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Smart Summary

Comprehensive Summary: Appellate Tribunal for Electricity — Appeal No. 298 of 2019 (Dated 18.10.2022)

Factual and Procedural Background

The appellant, Koppal Green Power Limited, is a small generator operating a 6 MW biomass-based generating station at Koppal (exportable capacity 5.4 MW). The appellant entered into a Power Purchase Agreement (PPA) on 30.03.2001 initially with Karnataka Power Transmission Corporation Limited (KPTCL), and subsequently renewed the arrangement by a renewal agreement dated 24.03.2011 with the first respondent, Gulbarga Electricity Supply Company Limited (the distribution licensee), fixing a tariff of Rs.4.3524 per unit from 30.03.2011.

By an order dated 22.01.2015 in OP No.08 of 2013, the Karnataka Electricity Regulatory Commission (State Commission) revised the tariff applicable to projects of this kind with effect from 01.01.2015 (setting out rates for FY 2014-15 through FY 2017-18 and leaving fuel cost for post-FY 2017-18 to be determined later). The State Commission directed modification of the PPA terms to reflect the revised tariff.

The distribution licensee did not promptly implement the tariff revision or execute the required supplementary agreement. The appellant pursued further proceedings before the State Commission: OP No.20/2015 seeking a direction to execute the supplemental agreement and payment of the tariff differential; Complaint No.06/2016 under Section 142 of the Electricity Act seeking penal action for non-compliance; and OP No.09/2018 seeking interest for delayed payment. The licensee resisted on various grounds (including “accord and satisfaction” and procedural bars).

Eventually the licensee executed a Supplementary PPA on 28.10.2016 and paid part of the differential (amounts paid in July 2017). The appellant continued to press for interest under the PPA for delayed payment. The State Commission, by an order dated 28.05.2019 in OP No.09 of 2018, denied the appellant’s claim for interest. The appellant challenged that order before the Appellate Tribunal for Electricity; the appeal was disposed of by an oral judgment pronounced on 18 October 2022.

Legal Issues Presented

  1. Whether the appellant is entitled to claim interest for delayed payment in terms of Article 6.3 of the PPA, calculated with reference to the tariff revision by the State Commission's order dated 22.01.2015.
  2. Whether the appellant's claim for interest was barred or otherwise improper because the enhanced tariff had not been formally incorporated into an amended PPA at the time invoices were raised or by operation of Order II Rule 2 of the Code of Civil Procedure (procedural limitation/pleading requirements).
  3. Whether the State Commission erred in denying interest and in delivering an incomplete or piecemeal adjudication of the disputes between the generator and the distribution licensee, thereby causing multiplicity of proceedings.

Arguments of the Parties

Appellant's Arguments

  • The appellant contends it was entitled to the revised tariff from 01.01.2015 as per the State Commission's order dated 22.01.2015, and therefore raised invoices based on the enhanced rate immediately after that order.
  • The appellant invoked Article 6.3 of the PPA (Late Payment clause) to claim penal interest for delayed payment by the distribution licensee, because the licensee failed to pay the differential in a timely manner.
  • The appellant maintained that the right to receive the modified tariff flows directly from the Commission’s order and is not contingent upon a subsequent formal amendment to the PPA—thus the claim for interest should not be subordinated to the formal execution of a supplemental agreement.

Respondent (Licensee) Arguments

  • The distribution licensee resisted the claim for interest on two primary grounds: (a) that the enhanced tariff claim could not be agitated until the revised tariff had been incorporated into the PPA by amendment (i.e., invoices based on the enhanced rate were premature), and (b) that the claim was hit by procedural provisions in Order II Rule 2 of the Code of Civil Procedure (CPC).
  • In earlier proceedings (OP No.20/2015) the licensee had also pleaded that receipt of payments at the pre-revised rate amounted to “accord and satisfaction” of the claim—an argument which the State Commission rejected in that earlier order.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Appellate Tribunal's analysis proceeded along the following lines, strictly reflecting the text of the opinion:

  1. The Tribunal observed a broader concern about “piecemeal adjudication” by regulatory commissions that produces multiplicity of proceedings and prolonged litigation; this contextual observation frames the case as an example of that trend.
  2. The Tribunal reviewed the contractual framework: the PPA explicitly stated the monthly energy charge (Article 5.1), required the generator to raise invoices in prescribed form for each billing period (Article 6.1), obliged the procurer to pay within 15 days, and contained a late payment clause (Article 6.3) which prescribes penal interest at SBI Prime Lending Rate plus 2% per annum from the date payment was due until full payment.
  3. The Tribunal emphasized the State Commission's order dated 22.01.2015 (OP No.08/2013) that revised tariff “with effect from 1.1.2015” and specifically directed that the terms of the PPA be modified accordingly. The Tribunal treated that direction as creating the generator’s substantive right to the revised tariff effective that date.
  4. The Tribunal noted the licensee’s repeated non-compliance with the Commission's directions to amend the PPA and pay the differential; it recorded that the Commission itself directed the execution of supplemental agreements (order dated 16.06.2016) and ultimately the licensee executed the supplement on 28.10.2016. The Tribunal also recorded that the licensee paid differential amounts in July 2017.
  5. Addressing the licensee’s defenses, the Tribunal rejected the contention that the appellant’s claim for interest was barred by Order II Rule 2 CPC or that the right to interest depended upon formal amendment of the PPA. The Tribunal reasoned that the right to the modified tariff flowed from the Commission’s order of 22.01.2015 and that the licensee’s defaults deprived the appellant of the time value of money; allowing the licensee to rely on procedural technicalities would reward deliberate defaults.
  6. The Tribunal also criticized the State Commission for failing to render a complete and effective adjudication (not deciding all relevant prayers earlier), which contributed to protracted litigation and the appellant’s continued deprivation of dues and their time value.
  7. On remedial directions, the Tribunal instructed a practical course: the appellant should issue a proper invoice under the PPA claiming interest properly calculated with reference to the tariff revision by the Commission’s 22.01.2015 order; the licensee must make payment within the prescribed contractual period. Given the licensee’s past conduct, the Tribunal cautioned that future defaults would be treated seriously and may attract penal action.

Holding and Implications

Holding: The impugned order dated 28.05.2019 in OP No.09 of 2018 is set aside, and the appellant is held to be entitled to claim interest on account of late payment in terms of Article 6.3 of the PPA.

Direct consequences and directions:

  • The appellant is directed to issue a proper invoice in terms of the PPA, calculating interest with reference to the tariff revision effected by the State Commission’s order dated 22.01.2015 (OP No.08 of 2013).
  • The first respondent (the distribution licensee) is obliged to make payment of that invoice within the contractual time period (i.e., within the prescribed period for payment under the PPA).
  • The Tribunal warned that, given the licensee’s prior conduct, any further default in compliance will be viewed as deliberate and may attract penal consequences.

Broader implications: The opinion emphasizes that regulatory orders which amend contractual rights take effect as directed and that procedural non-compliance by a procurer cannot be allowed to defeat the time value of money owed to a generator. The judgment primarily provides relief in respect of the parties' dispute and does not announce any broader legal doctrine beyond the facts and reasoning recorded in the opinion.

Disposition

The appeal was disposed of in the terms set out above by the Appellate Tribunal for Electricity (oral judgment pronounced on 18 October 2022).

Source: Text of the oral judgment of the Appellate Tribunal for Electricity in Appeal No.298 of 2019 (Koppal Green Power Limited v. Gulbarga Electricity Supply Company Limited & Ors.), dated 18.10.2022. This summary is based exclusively on the information contained in the provided opinion.

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    KOPPAL GREEN POWER LIMITED. v. GULBARGA ELECTRICITY SUPPLY COMPANY LIMITED. & Anr.

    IN THE APPELLATE TRIBUNAL FOR ELECTRICITY

    (Appellate Jurisdiction)

    APPEAL NO.298 OF 2019

    Dated: 18.10.2022 Present: Hon'ble Mr. Justice R.K. Gauba, Officiating Chairperson Hon'ble Mr. Sandesh Kumar Sharma, Technical Member In the matter of:

    KOPPAL GREEN POWER LIMITED

    Represented by its Managing Director, Registered office at :

    H.No.1-88/1/02,

    102, Shanti Vanam,

    Kaveri Hills Extension

    Hyderabad - 500081 … Appellant(s)

    VERSUS

    1. GULBARGA ELECTRICITY SUPPLY COMPANY

    LIMITED

    Rep. by its Managing Director, Opp : Hotel Parivar,

    Railway Station Road,

    Kalaburagi - 585101.

    2. KARNATKA ELECTRICITY REGULATORY COMMISSON

    Through its Secretary, No.16, C-1, Millers Tank Bed Area, Vasanth Nagar, Bengaluru, 560 052

    Karnataka, India … Respondent(s)

    Counsel for the Appellant (s) : Mr. Anand K. Ganesan Ms. Swapna Seshadri

    Mr. Amal Nair

    Mr. Sugandh Khanna

    Ms. Kritika Khanna

    Counsel for the Respondent (s) : Ms. Samiksha Jain Ms. Garima Jain for R-1

    1

    J U D G M E N T (Oral) PER HON'BLE MR. JUSTICE R.K. GAUBA, OFFICIATING CHAIRPERSON

    1. The appeal at hand has brought to us, yet again, a very disturbing trend showing piecemeal adjudication of the disputes brought before the Electricity Regulatory Commissions leading to multiplicity of proceedings forcing the stakeholders into unending spiral of litigation.

