Case: CLP INDIA PVT LTD Vs. GUJARAT URJA VIKAS NIGAM LTD.

2. The erstwhile Gujarat Electricity Board (GEB) (now Gujarat Urja) entered into a power purchase agreement ( PPA)with CLP on 03.02.1994. In terms of the PPA, Gujarat Urja was under an obligation to purchase - and CLP was under corresponding obligation to supply - 635 MW of electricity; the tenure of the agreement was 20 years. In terms of Section 43(A) of the Electricity Supply Act, 1948, (hereafterthe Act), a generating company may enter into a contract for the sale of electricity with the Electricity Board and the tariff for the sale of electricity shall be determined by the authority through the notification issued by the Central Government. Prior the PPA in this case, the Central Government had issued a notification under Section 43A, on 30.03.1992, specifying the controlling norms, terms and conditions for determination of tariff for sale of electricity by the generating company to the Electricity Boards. One of those conditions was the provision for incentive to units using naphtha. On 17.01.1994, an amendment to the notification dated 30.03.1992 was made providing for Note (1) stating that the incentive for generation above the target availability of 68.49% for fixed cost recovery was to be capped3. After the signing of the PPA between the parties, an amendment notification dated 06.11.1995 was issued by the Central Government amending the notification (dated 30.03.1992). By this, the Central Government provided that there would no longer be any deemed Generation Incentive payable to any generating company on available declaration of Naphtha as fuel. Based on this notification, the Electricity Board sought to enforce the said notification claiming that this generating company is not entitled to get the incentive for deemed generation. The Electricity Board also sent a letter dated 18.04.1996 informing the CLP, that it proposed to amend the Clause 7.5.2.1 of the PPA to the effect that no deemed generation shall be admissible beyond the level of generation in respect of Naphtha. CLP did not agree to the proposal and by its reply dated 24.04.1996 stated that the notification of 06.11.1995 was inapplicable. Gujarat Urja did not agree to CLPs position and reiterated its earlier position about the change in the incentive terms. A meeting was held in respect of various issues on 06.10.1997 during which several issues were discussed and decisions taken, between the parties. However, the minutes of meeting did not record any decision on the issue of incentive restricted in terms of the notification dated 06.11.1995. There was some more correspondence and meetings, which however, did not lead to any result in regard to both parties accepting that the incentive was payable in terms of the notification of November,1995. Ultimately, with effect from December 1997, CLP started billing Gujarat Urja for the power supplied, including the incentive (ignoring the amending notification); Gujarat Urja continued to pay deemed generation incentive from June, 1998 to 20004. The Union Ministry of Power issued a notification (dated 09.06.1998) which clarified profits on operating norms; several components such as station heat rate, auxiliary consumption and secondary fuel consumption were eliminated and income tax on incentives was no longer permitted (as a pass through in tariff). It was stated that this was prospective in operation and would apply to power purchase agreements which were not executed and delivered by the parties by 09.06.1998. For a long time, incentive continued to be paid, ignoring the notification of 06.11.1995 by Gujarat Urja, to CLP. On 05.12.2003, CLP and Gujarat Urja entered into a supplementary agreement, amending the PPA, to incorporate concessions offered by CLP to reduce tariff. Pursuant to execution of the supplementary agreement dated 05.12.2003, Gujarat Urja issued a letter to CLP stating that all the outstanding issues stood fully and finally resolved. Gujarat Urja continued to pay deemed generation incentive from 05.12.2003 to 23.02.2005. In February, 2005, a high-level committee was constituted to examine the issue of recovery of excess payouts made on the basis of deemed generation incentive. The receipt of the report, of that committee, led Gujarat Urja to file an application for recovery of the amounts from CLP (Petition No.874/2006 under Section 86(1)(f) of the Act, before the Gujarat Electricity Regulatory Commission (GERC), claiming for recovery of deemed generation incentive paid to CLP during the period from 1997-98 to 2005- 065. CLP resisted Gujarat Urjas application, contending that principles of estoppel precluded recovery; that in any event, parties had not agreed to change the terms of the PPA and that the previous correspondence evidenced that the matter had been closed, which meant that Gujarat Urja could not claim recovery of any so-called excess amounts. The GERC, by its order held that Note 2 (introduced by the notification of 06.11.1995) was applicable to the project and thus deemed generation incentive is not payable to CLP. However, it permitted recovery of only for a period of three years prior to the date of filing of the petition: the recovery for the period prior to 14.09.2002 were held to be time-barred6. The second appeal, i.e. CA 2793/2010 by CLP Limited, questions the impugned order