Case: Gujarat Urja Vikas Nigam Ltd Vs. Essar Power Limited

obligation of GUVNL to issue dispatch instructions was not dependent on declaration of the available capacity by the EPL. Contrary view of the Tribunal is clearly erroneous. In paras 45 and 46 and elsewhere in its judgment, the Tribunal erred in holding that there was no obligation to declare available capacity on proportionate basis. The finding of the Commission in paras 9.5 to 9.12 of its order quoted above is the correct interpretation of the Agreement. We hold accordingly. Re : (ii) : 23. The Commission in this aspect observed : ?8.4 In the present case, the PPA was executed on 30.5.1996 and remains operational for a period of twenty years. Under the terms of the PPA, the generating company i.e. EPL is required to declare availability and supply of electricity for the entire duration of the PPA, while the Petitioner GUVNL has an obligation to purchase electricity and pay the tariff in terms thereof. The dispute appears to have arisen sometime in 1998-99, when the CAG Report for the year 1998-99 rejected the contention of the Government that there was no adverse financial impact as a result of diversion of power. Thereafter, on or around 10.2.2000, a meeting was conducted with the GEB to discuss the issue of diversion. On 17.2.2000, EPL subject to certain conditions accepted that power is required to be supplied on a 58:42 basis. Attempts were made to renegotiate the PPA. By a letter dated 23.4.2002, GEB wrote to EPL identifying certain key areas for negotiation of PPA. The issue of allocation of power was also part of the agenda. Since the issue of allocation of power could not be settled, GEB by its letter dated 29.10.2003 raised a claim of Rs. 537 crores for the period 1.7.1996 to 31.3.1999. EPL by its letters dated 1.11.2003 and 1.12.2003 denied the claim of GUVNL. xxxx 9.10 Furthermore, in the letter dated 17.02.2000, EPL categorically agreed to the concept that power should be supplied in the ratio of 58:42 provided certain conditions are fulfilled. The conditions mentioned in the said letter will demonstrate that the each condition is either in the nature of additional concessions / modification that were sought by EPL or alleged defaults on the part of GUVNL, which was not agreed to by GUVNL. ? 24. It is clear from the above that the letters of the respondent acknowledged its liability to allocate the generated power to the appellant and to the ESL in the ratio of 58 : 42. The Tribunal in para 54 quoted above, held that the said letters could not be relied upon in support of the claim that the appellant was entitled to be allocated generated power in proportion of 58 : 42. This finding is clearly erroneous and is without any basis and is liable to be set aside. The finding of the Commission is based on record. Re : (iii) : 25. In interpreting Schedule VI, the Commission held that the EPL was liable to declare weekly capacity available and on that basis dispatch instructions were required to be issued (para 9.6). The contrary view taken by the Tribunal in para 45 and elsewhere is clearly contrary to the agreement between the parties as reflected in Schedule VI quoted above. Re : (iv) : 26. The main basis of the order of the Tribunal in rejecting the claim of the appellant is the finding that the respondent had no obligation to allocate available power in the ratio of 58 : 42 under the terms of the Agreement and in terms of correspondence between the parties. Apart from this, the Tribunal held that the appellant had claimed Rs.64 crores by way of full and final settlement (para 55) and that the appellant was in default in not opening letter of credit and not paying Rs.519 crores. In doing so, the Tribunal has ignored clear stipulation in the letter of the appellant dated 13th December, 2004 referred to in para 8.14 of the Commission that the amount of Rs.64 crores was not accepted by way of final settlement. Similarly, the Tribunal has ignored the supplementary agreement between the parties dated 18th December, 2003 followed by letter dated 19th December, 2003 (page 337 and 341,Vol.V) under which amount of Rs.289.40 crores was paid to the respondent by way of settlement for the delayed payment charges and other heads. Thus, the Tribunal was not justified in observing in para 75 that the appellant had defaulted in making payment of Rs.519 crores which was a breach of promise on the part of the appellant, thereby absolving the respondent of its obligation to supply power as per the agreement. Similar is the position with regard to letter of credit referred in para 17.6 of the order of the Tribunal. We have been informed that these aspects have been gone into by the State Commission in a subsequent dispute vide order dated 22nd October, 2014 and Appeal No.2 of 2015 against the said order before the Tribunal. We thus, make it clear that our observations may not be treated as affecting the decision of the said appeal. 27. We thus, hold that the order of the Tribunal is erroneous. The said order has given rise to the substantial question of law which has been discussed above, i.e., the interpretation of the Agreement between the parties and the obligation of the respondent to declare availability of generated power in the ratio of 58 : 42 and consequence of default therein. The Tribunal erroneously held that there was no pleading for making the claim. Thus, the Tribunal has committed error of law as well as of record in recording its finding as demonstrated above. It may also be noted that the Commission has left actual working out of the loss to be worked out separately and on that basis the appellant has already filed its claim which was pending consideration before the Commission. The said proceeding can now be revived in the light of our finding.

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

Explanation:
1[ds]22. The agreement clearly contemplates the proportion of allocation of a capacity. The EPL has to fuel and operate the generating station to meet the requirement of electric output that can be generated corresponding to the allocated capacity. The appellant has to pay annual fixed cost as determined in terms of clause 7.1.1 of Schedule VII of the Agreement. The Commission is thus, right in observing that once the entire capacity has been allocated in two parts in a particular proportion, the contention of the EPL that it could sell power to ESL beyond the allocated capacity could not be accepted. The EPL was under obligation as per Schedule VI to declare weekly schedule of the capacity available and the dispatch instructions were to be issued on the basis of the said declaration. It could not thus be said that the EPL had no obligation to declare the capacity and the obligation of GUVNL to issue dispatch instructions was not dependent on declaration of the available capacity by the EPL. Contrary view of the Tribunal is clearly erroneous. In paras 45 and 46 and elsewhere in its judgment, the Tribunal erred in holding that there was no obligation to declare available capacity on proportionate basis. The finding of the Commission in paras 9.5 to 9.12 of its order quoted above is the correct interpretation of the Agreementletters of the respondent acknowledged its liability to allocate the generated power to the appellant and to the ESL in the ratio of 58 : 42. The Tribunal in para 54 quoted above, held that the said letters could not be relied upon in support of the claim that the appellant was entitled to be allocated generated power in proportion of 58 : 42. This finding is clearly erroneous and is without any basis and is liable to be set aside. The finding of the Commission is based on record25. In interpreting Schedule VI, the Commission held that the EPL was liable to declare weekly capacity available and on that basis dispatch instructions were required to be issued (para 9.6). The contrary view taken by the Tribunal in para 45 and elsewhere is clearly contrary to the agreement between the parties as reflected in Schedule VI quoted above