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

Mangalore Electricity Supply Company Ltd. (MESCOM), the Appellant herein, is a distribution licensee. M/s. AMR Power Private Limited, the First Respondent herein, is a renewable power generator which has developed and is operating a 24.75 MW run of the river mini hydel power project in the State of Karnataka. The Karnataka State Electricity Regulatory Commission is the Second Respondent in the present Appeal.2. The Appellant and the First Respondent entered into a Power Purchase Agreement (hereinafter referred to as `PPA) on 02.08.2006 for the supply of 24 MW of electricity. It was mentioned in the PPA that the Government of Karnataka accorded its sanction to the proposal of the First Respondent for installation of a mini hydel electric power generating station of 24 MW capacity across River Netravathi, Dakshina Kannada District and that the Appellant was permitted to enter into a PPA with the First Respondent for purchase of electricity. Article 5 of the PPA provides for payment of L 2.80 perfor the first 10 years for the delivered energy. From the 11th year onwards, the PPA provides that the Appellant shall pay to the company a rate determined by the Commission for the energy delivered at the metering point. Article 6 of the PPA deals with billing and payment, Article 9 covers the term, termination and default of the PPA. As per Article 9.1.1, the PPA shall continue to be in force for a period of 20 years from the commercial operation date and may be renewed for a period of 10 years on such terms and conditions as may be mutually agreed upon. Article 6 and Article 9 which fall for consideration in this case will be dealt with in detail in the subsequent paragraphs. On 04.08.2008, the First Respondent increased the capacity from 24 MW to 24.75 MW.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 L 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 theapproval 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 foropen 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 L 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 foropen 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 ofopen 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.6. The Second Respondent Commission framed two issues for consideration. They are asWhether the termination of the PPA datedby the Respondent is illegal and invalid, as contended by the petitioner?(2) Whether the petitioner has made out a case for a direction by the Commission to the Respondent to act in accordance with the PPA datedand supply power in terms of the PPA, as prayedThe 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.8. The APTEL after considering the submissions made by the parties held that the Appellant failed to make out a case of either res judicata or issue estoppel as the scope of the proceedings in the petitions filed by the First Respondent was different. After a detailed consideration of the Default Notice dated 26.05.2011, the reply to the notice dated 04.07.2011 and the Termination Notice dated 22.07.2011 in the light of the provisions contained in the PPA, the APTEL confirmed the order of the Tribunal.

Court's reasoning:
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.