FAO(OS) 146 of 2010 Page 1 of 54 * IN THE HIGH COURT OF DELHI AT NEW DELHI + FAO(OS) No.146/2010 % Date of Decision: 13.08.2010 PTC India Ltd. Appellant Through Mr.Vikas Singh Sr. Advocate with Mr. Aashish Bernard, Mr. Varun Pathak, Advocates for Appellant. Versus JAYPEE KARCHAM HYDRO CORPORATION LTD. …. Respondent Through Mr.Shanti Bhushan, Sr.Advocate with Mr.Vishal Gupta, Advocate for respondent. CORAM: HON’BLE MR. JUSTICE ANIL KUMAR HON’BLE MR. JUSTICE MOOL CHAND GARG 1. Whether reporters of Local papers may be allowed to see the judgment? YES 2. To be referred to the reporter or not? NO 3. Whether the judgment should be reported in the Digest? NO ANIL KUMAR, J. * 1. The appellant PTC India Limited/Trading Licensee of electricity, has challenged the order dated 19th February, 2010, passed by the Single Judge in OMP No. 25/2010 titled as PTC India Limited Vs. Jaypee Karcham Hydro Corporation Limited (hereinafter referred to as JKHCL) dismissing its petition under Section 9 (ii) (d) and (e) of Arbitration and Conciliation Act, 1996 seeking an interim stay against the termination of PPA agreement dated 21st March, 2006 executed FAO(OS) 146 of 2010 Page 2 of 54 between the appellant and the respondent by letter dated 17th December, 2009 by JKHCL/respondent and a direction to respondent/JKHCL not to enter into any agreement for sale of power with any other party to the extent of power contracted by JKHCL with the appellant. 2. The learned Single Judge while dismissing the petition has held that in view of Section 14(i) (a), (b), (c) and (d) and 41 (i) (e) of Specific Relief Act, 1963 contemplating that if money is an adequate compensation and the contract is in its nature determinable, then, the appellant shall not be entitled for any injunction and placed reliance on Indian Oil Corporation Limited Vs. Amritsar Electric Service (1991) 1 SCC 533; State Bank of Saurashtra Vs. PNB, (2001) 5 SCC 751; Dave Ramshankar Jivatram Vs. Bailailal Gauri, AIR 1974 Guj. 69 and Union Construction Company (Pvt.) Ltd. Vs. Chief Engineer, Eastern Command, Lucknow and Anr., AIR 1960 All. 72. The learned Single Judge further held that Clause 13.3 of the Power Purchase Agreement dated 21st March, 2006 is not a negative covenant and since the appellant could be compensated in terms of money, as Clause 14.6.1 of PPA is not for the purpose of securing performance of contract but is for payment of compensation in lieu of specific performance, therefore, the appellant is not entitled for injunction and/or stay or any other interim order sought by the appellant. FAO(OS) 146 of 2010 Page 3 of 54 3. Brief facts to comprehend the disputes are that the appellant is a trading company of electricity which entered into a Power Purchase Agreement (hereinafter referred to as PPA) dated 21st March, 2006 for purchase of 704 MW of power to be generated from 1000 MW from Karcham Wangtoo Hydro Project in the district of Kinnor in the state of Himachal Pradesh to be developed by the respondent. The respondent is a generating company as defined in the Electricity Act, 2003. 4. The appellant company has been granted license to trade in electricity by Central Electricity Regulatory Commission (hereinafter referred to as “CERC”) under Section 14 of Electricity Act, 2003. In terms of Clause 3.1.3(iv) of PPA, the appellant/trading company entered into back to back Power Sale Agreements (referred to as the “PSA”) with several purchasers viz. UP, Punjab, Haryana and three distcoms of Rajasthan. 5. According to the appellant, the PPA entered with the respondent has detailed provisions with regard to tariff, which is to be calculated in accordance with Article 9 and Schedule E of the PPA. The appellant has to pay tariff on the capital cost and the means of finances as approved by CERC and determination of tariff was subject to approval of the appropriate commission under the Electricity Act, 2003. FAO(OS) 146 of 2010 Page 4 of 54 6. According to the appellant, the Central Electricity Authority (CEA) by its office memorandum dated 31st March, 2003, had granted economic clearance to Karcham Hydro Electric Project by M/s. JKHCL which was subject to stipulations that tariff had to be determined by Central Electricity Regulatory Commission. 7. Relying on Section 8 of the Electricity Act, 2003, it was also contended by the appellant that a generating company establishing a hydro generating station is required to submit to the Central Electricity Authority for approval of its scheme of capital expenditure. 