/2023 INSC 0181/
NON­REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 706 OF 2014
M/S PENNA ELECTRICITY LIMITED
(NOW M/S PIONEER POWER LIMITED) ….APPELLANT(S)
               VERSUS
THE TAMIL NADU ELECTRICITY 
BOARD & ORS. ….RESPONDENT(S)
J U D G M E N T
Rastogi, J.
1. The   instant   appeal   has   been   filed   under   Section   125   of   the
Electricity Act, 2003(hereinafter being referred to as the “Act 2003”)
assailing   the   judgment   and   order   of   the   Appellate   Tribunal   for
Electricity dismissing the appeal filed at the instance of the present
appellant.
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2. The appellant initially filed a petition under Section 86(1)(f) of
the Act, 2003 and sought the following reliefs:­
(a) direct   the   Respondent   to   make   the   payment   of   Rs.25.63
Crores   towards   fixed   charges   and   Rs.8.10   Crores   towards
payment   due   on   the   actual   variable   charges   payable   in
respect   of   the   power   generated   and   availed   for   153.26
millions unit during the period 29.10.2005 to 30.06.2006 to
the Petitioner.
(b) direct   the   Respondents   to   make   the   payment   to   the
Petitioner   of   the   sum   of   Rs.18.06   Crores   towards   under
recovered   fixed   charges   in   respect   of   operations   of   the
generating station of the Petitioner for the period 01.07.2006
to 15.06.2009.
(c) direct   the   Respondents   to   make   the   payment   to   the
Petitioner   of   the   sum   of   Rs.12.77   crores   towards   under
recovered   additional   cost   of   generation   (variable   charges)   in
respect   of   operations   of   generating   Station   of   the   Petitioner
for the period 01.07.2006 to 15.06.2009.
(d) direct the respondent to take immediate decisions on the use
of   Naphtha   or   any   other   compatible   fuel   as   alternate/
supplemental   fuel   to   increase   and   maintain   the   PLF   of   the
plant   as   contemplated   in   the   amending   PPA   dated
25.08.2004   in   future   thereby   enabling   the   plant   being
operated   at   optional   level   so   as   to   ensure   the   advantage   to
the   Respondent   and   also   the   assured   return   to   the
Petitioner.       The   permission   to   use   of   the   Naphtha/other
compatible   fuel   should   also   contemplate   dispatching   the
plant   under   merit   order   under   gas   based   tariff   only.     If   the
Respondent   desires   otherwise,   the   Petitioner   should   be
assured of the fixed charges.
(e) For any reason if the Respondent were not to consider any or
all of the relief claimed above by the Petitioner, to direct the
Respondent to make the payments due to the Petitioner as in
prayer   (a),   (b)   and   (c)   above   and   relieve   the   Petitioner   from
the obligations of the amendment PPA dated 25.08.2004.
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3. The   Tamil   Nadu   Electricity   Regulatory   Commission   thereby
disposed   of   the   petition   by   order   dated   30 th
  December   2011,
rejecting the claim of the appellant relating to unpaid fixed charges
of Rs.18.06 under Combined Cycle Operation as well as the claim of
underpaid   variable   charges   of   Rs.   12.77   crores   under   Combined
Cycle Operation for the period between 1 st
  July, 2006 to 15 th
  June,
2009.
4.   This   came   to   be   challenged   by   the   appellant   in   appeal   before
the Appellate Tribunal for Electricity(hereinafter being referred to as
the   “Tribunal”).     After   the   matter   came   to   be   heard,   taking   into
consideration   the   material   on   record,   the   Tribunal   returned   a
finding in paras 35, 36 and 38(1) and (2), and dismissed the appeal
under the impugned judgment.  The relevant paras are as under:­
“35. We   find   that   there   is   no   provision   for   compensation   for
capacity   charges   and   variable   charges   due   to   the   fact   that   the
plant   was   not   able   to   maintain   the   normative   availability/Plant
Load   Factor   on   account   of   shortage   of   fuel   in   the   Central
Commission’s   Tariff   Regulations,   2004   which   were   in   vogue   when
the   amended   PPA   was   entered   into   between   the   parties   or   in   the
Sate Commission’s Tariff Regulations, 2005.  Admittedly, the State
Commission’s Tariff Regulations were made effective subsequent to
the signing  of the PPA. The State Commission could not intervene
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in allowing amendment in the provisions of the PPA in this regard
which   were   voluntarily   agreed   by   both   the   parties   and   which   are
not   in   contravention   to   any   provision   of   the   Act   or   Rules   or   the
Regulations.
