Mangalore Electricity Supply Company ... vs M/S. Amr Power Pvt. Ltd. & Anr

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 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 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 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 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.

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.

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.”

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.

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.