    2. The appellant is a small generator having established a 6MW biomass based generating station at Koppal in the State of Karnatkaka having an exportable capacity of 5.4 MW. It had entered into a Power Purchase Agreement ("PPA") on 30.03.2001 initially with Karnataka Power Transmission Corporation Limited ("KPTCL") for sale of energy to the State Grid for a period of 10 years, the said contract having been renewed with first respondent - Gulbarga Electricity Supply Company Limited ("distribution licensee") for additional period of 10 years, the renewal agreement having been executed on 24.03.2011 with tariff of Rs.4.3524 per unit for energy delivered from 30.03.2011. By virtue of order dated 22.01.2015 passed in OP No.08 of 2013, the second respondent - Karnataka Electricity Regulatory Commission ("the State Commission") had revised tariff for such projects w.e.f. 01.01.2015 fixing it at Rs.4.63/kv for Financial Year ("FY") 2014-15, Rs.4.79/kv for FY 2015-16, Rs.4.97/kv for FY 2016-17 and Rs.5.15/kv for FY 2017-18, the fuel cost for period post FY 2017-18 to be determined by the Commission later, in due course.

    3. The differential in the dues were paid by the first respondent ("distribution licensee") after several rounds of litigations in July, 2017, the claim of the appellant for interest on account of delayed payment having been resisted all along and eventually denied by the State Commission, by

    2

    its order dated 28.05.2019, on petition registered as OP No.09 of 2018 which is impugned by the appeal at hand.

    4. It is not in dispute that the rate of monthly energy charges was reflected in the PPA (Article 5.1). It is also not in dispute that the appellant ("the generator") is expected by the contractual terms to raise tariff invoices for each billing period in the prescribed format demanding payment of amounts for the delivered energy in accordance with the said contractual rate (Article 6.1), the distribution licensee (procurer) being obliged to make the payment within 15 days from the date of delivery of the tariff invoices.

    5. The PPA also contains a specific provision on the subject of late payment, it reading thus:-

    6.3 Late Payment : If any payment from Corporation is not paid when due, there shall be due and payable to the Company penal interest at the rate of SBI Prime Lending Rate plus 2% per annum for such payment from the date such payment was due until such payment is made in full".

    (Emphasis supplied)

    6. The process of revision of the energy charge started with OP No.08 of 2013 in which the appellant and another similarly placed generator (M/s Poweroniks Limited) had joined in praying before the Commission for revision of the landed cost of the biomass fuel and certain other reliefs. The Commission, as mentioned earlier, upheld the claim and thus revised the tariff applicable to the power project of the appellant (as indeed of the other petitioner before it) revising it from 2014-15 onwards. The first respondent (the procurer) was a party to the said proceedings, it being the fourth respondent, the directions in the order dated 22.01.2015 including the following:

    "b) The terms of the PPA between the petitioners and the 4th Respondent shall be modified accordingly with effect from 1.1.2005."

    (Emphasis supplied)

    3

    7. It is not in dispute that the above quoted directions of the State Commission vis- à-vis modification of the PPA terms so as to align the same with the revised tariff were not immediately abided by and the appellant with the other generator thus were obliged to approach the State Commission by another Petition (O.P. No. 20/2015), the prayers pressed being inclusive of a direction to the licensee to execute the supplementary agreement for modification or amendment of the revised tariff in compliance with the order dated 22.01.2015 and for payment of the differential in the tariff as a result of the tariff revision, as indeed initiation of penal action for non-compliance. The petition was resisted by the licensee on the specious plea that receipt of the payment for energy supplied at the pre-revised rate amounted to

    "accord and satisfaction" of the claim being agitated. The Commission accordingly rejected this contention and directed the licensee:

    "to execute the Supplemental Agreements with the Petitioners to implement the revised tariff ordered in OP No.08/2013 on 22.01.2015 and to make payment accordingly, within 2(Two) months from the date of this Order".

    8. Noticeably the Commission failed to take any decision on the other prayers viz. direction for payment of the differential on account of revision of tariff and initiation of penal action for non-compliance with the order for supplementary agreement to be consequently signed.