of the APTEL which had upheld the rejection of its claim for interest on deemed loan component7. The facts as far as this appeal is concerned are that a supplementary agreement was executed between the parties on 05.12.2003. In terms of Article 4.6 of the Supplementary Agreement, original clause 7.5.14(a) of the PPA dated 03.02.1994 was substituted. CLP stated that the amount, i.e `53.90 crores was in fact due as a loan. If it was deemed as a loan, then interest was payable on the basis of normative repayment of principal amount during the period of the loan, i.e. the loan would not remain as a constant. In this regard, CLP had relied upon Clause 1.5 of the notification dated 30.03.1992. The PPA dated 03.02.1994 by Schedule VII Clause 7.5.10 defined Interest on Loan Capital in the following terms:7.5.10: Interest on Loan Capital-shall mean the sum of all payment of interest along with bank charges and all associated financing costs paid to the bank annually on the outstanding loans paid by GTEC, converted, as of the first day of the fortnight for the applicable fixed charge, into the currencies in which it is payable employing exchange rates at banks selling rate prevailing on that day obtained from the source mutually agreed8. The CERC Tariff Regulations, 2001 which provided for Interest on loan capital[clause 2.7(a)] and CERC Tariff Regulations,2004 were relied uponThey are set out below:t on loan capital shall be computed on the outstanding loans, duly taking into account the schedule of repayment as per the financial package approved by the Authority or an appropriate independent agency, as the case may be9. CERC Tariff Regulations, 2004 inter alia provides as under:20.Debt-Equity Ratio:(1) In case of alia generating stations, declared under commercial operation on or after 1.4.2004,debt-equity ratio as on the date of commercial operation shall be 70:30 for determination of tariff. Where equity employed is more than 30%,the amount of equity for determination of tariff shall be limited to 30% and the balance amount shall be considered as the normative loanProvided that in case of a generating station where actual equity employed is less than 30%, the actual debt and equity shall be considered for determination of tariff(2) The debt and equity amount arrived at in accordance with clause (1) shall be used for calculating interest on loan, return on equity, Advance against Depreciation and Foreign Exchange Rate Variation10. Gujarat Urja resisted this claim. After adjudication, the GERC rejected the CLPs argument on a plain reading of the clause, saying that for the first time in the supplementary agreement, which stated that the agreement too recognized ` 53.9 crores as own Capital for which the cost of Own Capital @ 14% was to be a pass through. The effective date for such recognition was from 01.07.2003 to 31.03.2009 and no amounts were due and payable as interest after that date. It was specifically stated that this condition constituted the complete bargain to the extent it provided for treatment of cost of Own Capital @ 14% per annum for a defined period. The agreement had to be and was given prospective operation. This excluded any liability on part of Gujarat Urja for the past period, i.e. December 1997. It was also held that the claim made in 2010 was substantially barred to the extent it sought for any amount of interest beyond a period of three years11. The CLP claimed on another issue, i.e. interest on ` 14.48 crores @ 16% per annum from July 2000 to 30.06.2003 was payable. In terms of the supplementary agreement, the condition specifically stated that GPEC (i.e. CLC) had further deployed a sum of ` 14,48,40,831/- from its internal accrual to complete shortfall and disbursal of loan by the lenders, which agreed to allow payment on this amount @ 16% per annum from July 2000 to 30.06.2012. Gujarat Urja stated that this interest was payable on reducing balance terms, not as bullet payment of interest12. The CERC ruled that it was quite clear that the parties had agreed to allow interest at the said rate, @ 16% on the said sum, i.e. 14.48 crores. Therefore, Gujarat Urja could not argue that interest was payable on the reducing balance method and that the payment of interest on a bullet repayment method was not permissible. The Commission, i.e. GERC noted that the statutory notification, i.e. clause 1.5 of the notification dated 30.03.1992 did not prohibit calculation of interest on bullet repayment as regards clause 7.5.10 in Schedule VII of the PPA dated 03.02.1994, the subject matter or its content was deemed loan. On this second aspect, therefore, the terms of the contract contained in the supplementary agreement directing 16% per annum interest on `14.48 crores is bullet repayment, was upheld13. The CLP Limited was aggrieved by that portion of GERCs order which rejected its claim on the deemed loan component prior to the period 2003. It appealed to the APTEL (Appeal No.44/2009). The APTEL concurred with the decision of the GERC and held that clause 7.5.14(a) of the supplementary agreement did not oblige Gujarat Urja to refund interest paid upon the deemed loan component upon the equity portion treated as deemed loan, i.e. ` 53.9 crores for any period prior to 01.07.2003. Therefore, CLPs appeal was rejected. It, therefore, has appealed to this Court on the said findings.

