Case: Mangalore Electricity Supply Company Ltd Vs. M/S. Amr Power Pvt. Ltd.

for MESCOMs 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 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 Appellants 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 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 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 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 by it in Appeal No.152 of 2012 M/s. Soham Manipatlu Power Pvt. Ltd. v. Karnataka Power Transmission Corp. & Ors. (decided on 12.02.2014) 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 L 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 partiesby filing O.P. No. 48 of 2011. After withdrawing O.P. No. 48 of 2011, the First Respondent filed a Petition before the CERC foropen 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 ofapproval 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 theapproval 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 by it in Appeal No.152 of 2012 M/s. Soham Manipatlu Power Pvt. Ltd. v. Karnataka Power Transmission Corp. & Ors. (decided on 12.02.2014) to hold that anapproval 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 L 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.