8. The appellant further asserted that respondent had contended that on account of delays in issue of mandatory clearance from the Ministry of Environment and Forests, Govt. of India, the starting date of the work got delayed from 1st January, 2004 to 18th November, 2005 which resulted in delay in commencement of work by about 23 months which changed the parameters including the amount as there had been a steep increase in price of various raw materials and consequently, additional overhead cost of Rs. 1965.40 million was contemplated. The respondent company, therefore, sought revision of scope of work and also the project cost. FAO(OS) 146 of 2010 Page 5 of 54 9. According to the appellant, the respondent company had informed the appellant for revision of scope of work and project cost by its office memorandum dated 18th February, 2009 and 16th March, 2009. It was asserted that though statutory power to decide the costing of any project is vested with Central Electricity Authority under Section 73(i) of the Electricity Act, 2003. however, the respondent got estimated modification of project cost by an independent technical consultant. 10. The appellant further contended that respondent for its own interest and for the purpose of making claim upon the financial institutions for financial increase in the project cost, approached CERC with Petition No. 153/2009 praying for revision of estimated project cost from Rs. 5,909.59 crores to Rs. 7,080.38 crores. The respondent also sought final capital cost and/or tariff for the project in view of Section 79 (i) (b) r/w Section 185 of the Act. 11 The prayers made by the respondent in the said petition are as under:- “a. Grant approval for the revised capital cost of Rs.7080.38 crores incurred or to be incurred for the completion of the project. b. Declare and confirm that this Hon‟ble Commission shall based on an appropriate filing, consider the final capital cost and/or tariff for the Project in view of: FAO(OS) 146 of 2010 Page 6 of 54 i. Section 79(1)(b) read with Section 185 of the Act. ii. TEC dated 31.03.2003 iii. Tariff Clauses under the PPA and the respective PSA‟s read with the principles derived from the judgments of the Hon‟ble Supreme Court in DLF vs. Central Coalfields & Anr (2007) 10 SCC 588. iv. The maxim “Ubi jus ibi remedium” v. Orders dated 18/21.06.2007 and 12.05.2009 issued by the Haryana Electricity Regulatory Commission and the Uttar Pradesh Electricity Regulatory Commission respectively.” 12. According to the appellant the CERC by its order dated 26th October, 2009, only adjudicated on the issue of revision of projected capital cost, however, the second prayer of the respondent company was not considered. Regarding financing the capital cost and/or tariff for the project, there was no discussion or even any analysis made in the order dated 26th October, 2009 while dismissing the petition as not maintainable. 13. It was held by CERC that there is no corresponding provision for Hydro Power Generating stations as while framing the 2009 Regulations, the Commission had done away the provisions for “in principal” approval of the project capital cost applicable to thermal power generating stations through a conscious decision. In the circumstances, it was held that granting approval to the estimated completion cost for the generating station by relaxing the provision of the tariff regulations through invoking Regulation 44 thereof may FAO(OS) 146 of 2010 Page 7 of 54 amount to restore the repealed provision through back door and therefore, the prayer (i) of the respondent was also not granted and it was held that the petition is not maintainable. 14. The application being IA 52/2009, was also filed by the appellant in the petition No. 153/2009 before CERC for impleading distribution companies as parties as the appellant had entered into back to back power supply agreement with them, but since the main petition was held to be not maintainable, the application by the appellant to implead the distribution companies was also dismissed. 15. The disputes arose according to the appellant, when in view of the order dated 26th October, 2009 of CERC, the respondent company sent a letter dated 17th December, 2009 terminating the PPA dated 21st March, 2006. The letter dated 17th December, 2009 terminating the PPA is as under:- JKHCL/MD/PTC/09 17th December, 2009 Shri T.N.Thakur ji Chairman & Managing Director PTC India Limited 2nd Floor, NBCC Tower 15, Bhikaji Cama Place New Delhi-110066 (Fax No.011-41659502) FAO(OS) 146 of 2010 Page 8 of 54 Dear Sir, Kindly refer to your letter dated 25.11.2009, addressed to the Executive Chairman Jaiprakash Associates Limited, referring to the order of the Central Electricity Regulatory Commission (CERC) dated 26.10.2009 holding our petition before the CERC related to estimated capital cost and tariff as not maintainable. In view of the facts and circumstances, we had to obtain legal advice from a senior counsel and he has, after going into all the facts and the law on the subject, advised us that the Power Purchase Agreement (PPA) dated 21.03.2005 between this Company (JKHCL) and the PTC India Limited was void as the procedure contemplated