Case: Rithwik Energy Generation Pvt. Ltd Vs. Bangalore Electricity Supply Co. Ltd. &amp; Others

The present appeals are filed by the appellanta Generating Company, which entered into an Agreement dated 26.09.2006, with the Government of Karnataka for setting up a 24.75 MW minipower plant in a certain District in Karnataka. On 03.05.2007, the appellant and Respondent No.1 signed a Power Purchase Agreement (for short the PPA). Pursuant to the Clauses of the PPA, Respondent No.1 sent the PPA to the State Commission for its approval. On 06.06.2007, the State Commission did not accord its approval to the PPA and returned the same on the ground that Respondent No.1s quota of 10% under the Karnataka Regulations of 2004 had already been exhausted from other sources.2. Meanwhile, on 26.07.2008, the appellant entered into another PPA with PTC India Limited for sale of electricity and sought the Commissions approval for supply to PTC under the Open Access provisions of the Electricity Act. On 31.08.2009, the appellant filed O.P. No. 29 of 2009 before the State Commission seeking a declaration that no valid PPA subsisted between the appellant and Respondent No.1, as a result of which it was open to the appellant to enter into another PPA and supply electricity under the Open Access system.3. On 23.12.2010, the State Commission dismissed the appellants O.P. holding that the return of the PPA did not tantamount to rejection, and thisof approval, therefore, did not invalidate the PPA between the parties. An Appeal was preferred before the Appellate Tribunal, during the pendency of which a letter dated 05.05.2011 was sent by the appellant to Respondent No.1.On 21.10.2011, the Appellate Tribunal dismissed the appeal filed by the appellant. On the two issues that were raised before the State Commission, the Appellate Tribunal found in favour of Respondent No.1 and was in complete agreement with the findings of the State Commission. However, the Appellate Tribunal then went on to advert to an affidavit that was filed before the Appellate Tribunal seeking to bring on record certain subsequent events as being material for decision of the appeal. And these subsequent events were sought to be brought on record by the appellant itself. After a contest on whether these events ought to be brought on record, Respondent No.1 stating that this is a new case not permissible in appeal, the Appellate Tribunal turned down the plea of Respondent No.1 and felt that it was important to examine the subsequent events on merits.On 11.05.2012, since according to the appellant, Respondent No.1 did not remedy the default in payment of interest despite the expiry of 30 days period from the date of the notice dated 05.05.2011 and also from the expiry of a further period of 30 days granted by the Appellate Tribunal, the appellant purported to terminate the PPA. The letter of 11.05.2012 specifically referred to and relied upon the notice dated 05.05.2011 and referred to it in para 9 thereof as a default notice that was issued subsequent to which, defaults as mentioned therein, were not cured and that therefore, exercising their rights under Clause 9.3.2 of the PPA, a termination notice was then issued. It needs only to be mentioned that on 29.05.2012, in reply to the "without prejudice" part of the 11.05.2012 notice to pay interest, in any case, within 30 days from the said notice, Respondent No.1 paid a sum of Rs. 3.22 lakhs as interest. On 14.08.2012, it also substituted the earlier Letter of Credit that was opened and opened a Letter of Credit for an amount that was in accordance with the PPA, as was contended by the appellant.6. Thereafter, on 21.02.2013, Respondent No.1 filed O.P. No. 6 of 2013 before the State Commission for a declaration that the termination of the PPA by the appellant was invalid.7. By an order dated 09.05.2013, the Central Commission first asked the petitioner i.e. the appellant herein to approach the State Commission for adjudication of the dispute regarding subsistence or otherwise of the PPA after the termination notice dated 11.05.2012.8. On 17.10.2013, Respondent No.1s O.P. No. 6 of 2013 was allowed by the State Commission, relying strongly on the observations of the Appellate Tribunal in its judgment dated 21.10.2011, which have been extracted above, to say that the notice dated 05.05.2011 was not a default notice or could not be said to be a default notice under Clause 9.3.2 of the PPA and that this being so, it is clear that the subsequent notice of termination based upon the 05.05.2011 notice being a default notice could not be said to be valid in law. It thus allowed the O.P. filed by Respondent No.1 and held the termination of the PPA to be invalid.9. In appeals filed against both the 09.05.2013 order and the 17.10.2013 order, the Appellate Tribunal dismissed the appeals of the appellant, again relying upon the Appellate Tribunals judgment dated 21.10.2011 in stating that the alleged notice dated 05.05.2011, not being in conformity with Clause 9.3.2 of the PPA, could not be said to be a default notice and that, therefore, any termination notice issued thereafter is also invalid.