36. Therefore,   there   is   no   infirmity   in   the   findings   of   the   State
Commission in not  agreeing  to interfere with the provisions of the
PPA declaring the PPA unworkable with regard to compensation for
fixed charges for the above period due to shortage of supply of gas.
37. xxx xxx
38. Summary of Our Findings
i) The Appellant is not entitled to payment of full fixed charges
and   actual   variable   charges   in   respect   of   supply   of   energy
between   1.7.2006   to   15.6.2009   when   the   operational
parameters   were   affected   on   account   of   shortage   supply   of
gas by M/s GAIL in view of non availability of any provision
in this regard in the PPA or Tariff Regulations.
ii) There is no infirmity in the findings of the State Commission
in not agreeing to interfere with the provisions of the PPA or
declaring   the   PPA   unworkable   with   regard   to   compensation
for   fixed   and   variable   charges   for   the   above   period   due   to
shortage of supply of gas.”
5. Mr. Parag P. Tripathi, learned senior counsel for the appellant
submits   that   in   the   absence   of   any   clause/provision   under   the
amended   Power   Purchase   Agreement   dated   25 th
  August,
2004(hereinafter   being   referred   to   as   the   “PPA”)   in   reference   to
payment   of   fixed   charges,   it   was   incumbent   upon   the   Tribunal   to
have   considered   that   the   short   supply   of   gas   was   due   to   the
diversion of gas to other generating stations and on this account the
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Tamil   Nadu   Electricity   Board   (hereinafter   being   referred   to   as   the
“Board”)   could   not   have   made   the   appellant   to   suffer   by   citing   the
terms   of   the   PPA.     However,   the   Tribunal   omitted   to   note   the
unimpeachable   evidence   and   it   has   not   been   disputed   before   the
Tribunal   that   the   short   supply   of   gas   was   due   to   the   diversion   of
gas   to   the   generating   stations   of   Board   and   the   appellant   has
suffered   financial   losses   due   to   the   diversion   of   gas   to   the   other
generating stations.
6.   Learned   counsel   further   submits   that   there   was   sufficient
evidence   on   record   regarding   the   communication   between   Gas
Authority   of   India   Limited(GAIL)   and   the   Board   in   reference   to   the
diversion of gas to other generating stations and this has seriously
impaired the functionality and efficiency of the appellant company.
7. Learned   counsel   further   submits   that   it   cannot   be   disputed
that   the  generating   station   of  the   appellant   is  capable  of   achieving
the technical parameters and 85% of Plant Load Factor(hereinafter
referred   to   as   the   “PLF”).     In   the   aforesaid   premise,   the   Board
cannot be allowed to take benefit due to its own wrong at the cost of
the appellant Company.
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8. Learned counsel further submits that the amended PPA dated
25 th
  August, 2004 was not approved in terms of Section 86(1)(b) of
the Act 2003 still it is a binding document between the parties inter
se and since the electricity was sold to the Board otherwise than as
a gratuitous act, Board needs to pay  for  the same on the principle
of  Quantum Meriut .   In support of his submissions, learned counsel
has placed reliance on the judgment of this Court in  State of West
Bengal  Vs.  B.K. Mondal and Sons 1
;  Union of India  Vs.  Sita Ram
Jaiswal 2
  and   Food   Corporation   of   India   and   Others   Vs.   Vikas
Majdoor Kamdar Sahkari Mandli Limited 3
.
9. Learned   counsel   further   pressed   that   even   in   the   absence   of
PPA   not   been   approved   and   enforceable,   still   the   compensation
payable to the appellant ought to be computed as per the tariff fixed
by the Commission for open market purchases by Board, or at least
in   accordance   with   the   relevant   regulations   and   this   being   the
manifest   error   which   the   Tribunal   has   committed   in   rejecting   the
claim of the appellant needs to be interfered by this Court.