in the PPA for determination of the tariff on the basis of which alone the price for supply of electricity by the company to PTC India Limited was payable could not be enforced. Since the PPA is now found to be void, no agreement, according to the legal opinion, survives between us. Thanking you, Yours faithfully, For Jaipee Karcham Hydro Corporation Limited (D.P.Goyal) Managing Director. C.C to: Group Head-DCS PTC India Limited, 2nd Floor, NBCC Tower, 15, Bhikaji Cama Place, New Delhi-110066 (Fax No.011-41659502) by FAX and also by registered mail.” According to the appellant, the termination by letter dated 17th December, 2009 was illegal and even contrary to Article 13.2.2 and 13.2.3 of PPA. FAO(OS) 146 of 2010 Page 9 of 54 16. In these circumstances, the petitioner filed the OMP No. 25/2010 under section 9 of the Arbitration and Conciliation Act, 1996, which has been dismissed by the learned Single Judge. The submission of the appellant in brief is that there was no occasion for the respondent to approach CERC with petition No. 153/2009 as in terms of Regulation 5(i) of Tariff Regulation 2009, the capital cost of the project could not be approved by CERC unless the commercial operation date is six months from the date of filing of application for approval of the capital cost which admittedly, according to the appellant, is on 17th November, 2011. 17. The appellant also relied on an order dated 11th January, 2010 passed in Petition No. 109/2009, in which the tariff was determined by CERC for sale/supply of electricity from Torrent Power Limiter, another generating company to PTC India Ltd, appellant, the trading licensee. It was further disclosed that Torrent Power Limited is another generating company in the state of Gujarat, like a generating company/respondent, which is however, supplying about 800 MW of power to distribution licensees and CERC had determined the tariff under Section 79 (i) (b) of the Electricity Act, 2003. In the circumstances, it is contended that the plea of the respondent that CERC shall not determine the tariff in respect of PPA entered with the appellant or has declined to determine the tariff by its order dated 26th FAO(OS) 146 of 2010 Page 10 of 54 October, 2009 is not correct and consequently, by letter dated 17th December, 2009, the respondent could not declare the PPA dated 21st March, 2006 as void. It is asserted that in any case, the agreement could not be declared void without resorting to the procedure prescribed in Article 13.2.1 of PPA and therefore, the letter dated 17th December, 2009 declaring the PPA as void could not be acted upon. 18. Though the appellant contended that the CERC could determine the tariff, however, as the Appellate Tribunal for Electricity in its judgment dated 21st October, 2008, passed in Appeal No. 71/2008, has specifically noted that CERC does not have the power to determine tariff between generator companies and trading licensees, therefore, under the Electricity Act, CERC does not have the power to adjudicate upon disputes between the generator company and licensee, i.e., respondent and the appellant. Relying on Gujarat Urja Vikas Nigam Ltd. Vs. Essar Power Ltd., (2008) 4 SCC 755, it has been contended that since there is an Arbitration Agreement with the respondent under Article 13.3 of the PPA, the appellant was competent to invoke the jurisdiction under Section 9 of the Arbitration and Conciliation Act, 1996 as the Supreme Court had held in Gujarat Urja Vihar Ltd. (supra) that all other disputes, other than which are covered under the Electricity Act, 2003, would be decided in accordance with Section 11 of the Arbitration and Conciliation Act, 1996. FAO(OS) 146 of 2010 Page 11 of 54 19. The appellant has also contended that though the Single Judge has declined the prayer for injunction in view of Section 14(i) (a), (b), (c) and (d) of the Specific Relief Act, however, in view of provision of Section 3, Section 10(b) and Section 10(b)(ii) (a), Section 23, Section-34 and Section-42 of the Specific Relief Act, injunction ought to have been granted to the appellant. 20. Relying on Section 9 (ii) (e) of the Arbitration and Conciliation Act, 1996, it was contended that though an interim injunction was declined under Section 9(ii) (d) of the Arbitration and Conciliation Act, 1996, however, an appropriate order directing the respondent/generating company from creating any third party rights could be granted under sub-section (e) of the Arbitration and Conciliation Act, 1996. 21. Buttressing the point that the compensation for breach of contract is not an adequate relief, the learned Sr. counsel for the appellant Mr. Vikas Singh contended that under Article 14.6 of the PPA, the total compensation contemplated is only Rs. 250 crores payable by the respondent out of which the appellant shall only be entitled to retain Rs. 12.50 crores as rest of the compensation has to be passed on by the appellant to the purchasers with whom the appellant had entered into PSA in accordance with Article 3.1.3 of PPA whereas the FAO(OS) 146 of 2010 Page 12 of 54 appellant would have earned otherwise a revenue of Rs. 900 crores during the term of PPA dated 21st March, 2006. 