Court's reasoning:
12. Having heard the learned counsel appearing for the parties, we are of the view that there is no doubt whatsoever that the appellant itself invited the Appellate Tribunal to go into a subsequent event, which, according to it, was of extreme importance in deciding the appeal. This being the case, it is clear that, after contest, and after the Appellate Tribunal held in favour of the appellant that such subsequent event is indeed important and will be decided by the Tribunal, and then suffering a finding which was found, on merits, to be against it, we are of the view that the appellant is clearly estopped from attempting to argue now that the very important issue raised by way of subsequent events according to the appellant itself should be held, as a matter of law, to be only a collateral issue and therefore, not res judicata.As seen from the Appellate Tribunals judgment dated 21.10.2011, not only did the appellant considered the subsequent event as directly and substantially in issue for deciding the appeal, which incidentally was not opposed by Respondent No.1 on this ground but on the ground that it would be bringing in a new issue at the stage of appeal, but the Appellate Tribunal having turned down the Respondent No.1s plea, and having examined subsequent events, it cannot but be said that the Appellate Tribunal itself considered the issue No.3 raised by it, based on subsequent events brought to its notice, as being directly and immediately in issue. On this ground also, therefore, we are of the view that, apart from the appellant being estopped in law from raising such a plea, the plea itself has no legs to stand down.On a perusal of the letter dated 05.05.2011, what is clear is that the letter speaks only of events of default, but does not call upon Respondent No.1 to remedy the same within the period specified. This, according to Mr. Mehta, is in any event substantial compliance with the aforesaid clause. We cannot agree. Both parts of Clause 9.3.2 are importantone specifying in reasonable detail the event of default and the second, calling upon Respondent No.1 to remedy the same within a period of 30 days. It is also important to note that the parties may otherwise agree, in which case the Respondent No.1 may remedy the defaults mentioned in the notice either before or after the expiry of 30 days period laid down, showing that the parties considered that this part of Clause 9.3.2 is as important as the first part, for otherwise, a termination notice could, de hors the second part of Clause 9.3.2 have issued straight away without more. This being the case, we are unable to agree with Mr. Mehtas submission that there has been substantial compliance of Clause 9.3.2 of the PPA.18. Mr. Mehta cited three judgments before us to persuade us that the letter dated 05.05.2011 substantially complied with Clause 9.3.2 of the PPA.19. In Nani Gopal Biswas v. The Municipality of Howrah, [1958 S.C.R. 774, this Court was concerned with a notice issued under Section 299 of the Calcutta Municipal Act, 1923. Since Section 300 of the Municipal Act was attracted to the facts of the case and not Section 299, this Court held that even though the notice may be headed as being under Section 299 of the Act, it would make no difference as, in substance, the effective part of the notice leaves no doubt in the minds of the parties concerned that the requisition is to remove an encroachment caused by a compound wall which is a structure which falls within Section 300. This case is wholly distinguishable inasmuch as all that was required by Section 300 of the Calcutta Municipal Act was the fact that a compound wall was an encroachment. This was clearly stated in the notice, and the fact that it was stated to be under a wrong provision of law would, therefore, make no difference to the substance of the notice.20. Similarly, in Thakur Pratap Singh v. Shri Krishna Gupta and Others, [1955] 2 S.C.R. 1029, this Court dealt with the filling up of a nomination paper in order to stand for the office of President of a Municipal Committee. Here again, this Court held that the fact that the word "occupation" in the form was either struck out or left blank would make no difference since a mans occupation is not one of the qualifications for the office of President. It was, therefore, held that this part of the form was only directory, and is part of the description of the candidate, but does not go to the root of the matter, so long as there is enough material in the paper to enable him to be identified beyond doubt. This judgment again is wholly distinguishable on facts in that, as has been found by us above, the part of Clause 9.3.2 relating to calling upon Respondent No.1 to remedy defaults within a period of 30 days unless otherwise agreed is as important as the events of default that have been stated to have taken place. Substantial compliance, therefore, can be no answer to such a mandatory requirement.21. It is unnecessary for us to pronounce on any further aspect, including the aspect of late payment and late opening of Letter of Credit. We are of the view that the Appellate Tribunal in the impugned judgment cannot be faulted on any score.