MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED versus RATNAGIRI GAS AND POWER PRIVATE LIMITED & ORS

Summary

The Supreme Court upheld MSEDCL’s liability for fixed capacity charges when Ratnagiri declared availability using RLNG during a domestic-gas shortage. RLNG was already an agreed primary fuel under the PPA, and the approval requirement for fuel contracts could not be used to defeat a permitted capacity declaration. Fixed capacity charges were independent of actual scheduling or delivery, unlike energy charges. APTEL’s execution proceedings were to continue.

Issues

1. Whether RLNG-based capacity declarations required MSEDCL’s prior consent under the PPA.
2. Whether refusal to schedule RLNG-based electricity relieved MSEDCL of fixed capacity charges.
3. Whether the proposed consent condition could be implied consistently with the contract’s text and purpose.

Provisions considered

• Clauses 1.1(b), 4.3 and 5.9, Power Purchase Agreement dated 10 April 2007RLNG fell within agreed primary fuels for capacity declarations. The separate approval provision could not be imported to restrict the primary-fuel permission in Clause 4.3. (¶¶ 21, 23, 26–29, 31–32)
• Clauses 2.2.1, 2.2.2, 5.2 and 5.3, Power Purchase Agreement dated 10 April 2007Fixed charges depended on contractually declared available capacity, whereas energy charges related to electricity supplied. The arrangement preserved capacity-charge recovery even where allocated power was not utilised. (¶¶ 22, 25–26, 33–34)

Held

• The PPA must be read as a whole. Clause 4.3 permitted LNG, natural gas and RLNG as primary fuels, while its consent condition concerned liquid-fuel arrangements. A transition between agreed primary fuels did not require that consent. (¶ 28–29)
• Clauses 4.3 and 5.9 operated in different spheres. On these facts the fuel-contract approval requirement did not invalidate the RLNG capacity declaration or eliminate the resulting fixed-charge liability. (¶¶ 26–29, 31–32)
• Capacity charges arose from the station’s capability and valid declaration of availability, independently of actual delivery. MSEDCL could not avoid those fixed charges by declining to schedule power; energy charges were distinct. (¶¶ 25–26, 33–34)
• The project’s revival, viability and undisputed shortage of domestic gas informed interpretation of the bargain. Courts should not imply conditions contrary to clear commercial terms merely to adopt one party’s preferred understanding of business efficacy. (¶¶ 27–28, 30–36)
• CERC and APTEL correctly imposed fixed-charge liability. The execution proceedings based on the upheld orders were to continue. (¶¶ 20, 32–38)

Result

Appeal dismissed. APTEL execution proceedings to continue. No costs; pending applications disposed of.