22. The order was also impugned on the ground that though electricity is movable property yet it is not an ordinary article of commerce and it is also not easily obtainable in the market and has special value and interest to the appellant and consequently, in terms of Section 10(b) (a) of the Specific Relief Act, the appellant should have been granted an appropriate injunction. 23. Relying on Hungerford Investment Trust Limited Vs. Haridas Mundhra, (1972) 3 SCC 684, it was contended that Specific Relief Act, 1963 is not exhaustive enactment and it does not lay down law relating to specific relief in all its ramifications and in the circumstances, the appellant could not be denied reliefs in view of Section 14 (i)(a) (b) (c) and (d) of the Specific Relief Act, 1963 and therefore, refusal of relief was erroneous. Reliance was also placed by the appellant on Ashok Kumar Srivastava Vs. National Insurance Company Limited and Ors. (1998) 4 SCC 361 where it was held that though Specific Relief Act widens the spheres of the civil Court but it is not exhaustive of all kinds of specific reliefs. It was further held that the Act is not restricted to specific performance of contracts as the statutes govern powers of the FAO(OS) 146 of 2010 Page 13 of 54 Court in granting specific reliefs in a variety of fields even then it does not cover all specific reliefs conceivable. 24. On behalf of the appellant, it has also been contended that Article 13.3 contains implied negative covenant as the right and obligation of the parties has to remain effective during the Arbitration proceedings and one of the principal obligation of the respondent is to sell contracted power and contracted energy to the appellant and so during the resolution of the disputes on account of implied negative covenant, the respondent ought to be restrained from selling or entering into any sale agreement with any other person or company, more so as the appellant has failed to perform its part of contract as contemplated by proviso to Section 42 of the Specific Relief Act though the appellant has fulfilled the condition precedent in Article 3.1.3 (iv) of the PPA by entering into Power Sale Agreements with safe purchasers, namely, UP, Punjab, Haryana and three distcoms of Rajasthan. The learned counsel for the appellant also relied on M/s. Gujarat Bottling Company Limited and Ors. Vs. Coca Cola Company and Ors. (1995) 5 SCC 545 to claim a restrain and an injunction order against the respondent. 25. The petitioner also pleaded that in view of the Arbitration Agreement between the appellant and the respondent as per Article 13,before the Arbitrator adjudicate upon the dispute about the specific FAO(OS) 146 of 2010 Page 14 of 54 performance of the agreement, the Court is competent under Section 9 to grant appropriate relief and reliance was placed on Olympus Super Structures Pvt. Ltd. Vs. Meena Vijay Khetan & Ors. (1999) 5 SCC 651 holding that the issue of specific performance of a contract can be decided by the Arbitrator. Reliance was also placed on Rodemadan India Ltd. Vs. International Trade Expo Centre Limited (2006) 11 SCC 651. 26. The appeal is contested by the respondent contending, inter-alia, that the Single Judge has declined injunction and restrain order against the respondent to sell or entering into sale agreements with the Distribution Companies. Considering the facts and circumstances, and exercising its discretion, the Appellate Court is not to interfere with the exercise of such discretion by a Single Judge as the order of the Single Judge is neither arbitrary, nor capricious or perverse, nor has been passed ignoring settled principals of law regulating grant or refusal of interlocutory injunction. 27. Mr.Shanti Bhushan, learned Senior Counsel for the respondent has contended that the Appellate Court is not to reassess the whole material and seek to reach a conclusion different from one reached by the Single Judge, as the decision by the Single Judge is reasonably possible on the basis of the material which was before him and in FAO(OS) 146 of 2010 Page 15 of 54 circumstances, the Appellate Court will not be justified to interfere with the exercise of discretion by the Single Judge. Reliance was also placed on (1990) (Supp.) SCC 727 „Wander Ltd. v. Antox India Pvt. Ltd.