“Privity Prevails: Exclusive Liability of the Contracting Generator for Bay-Related Charges under the Electricity Act, 2003”
Commentary on Supreme Court’s Judgment in HP Power Transmission Corporation Ltd. v. M/s Brua Hydrowatt Pvt. Ltd. (2025 INSC 680)

1. Introduction

The Supreme Court’s decision of 14 May 2025 in HP Power Transmission Corporation Ltd. v. M/s Brua Hydrowatt Pvt. Ltd. settles a vexed question in the electricity sector: when several generating companies intend to share a single evacuation bay, who bears primary liability towards the State Transmission Utility (STU) for bay construction and Operation & Maintenance (O&M) charges? The Court holds that only the entity that is party to the Connection Agreement with the STU can be made liable; the STU cannot recover any part of that liability directly from generators who are not privy to the agreement, even if those generators are the intended beneficiaries of the interconnection facility.

Facts in brief: Brua Hydrowatt Pvt. Ltd. (BHP), along with Darjeeling Power Pvt. Ltd. (DPPL) and Roura Non-Conventional Energy Pvt. Ltd. (Roura), planned to evacuate power through a common 66 kV bay at the STU’s Urni switching station. Although the three generators executed an internal tripartite arrangement allocating costs inter se (ITA, 27 Dec 2019), only BHP executed the statutory Connection Agreement dated 2 July 2021 (CA 2021) with the STU—H.P. Power Transmission Corporation Ltd. (HPPTCL). When HPPTCL demanded the entire bay-construction cost (₹3.42 crore) from BHP, BHP invoked the ITA and asked HPPTCL to split the demand amongst the three generators. The State Commission upheld HPPTCL’s single-party demand; the Appellate Tribunal for Electricity (APTEL) reversed that finding. In the instant appeal, the Supreme Court restores the State Commission’s view, firmly anchoring its reasoning in the doctrine of privity of contract.

2. Summary of the Judgment

• The Court allows HPPTCL’s appeal, sets aside APTEL’s judgment (17 Mar 2023) and restores the Himachal Pradesh Electricity Regulatory Commission’s order (27 Dec 2022).
• It rules that, under Clauses 2.1-2.5 of the CA 2021, BHP assumed full liability for (a) monthly transmission tariff, (b) modifications/alterations to STU infrastructure, (c) damages, (d) bay construction costs, and (e) O&M charges.
• Because DPPL and Roura are not signatories to CA 2021, HPPTCL has no cause of action against them; its only recourse is against BHP. Any intra-generator reimbursements must be enforced by BHP under the ITA.
• APTEL erred in reading Clauses 2.4-2.5 (“mutually agreed terms”) as if they contemplated further individual agreements with the other two generators; the clause merely permits negotiation of quantum, not substitution of the debtor.
• The Court clarifies that statutory flavour of a Connection Agreement does not override ordinary contractual principles; unless the regulator mandates multi-party contracting, the doctrine of privity remains intact.

3. Analysis

3.1 Precedents Cited and Applied

• Tweddle v. Atkinson (1861) 121 ER 762 – Classical exposition of privity: a stranger cannot enforce a contract.
• Jamna Das v. Pandit Ram Autar Pande (1911) PC – Privy Council recognition of privity in Indian contract law.
• Essar Oil Ltd. v. Hindustan Shipyard Ltd. (2015) 10 SCC 642 – Supreme Court held that a sub-contractor lacking privity with the employer cannot sue for direct payment; cited for analogous reasoning regarding “sub-generators”.

Notably, no electricity-specific precedent was needed; general contract law sufficed. The Court implicitly distinguishes earlier APTEL rulings that allowed apportionment among multiple beneficiaries where all were signatories or where specific regulations required such apportionment.

3.2 Legal Reasoning of the Supreme Court

1. Identification of Parties and Obligations – The Court dissects the CA 2021 and emphasises the “Applicant–STU” dyad. Terms such as “the applicant shall pay” occur repeatedly, with no language binding “other generators”.
2. Contractual Autonomy – Under Section 10 of the Indian Contract Act, parties are free to decide whom they bind. By electing to enter the CA 2021 alone, BHP knowingly bore sole contractual responsibility.
3. Privity vs. Beneficiary Principle – While DPPL and Roura benefit from HPPTCL’s obligation to construct/operate the bay, they are not “statutory beneficiaries” under any regulation that would impose reciprocal payment obligations. Therefore, the “beneficiary principle” in public contracts (e.g., road concessions) does not apply.
4. Co-existence of ITA – The Court carefully demarcates the ITA 2019 as an internal risk-allocation document. Since HPPTCL is a stranger to it, the ITA cannot enlarge HPPTCL’s right to payment, nor diminish BHP’s liability.
5. Regulatory Silence – Neither the Electricity Act, 2003 nor HPERC regulations mandate that bay charges be recovered directly from every generator using the bay. Absent such a mandate, ordinary contract law governs.
6. Commercial Certainty – Allowing STUs to chase non-signatory generators would inject uncertainty into capital-intensive transmission planning. The Court therefore prefers the “single-window” liability model.

3.3 Likely Impact on Future Cases and the Power Sector

• Single-Window Contracting Standardised – STUs are likely to insist that each generator seeking capacity sign the Connection Agreement, or that one lead generator expressly assumes joint-and-several liability. The judgment thus incentivises clearer drafting.
• Risk Allocation Moves Upstream – Lead developers must price in default risk of consortium partners. Financial closure and lender due-diligence will scrutinise back-to-back agreements (like the ITA) more closely.
• Regulatory Re-look – State Commissions may consider amending connectivity regulations to mandate multi-party execution or bank guarantees from each beneficiary, aligning legal liability with cost-causation.
• Litigation Reduction – The precedent discourages generators from shifting liability onto STUs through interpretative arguments and may reduce disputes before APTEL.
• Broader Commercial Law Ramifications – The ruling reaffirms that statutory sectors (electricity, telecom, highways) do not displace core private-law doctrines unless the statute explicitly says so.

4. Complex Concepts Simplified

Bay (in Transmission Engineering)

A physical extension within a sub-station comprising breakers, isolators, protection and metering equipment through which a transmission line or generator is connected.

Connection Agreement (CA)

A mandatory agreement under Section 10 & Section 32 of the Electricity Act, 2003 between a generator and the STU specifying technical and commercial conditions for connectivity.

Operation & Maintenance (O&M) Charges

Periodic charges levied by the STU for maintaining the bay equipment—covers spares, labour, periodic testing, etc.

Doctrine of Privity of Contract

Only parties to a contract (or their legal representatives) can sue or be sued on it; third parties cannot enforce obligations nor be burdened by them.

Lead Generator / Lead Applicant

The generator that deals with the STU on behalf of a cluster of projects, taking primary contractual responsibility.

5. Conclusion

The Supreme Court’s judgment in HPPTCL v. Brua Hydrowatt is, at heart, a reaffirmation of orthodox contract law within a highly regulated infrastructure sector. By holding that the STU’s claim lies exclusively against the contracting generator, the Court provides commercial certainty and preserves the sanctity of written agreements. Consortia of generators may still share costs internally, but they cannot foist liability onto the STU absent privity. Electricity regulators, developers, and lenders should note the Court’s preference for clarity: whoever signs, pays. Future disputes on shared facilities—reactive compensation, telemetry systems, pooling sub-stations—will likely be resolved along similar lines unless regulation expressly creates multi-party liability.