Reasoning: 15. At the outset, it is noticeable that on the issue, whether amounts paid to CLP, for the period 1998 to 2005 onwards, were in excess of what was actually payable by Gujarat Urja, the findings of GERC and the APTEL are concurrent. This court does not discern any unreasonableness or facial omission of material factors, to warrant appellate review19. The submissions of parties are with respect to two notifications dated 30.03.1992 and 06.11.1995. These Notifications were under Section 43(A) of the Supply Act. Concededly, these notifications are statutory and are binding on the parties. Any PPA between a generating company and the purchaser of electricity is subject to such statutory notifications; parties by agreement cannot override statutory provisions, or such notifications, as far as they relate to matters of tariff20. Therefore, the rights and obligations of the parties under the PPA have to be read subject to the statutory provisions. The provisions of the PPA, if they are contrary to the statutory provisions, cannot be given effect to22. The argument of CLP that its unit was essentially gas-based and that the definition of naphtha-based unit meant only that unit which depended entirely on naphtha as a fuel, or that which used naphtha at least to the extent of 50%, in our opinion is not correct25. There is no dispute that the PPA which the parties entered into specifically referred to the notification of 30.03.1992 and further went on to state that for the first Kwh/KW, a plant load factor of 68.5% fixed charges and variable charges were deployed. For generation achieved over and above this by the concerned unit – CLP, an incentive @ 5.75% for every 1% increase over and above the fixed and variable charge payable was agreed to. Significantly, the fixed and variable charges are in consonance with the statutory notification of 30.03.1992 (which was also later amended on 17.01.1994). This much is clear from a plain reading of clause 7.1 of the Schedule VII to the PPA itself. In view of the fact that the notification amended on 06.11.1995 was a statutory one, there cannot be any doubt that it was binding upon the parties. Therefore, the earlier notification which left it free to the parties to negotiate on various aspects, including on the incentive payable, stood amended by Note 2, which was added to clause 1.6 of the tariff. The effect of this statutory incorporation by way of amendment was that incentive no longer became payable. The arguments by the CLP, in the opinion of the Court, that the parties were bound only by the terms of the agreement and that the amendment notification being prospective, could not have altered the terms of the tariff, especially the incentive payable, are insubstantial and have no force. The concurrent findings on this aspect, therefore, are sound and do not call for interference. Likewise, the change of law provision (Clause 6.5 of the PPA) clearly contemplated that any amendment to the prevailing tariff notification (dated 30.03.1992) would bind the parties. Since Note (2) was an amendment, which dealt with the issue of incentive, it cannot now be said that it was inapplicable. The findings of the lower authorities, therefore, are correct; no interference is called forThe concurred findings on this aspect, in the opinion of this court, are reasonable. There is merit in CPLs submission that the earliest point in time, when the cause of action arose, was in May,1996, when Gujarat Urja rejected its contention that incentive was payable in terms of the PPA, notwithstanding the notification of 06.11.1995. Despite this stated position, meetings continued to be held and, what is more, incentive amounts, were paid to CLP. No doubt, no document conclusively stated that CLPs claim was accepted. We do not find any merit in the submission of Gujarat Urja that the issue was kept alive, due to a series of communications. In this regard, APTELs findings about inapplicability of Section 18 of the Limitation Act, are correct. There was no admission on the part of CLP, at least of the kind, that extended the time for preferring an application for recovery of excess payments. It has been consistently ruled by this court that repeated letters, or exchange of communications, do not extend the period of limitation, provided by law.27. The third, and last issue, is with respect to payment of interest on deemed equity. Clause 1.5 of the 30.03.1992 notification provided for interest on loan, as a component of tariff; it stipulated that interest (on outstanding loan) shall be computed as per financial package approved by the Authority (CEA). The PPA of 03.02.1994 (Schedule VII) clause 7.5.10 defined interest on loan capital as the sum of all payments of interest along with bank charges and all associated financing costs paid to the bank annually on the outstanding loans paid by GTEC. … The Central Commissions order of 21.02.2000 led to a stipulation in the tariff regulations of 2001. Eventually, the Tariff Regulations of 2004 was brought into force; it provided for a debt ratio of 70:30 for determination of tariff29. It is thus apparent, that the parties did not harbor any doubt about the period for which the specified interest was payable on such deemed loan. The rate of interest was fixed; likewise, the date from which payment obligations were to arise, too were known. Also, the date upto which the interest on such deemed loan payments were to be made, was known and fixed. In these circumstances, CLPs claim that the payment of interest for a prior period was outstanding, and constituted Gujarat Urjas liability, is insubstantial. In a recent judgment (Uttar Haryana Bijli Vitran Nigam Ltd.and Ors. vs. Adani Power Ltd. and Ors. 2019 (5) SCC 325 ) a similar issue had arisen. The court quoted from the decision in National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board ((2011)15 SCC 580) where another previous decision was cited with approval on the issue that the express provision for something, in an agreement, meant that other similar matters stood excluded31. In the present case, the clear agreement between the parties was that interest on the sum of `53.90 crores was payable for the specified period 01.07.2003 to 31.12.2009.Therefore, CLPs claim that any amount was payable, for any period prior to 01.07.2003, was not tenable. Had CLP wished so, nothing prevented it to claim for it during negotiations and have it included as a term of the contract. Once having settled for a specified sum, on an amount (`53.90 crores) that was only fictionally a loan - and treated as such, for purpose of fixing interest payable, considering the equity infused, in excess of the tariff regulations, the absence of any like item, such as interest for prior period, precludes a claim. But it was really part of the equity component. Therefore, interest was per se not payable, but could be paid in terms of the tariff notification or the agreement. No claim on any other legal or equitable considerations could have been made. The findings of the lower authorities are therefore, sound and reasonable