‟ asserting that at the time of entering into Power Purchase Agreement dated 21st March, 2003, the parties were not aware that under the Electricity Act, 2003 Regulating Commission was not competent to determine tariff for supply of electricity by a generating company to a trading licensee. Since the question of determination of price at which the electricity is to be supplied by the respondent to the appellant was to be determined by the CERC (Central Electricity Regulatory Commission), which will not be determined by CERC, therefore, the agreement has become void in terms of Section 10 of the Sale of Goods Act, 1930 and Section 2 (g) of the Indian Contract Act, 1872. For the plea that CERC will not determine the tariff between the generating company and trading licensee, reliance was placed on the judgment dated 22nd December, 2006 of Appellate Tribunal for electricity in Petition No.1 of 2005, titled as „Gajendra Haldea v. CERC and others‟ holding that the Central Electricity Regulatory Commission under Section 62 (1) (a) read with Section 79 (1) (a) & (b) of the Act is empowered to determine the tariff only for sale of electricity by a generating company to a distribution licensee. Reliance was also placed on the decision of Appellate Tribunal for electricity in appeal No.71 of 2008, „Lanco Amarkantak Power Pvt. Ltd. v. Madhya Pradesh Electricity Regulatory Commission and others‟ dated 21st October, 2008, holding FAO(OS) 146 of 2010 Page 16 of 54 that though the parties themselves had stipulated that tariff would be fixed by the Commission, however, this will not give jurisdiction to the Commission to fix tariff under the power purchase agreement as the Commission derives jurisdiction only from the Electricity Act, 2003, and parties before the Commission cannot confer jurisdiction by their agreement, if the commission does not have the same under the Act. The respondent generating company also relied on the decision of the CERC (Central Electricity Regulatory Commission) dated 26th October, 2009 whereby the petition of the respondent being Petition No.153 of 2009 relating to revised capital cost approval of 1000 megawatt from Karcham Wangtoo Hydro Electricity Project in Himachal Pradesh and also seeking a prayer for determination of tariff was declined, and consequently, it is contended that the agreement has become void as the procedure contemplated by the agreement for determining the tariff on the basis of which the price of electricity to be supplied by the respondent to appellant could not be enforced, and in the circumstances, the agreement cannot be enforced, nor the appellant can seek specific performance to supply power to the appellant and contend that the agreement is not void. 28. Regarding specific performance of the agreement, it was contended that the respondent cannot be restrained from entering into the agreement as the electricity once generated cannot be stored and FAO(OS) 146 of 2010 Page 17 of 54 granting any injunction restraining the respondent from selling electricity to anyone else will result into waste of energy seriously effecting the rights of the respondent as well as a very large segment of consumer. The respondent relied on the principle enunciating by the Apex Court in „Gujarat Bottling Company Ltd. v. Coca Cola Company‟, 1995 (5) SCC 545 and contended that granting injunction against the respondent in the facts and circumstances will be contrary to the principle enunciated by the Apex Court. 29. The respondent further contended that the power purchase agreement is for purchase of electricity which is a movable property as contemplated under Section 10 of the Specific Relief Act, and under the Act, breach of such a contract of a movable property can be compensated in terms of money, and therefore, the agreement cannot be specifically enforced. Reliance was also placed on Section 14 of the Specific Relief Act which stipulates which contract cannot be specifically enforced. The other plea of the respondent is that since the agreement by its nature is determinable, therefore, on this ground also the appellant is not entitled for any interim order against the respondent and reliance was placed on „Indian Oil Corporation Ltd. v. Amritsar Gas Services‟ 1991 (1) SCC 533. Relying on „State Bank of Saurashtra v. Punjab National Bank‟, 2001 (5) SCC 751, „Dave Ramashanker Jivatram v. Bai Kailash Gauri‟ AIR 1975 (Gujarat) and FAO(OS) 146 of 2010 Page 18 of 54 „Union Construction Company Pvt. Limited v. Chief Engineer, Eastern Company Limited‟, AIR 1972 Allahabad 72 it was contended that the compensation of money is an adequate relief in the facts and circumstances and therefore, the appellant is not entitled for any interim relief. 30. Mr.Shanti Bhushan, learned Senior Counsel very emphatically contended that even according to the appellant the compensation contemplated under the agreement is Rs.250/ crores out of which appellant is only entitled for Rs.12.50/ crores though the appellant would earn about Rs. 900/- crores, if the agreement is enforced as alleged by the appellant,