of a Letter of Credit as provided
for in Article 6.5 of the Agreement. In the reply dated
04.07.2011, the Appellant did not expressly deal with any of
the defaults mentioned in the Default Notice. On the other
hand the Appellant stated that it relied heavily on
Government subsidy for payment to be made, an attempt
would be made in the future to make payments promptly,
LCs would be opened and that payment for January,
February and March 2011 were delayed because the
approval for inter-connection was given only on 23.06.2011.
The invoice for December 2010 which was due to be paid on
19.01.2011 was actually paid on 24.02.2011. The payment
to be made for the months of January 2011 and February
2011 due on 18.02.2011 and 18.03.2011 was actually done
on 25.05.2011. Admittedly, interest on the delayed
payments as provided for in Article 6 was not paid and a
Letter of Credit was not opened. In view of the default
mentioned by the First Respondent in the notice not being
remedied within a period of 30 days, we are of the opinion
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that the Second Respondent Commission and the APTEL
were correct in upholding the termination notice
dated22.07.2011. We do not agree with the submissions of
Mr. Giri that non-opening of Letter of Credit would not be a
default covered by Article 9.2.2. As per Article 9.2.1, a
failure or refusal by the Appellant to perform its financial
and other material obligations under a PPA constitutes an
event of default. Both the parties to the PPA are bound by
the terms thereof and they are free to resort to action in
accordance with the provisions contained therein.
16. This Court in Sarguja Transport Service ( supra ) held
that withdrawal of a Writ Petition without seeking
permission to file a fresh Writ Petition would bar filing of a
fresh Writ Petition. But there is no bar for taking a defence
in a fresh round of litigation in respect of the same point
involved in a suit which was withdrawn without seeking
liberty. (See Kandapazha Nadar, ( supra )). The First
Respondent initially sought for open access for sale of
electricity to third parties intra-state by filing O.P. No. 48 of
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2011. After withdrawing O.P. No. 48 of 2011, the First
Respondent filed a Petition before the CERC for inter-state
open access. It is no doubt true that in O.P. No. 48 of 2011,
the First Respondent also sought for a relief of a declaration
that the PPA is not binding on it. Strictly speaking, there
was no need for such a declaration being sought by the
First Respondent as the PPA was terminated by issuance of
a notice dated 22.07.2011. In any event, we are at present
concerned with O.P.No.37 of 2012 in which the First
Respondent raised a defence that Termination Notice was
valid and that it was entitled to open access, which is legally
permissible.
17. The APTEL found that the grant of inter-connection
approval on 26.03.2011 could not be a justification for
delayed payment of bills. It was held that there was delay
in payment of bills for January and February 2011 even
after the inter-connection approval was given on
23.03.2011, as admittedly the payments were made only on
26.05.2011. The APTEL relied upon an earlier order passed
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by it in Appeal No.152 of 20121 to hold that an
inter-connection approval was not a condition precedent for
payment of tariff invoices. We approve the above findings
recorded by the APTEL.
18. It is an admitted fact that the First Respondent
continued to supply power to the Appellant on payment of
Rs.2.80 per unit even after the notice of termination dated
22.07.2011. There was a refusal of open access to the First
Respondent in the pending proceedings. There was also an
interim order for maintenance of status quo in O.P.No.37 of
2012 by the Second Respondent Commission. In view of
the fact that the power was being generated by the First
Respondent and had to be supplied, the continuation of the
supply made by the First Respondent after the Termination
Notice dated 22.07.2011 cannot be taken to be a
condonation of the events of default by the Appellant.
1 M/s. Soham Manipatlu Power Pvt. Ltd. v. Karnataka Power Transmission
Corp. & Ors. (decided on 12.02.2014)
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19. In view of the foregoing, we do not find any error in the
judgment of the APTEL confirming the Order of the Second
Respondent Commission. The Civil Appeal is dismissed.
No order as to costs.
.…............................J. [ANIL R. DAVE]
................................J. [L. NAGESWARA RAO]
New Delhi, September 15, 2016.
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