Case Note & Summary
The Supreme Court dismissed two appeals arising from a common order of the Appellate Tribunal for Electricity (APTEL) concerning a power purchase agreement (PPA) between CLP India Pvt. Ltd. (a generating company) and Gujarat Urja Vikas Nigam Ltd. (the state utility). The PPA, dated 03.02.1994, obligated Gujarat Urja to purchase 635 MW of electricity from CLP for 20 years. The tariff was governed by a Central Government notification under Section 43A of the Electricity Supply Act, 1948, which initially provided for an incentive for generation above a target availability. However, an amendment notification dated 06.11.1995 capped the deemed generation incentive for naphtha-based plants. Despite this, CLP continued to bill for the incentive, and Gujarat Urja paid it from June 1998 to 2000 and again from December 2003 to February 2005. In 2005, a high-level committee recommended recovery of excess payments, leading Gujarat Urja to file a petition before the Gujarat Electricity Regulatory Commission (GERC) under Section 86(1)(f) of the Electricity Act, 2003, seeking recovery of deemed generation incentive paid from 1997-98 to 2005-06. CLP resisted, arguing estoppel and that the matter had been closed by a supplementary agreement dated 05.12.2003. The GERC held that the 1995 notification applied and that deemed generation incentive was not payable, but limited recovery to three years prior to the petition (i.e., from 14.09.2002), deeming earlier claims time-barred. CLP also claimed interest on a deemed loan component of ₹53.9 crores, which the supplementary agreement recognized as own capital with 14% interest from 01.07.2003 to 31.03.2009. CLP sought interest for the period prior to 2003, but GERC and APTEL rejected this, holding that the supplementary agreement was a complete bargain and no interest was payable for the past. The Supreme Court upheld APTEL's decision, finding that the 1995 notification applied to the PPA and that the supplementary agreement precluded any retrospective claim for interest. The Court also upheld the limitation period applied by GERC. Both appeals were dismissed.
Headnote
A) Electricity Law - Tariff Determination - Deemed Generation Incentive - Section 43A, Electricity Supply Act, 1948 - Notification dated 06.11.1995 capped deemed generation incentive for naphtha-based plants - Held that the notification applied to the PPA and CLP was not entitled to incentive beyond the cap; recovery of excess payments was limited to three years prior to filing of petition (Paras 2-5). B) Contract Law - Supplementary Agreement - Final Settlement - Clause 7.5.14(a) of Supplementary Agreement dated 05.12.2003 recognized ₹53.9 crores as own capital with 14% interest from 01.07.2003 to 31.03.2009 - Held that this clause constituted a complete bargain and no interest was payable for prior period; claim for retrospective interest was barred (Paras 7-13). C) Limitation - Recovery of Excess Payments - Section 86(1)(f), Electricity Act, 2003 - GERC allowed recovery only for three years prior to filing of petition - Held that recovery for period prior to 14.09.2002 was time-barred (Para 5).
Issue of Consideration
Whether the generating company is entitled to deemed generation incentive despite the 1995 notification capping it; whether the supplementary agreement precludes recovery of excess incentive paid; whether interest on deemed loan component is payable for period prior to supplementary agreement.
Final Decision
The Supreme Court dismissed both appeals, upholding the APTEL order. It held that the notification dated 06.11.1995 applied to the PPA and that deemed generation incentive was not payable. Recovery of excess payments was limited to three years prior to filing of petition. The supplementary agreement was a complete bargain and no interest on deemed loan was payable for the period prior to 01.07.2003.
Law Points
- Electricity Act
- 2003
- Section 125
- Electricity Supply Act
- 1948
- Section 43A
- Power Purchase Agreement
- Deemed Generation Incentive
- Estoppel
- Limitation
- Supplementary Agreement
- Interest on Loan Capital
- Bullet Repayment