1   1962(Suppl) 1 SCR 876
2   1976(4) SCC 505
3   2007(13) SCC 544
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10. Per   contra,   learned   counsel   for   the   respondents,   while
supporting the concurrent finding returned by the Commission and
confirmed   by   the   Tribunal   under   the   impugned   judgment   submits
that the appellant has failed to meet the PLF as agreed to under the
PFA   ­   apart   from   the   fact   that   admittedly   PPA   was   not   approved
under   the   Act   2003.     That   apart,   there   is   no   clause   in   the   PPA
which provides for  payment  of  full fixed cost,  even  when  generator
fails   to   meet   the   PLF.     Any   compensation   by   way   of   deemed
generation   or   relaxed   heat   rate   due   to   partial   loading   of   machine
due   to   shortage   of   fuel   supply   is   the   sole   responsibility   of   the
appellant.
11.   Learned counsel further submits that the shortfall in PLF and
increase in tariff heat rate was due to two factors, (i) poor efficiency
of   the   power   plant;   and   (ii)   short   supply   of   natural   gas   by   fuel
supplier(GAIL).     Further,   during   the   period   between   1 st
  July,   2006
and   23 rd
  October,   2007,   sufficient   quantity   of   natural   gas   was
available to the appellant in order to operate the power at 52.8 MW
(the contracted capacity) but tariff heat rate of the plant was always
more   than   1980   Kcal/Kwr   due   to   its   poor   efficiency   of   the   plant.
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The   PLF   achieved   by   the   appellant’s   power   plant   for   the   period
between 1 st
 July, 2006 and 1 st
 July, 2009 is as under:­
Period Concerned PLF Achieved
1 st
  July,   2006   to   30 th
  June,
2007 80.82%
1 st
  July,   2007   to   30 th
  June,
2008 73.20%
1 st
 July, 2008 to 1 st
 July, 2009 67.09%
12.   In   the   given   circumstances,   the   respondents   cannot   be   held
responsible to meet the short supply of gas to the appellant.  Thus,
issue of short supply of gas as alleged is an issue between GAIL and
the appellant.  It was submitted that the inability of the appellant to
achieve 85% of the PLF is not due to any   Force Majeure  as claimed.
More   so,   the   appellant   never   initiated   any   proceedings   under   the
clause of  Force Majeure  as per procedure provided under the PPA.
13. In   addition,   learned   counsel   further   submits   that   PPA   was
entered   into   between   the   parties   based   on   notification   of
Government of India dated 6 th
 November, 1995.  Therefore, claim of
compensation by way of deemed generation due to shortage in fuel
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supply   is   the   responsibility   of   the   generator   and   not   applicable   in
terms   of   PPA   dated   25 th
  August,   2004.     Therefore,   the   State
Commission’s   refusal   to   allow   claim   of   underpaid   charges   and
variable   charges   is   well   founded   and   rightly   confirmed   by   the
Tribunal under the impugned judgment.
14. We  have  heard   learned   counsel   for   the   parties   and  with   their
assistance perused the material available on record.
15. From   the   facts,   it   manifest   that   the   appellant   is   an
Independent   Power   Producer(IPP)   operating   and   maintaining   a
Combined   Cycle   Gas   Turbine   Power   Generating   station   in   Tamil
Nadu   with   a   generating   capacity   of   52.8   MW   and   the   said
generating   station   is   dedicated   to   the   Board   and   the   entire   power
generated by the appellant is to be supplied to the Board.
16. It   is   not   disputed   that   the   PPA   dated   25 th
  August,   2004   was
not   approved   under   Section   86(1)(b)   of   the   Act   2003.     That   apart,
there is no clause in the PPA which provides for full fixed cost, even
when appellant fails to meet the PLF.  PPA between the parties was
entered   based   on   notification   of   Government   of   India   dated   6 th
November, 1995 and in terms of clause 4.3 of the said notification,
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the   responsibility   of   the   fuel   linkage   would   be   that   of   the
independent power producer and any fuel supply risk would have to
be   shared   between   the   power   and   fuel   producer/supplier   and   not
by the Board to indemnify.
17. There   is   a   bi­partite   agreement   executed   between   appellant
and   the   GAIL,   to   which   the   respondent   Board   is   not   privy,   and   if
any default has been committed by GAIL in supply of natural gas to
the  appellant,  the respondent Board is not  supposed to  indemnify,
that   apart,   there   is   nothing   on   record   to   show   that   any   remedial
action   was   taken   by   the   appellant   against   the   gas   supplier   on
account of short supply of gas, if permissible under the law.