    9. The licensee once again failed to comply. Eventually, the appellant herein was constrained to approach the State Commission yet again, now invoking its jurisdiction under Section 142 of the Electricity Act (Complaint No.06/2016) referring to the directions given by earlier order dated 16.06.2016. It is during the course of hearing on the said complaint that the licensee eventually agreed to comply by executing the Supplementary PPA of 28.10.2016. The Commission declined to take any penal action in the nature envisaged under Section 142 of Electricity Act recording certain views to indicate the disinclination to do so on grounds of expediency,

    4

    though observing that there had been delay for certain period on the part of licensee which had not been properly explained. Though we have some reservations as to the manner in which the complaint under Section 142 of the Electricity Act was dealt with by the State Commission, at this distance in time, we do not wish to reopen the said chapter noting that during the course of the proceedings on the said complaint, the licensee had paid the principal amount of the differential, first in the sum of Rs.1,42,00,000/- on 07.07.2017 and then in the sum of Rs.1,00,29,661/- on 13.07.2017.

    10. The appellant was still aggrieved as the principal amount paid as above did not fully satisfy its claim, the payment being belated, this having given rise to its claim for interest in terms of Article 6.3 of the PPA, quoted earlier.

    11. Against the above backdrop, the appellant once again approached the State Commission (by O.P. NO. 09 of 2018) seeking directions for payment of interest, the same having been resisted by the licensee on the plea that such plea could not have been agitated without the enhanced tariff being incorporated by amendment in the PPA, the claim being also hit by the provision contained in Order II Rule 2 of the Code of Civil Procedure 1908 ("CPC"). Indisputably, the appellant had been raising invoices based on its enhanced rate of tariff immediately after the modification of the tariff by the first order on the subject rendered by the State Commission on 22.01.2015. Such invoices statedly were not honoured on the ground that PPA had not been then amended. The State Commission, by the impugned decision, upheld the objections of the licensee and has declined to grant any relief which result, in our view, is most unfair and unjust.

    12. The directions in the judgment dated 22.01.2015 on OP NO.08/2013 revising the tariff from FY 2014-15 onwards were crystal clear leaving no

    5

    ambiguity. There was a direction for the PPA between the parties to be amended accordingly w.e.f. 01.01.2015, the tariff having been revised "with effect from 1.1.2015". What was required to be done in the follow-up compliance was only a formality. The PPA had to be amended and aligned with the tariff order. The right of the appellant to receive the modified tariff flows from the decision rendered on 22.01.2015. This cannot, by any stretch of logic or imagination, be contingent upon or mercy of the inclination of procurer of modify, not the least at its whims or convenience. The Commission itself ruled by order dated 16.06.2016 that the non- compliance was not justified. By the said order, it now proceeded to issue time-bound directions for the supplemental agreement to be executed. The prayers made at that stage had also included one for a direction for payment of the differential amount. The Commission glossed over the said prayer through creating an unnecessary confusion, forcing the appellant into another round of litigation. The clear directions for a time-bound amendment of PPA were also ignored by the licensee, there being no justification offered for such continued default, even at this stage. It was only when the appellant sought penal action to be initiated that the licensee fell in line, executed the amended PPA on 28.10.2016 though the formal approval by the Commission, this having come by communication dated 02.05.2017 would take some more time.

    13. The defaults and delays throughout were on the part of the licensee which were wholly unjustified. The claim for payment of the differential, pressed by the OP No.20/2015, had remained unaddressed till the licensee eventually made the payments in July, 2017. In these circumstances, it is also a case of failure on the part of the State Commission to render a complete and effective adjudication which has resulted in the claim having remained not fully satisfied till date. The appellant had been deprived of the

    6

    time value of the money which was due immediately upon the revision of the tariff by Commission's order dated 22.01.2015. In these circumstances, the claim cannot be said to be hit by the provision contained in Order II Rule 2 of CPC and definitely not on the ground that such claim could not have been raised till the revised tariff had been incorporated in the amended PPA.

    14. On the foregoing facts, and in the circumstances, allowing the distribution licensee to deprive the appellant of the time value of the money due to it would be putting premium on the deliberate defaults committed by it which is neither just nor fair. Thus, the impugned order is set aside. We hold that the appellant is entitled to claim interest on account of late payment in terms of Article 6.3 of the PPA. To leave no scope for doubts and to ensure that the order is properly complied with, we direct that the appellant shall issue a proper invoice in terms of the PPA raising claim of interest properly calculated with reference to the revision of tariff by order of Commission dated 22.01.2015 in OP No.08 of 2013 and serve it on the first respondent (the licensee) which, in turn, shall be obliged to make the payment within the prescribed period of time. Given the past conduct of the licensee, we add a note of caution that no default in compliance shall be brooked, any negligence in payment likely to be construed as deliberate, entailing possible penal action.

    15. The appeal is disposed of in above terms.

    Pronounced in open court on this 18th Day of October, 2022. (Sandesh Kumar Sharma) (Justice R.K. Gauba)

    Technical Member Officiating Chairperson pr/tp

    7

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    KOPPAL GREEN POWER LIMITED. v. GULBARGA ELECTRICITY SUPPLY COMPANY LIMITED. & Anr.
    (Oct 18, 2022)