18. At   the   same   time,   the   appellant   has   not   been   able   to
demonstrate any provision either under the Act, 2003 or under the
PPA   although   has   not   been   approved   by   the   competent   authority
under the Act, 2003 which may protect the right and interest of the
appellant.     That   apart,   no   clause   of   the   PPA   has   been   pointed   out
indicating if there is a short supply of gas due to diversion of gas to
the other generating station of the Board, the respondent Board has
to indemnify the appellant. 
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19. The thrust of submission of learned counsel for  the appellant
that it is the respondent Board who have sent letters to the GAIL to
divert the gas to other generating units of the Board, at least on this
account, the Board could not have made the appellant to suffer by
citing   the   terms   of   the   PPA.     There   is   no   dispute   that   the   project
was taken over on the basis of the notification dated 6 th
  November,
1995 issued by Government of India and in terms of para 4.3 of the
notification,   the   fuel   of   the   power   project   was   either   fuel   oils   or
natural gas.  The said clause of the Notification is as under:­
“4.3   The   responsibility   of   either   indigenous   or   imported   fuel
linkage would be that of the Independent Power Producer(IPP) and
any   fuel   supply   risks   would   have   to   be   shared   between   the
IPP/Fuel   suppliers.     The   State   Electricity   Board   will   not   take   any
fuel supply risk.”
20. In   terms   of   the   notification   referred   to   above,   it   is   clear   that
the responsibility of fuel linkage ­ either heavy fuel or natural gas ­
would be that of the appellant to the generator.  If there is any risk
in the supply, the same has to be shared between the generator and
the fuel supplier.  The notification has classified that the Board will
not   take   any   fuel   supply   risk   and   is   not   supposed   to   indemnify   in
the given situation.  
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21. It   is   also   not   disputed   that   there   is   no   clause   in   PPA   which
provides  for  payment  of full  fixed cost  to  the generator, even when
generator   fails   to   meet   the   PLF.     In   the   given   circumstances,   any
compensation   by   way   of   deemed   generation   or   released   heat   rate
due   to   partial   loading   of   machine,   arising   due   to   shortage   to   fuel
supply   which   is   the   sole   responsibility   of   the   appellant,   is   not
applicable   as   per   the   amended   PPA   dated   25 th
  August,   2004.
Furthermore,   there   is   no   provision   for   compensation   by   way   of
deemed   generation   or   partial   norms   due   to   operation   of   the   power
plant at partial load due to shortage of fuel in Central Government’s
Tariff   Regulations,   2004   which   admittedly   were   in   force   when   the
agreement was entered into between the parties.  
22. The   submission   made   by   learned   counsel   for   the   appellant
that because of the diversion of gas to the other generating stations
of   the   Board,   at   least   on   this   account,   the   Board   could   not   have
made the appellant to suffer by citing the terms of PPA, on the first
blush   appears   to   be   attractive   but   has   no   legs   to   stand   for   the
reason   that   in   the   absence   of   there   being   any   provision   for
compensation for capacity charges and variable charges due to the
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fact   that   the   plant   was   not   able   to   maintain   the   normative
availability/PLF   on   account   of   shortage   of   fuel   in   terms   of   the
Central   Government’s   Tariff   Regulations,   2004,   at   least   the
respondent   Board   cannot   be   said   to   be   at   fault   and   that   was   the
reason   prevailed   upon   the   Commission   to   arrive   at   the   conclusion
that the appellant was not entitled to payment of fuel fixed charges
and actual variable charges in respect of supply of energy  between
1 st
  July,  2006  and  15 th
  June,  2009 during   the  period  when  partial
parameters   were   rejected   because   of   shortage   of   supply   in   view   of
the provision in PPA or tariff regulations.
23. We find no infirmity in the finding returned by the Tribunal in
the impugned judgment which may call for our interference. 
24. Consequently,   the   appeal   fails   and   is   accordingly   dismissed.
No costs.
25. Pending application(s), if any, shall stand disposed of.
…………………………….J.
(AJAY RASTOGI)
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…………………………….J.
(C.T. RAVIKUMAR)
NEW DELHI;
MARCH 15, 2023
 
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