Summary
A generating company that signed a Connection Agreement with the State transmission licensee for a 66kV bay to be used jointly with two other generators was held solely liable to the licensee for the entire construction cost of the bay. The licensee was not a party to the generators' internal tripartite cost-sharing agreement and, for want of privity, could not recover proportionate shares from the other two generators; APTEL's contrary judgment was set aside and the State Commission's order restored.
Issues
- Whether, under the Connection Agreement dated 02.07.2021, the applicant generating company alone was liable to the transmission licensee for the full construction cost and O&M charges of the common bay, or only for its proportionate share.
- Whether the transmission licensee could rely on, or be bound by, the Internal Tripartite Agreement dated 27.12.2019 between the three generating companies to which it was not a party, so as to recover proportionate shares from the other two generators.
- Whether execution of an O&M agreement and acceptance of a proportionate deposit in compliance with APTEL's judgment precluded the licensee from challenging that judgment.
Provisions considered
- Sections 86(1)(f), 111 and 158; Section 2(28), Electricity Act, 2003The generating company (a generating company under Section 2(28)) invoked the State Commission's adjudicatory jurisdiction under Section 86(1)(f) read with Section 158 and the Commission's Conduct of Business Regulations; its appeal to APTEL lay under Section 111. These provisions supplied the forum and were not construed; the dispute turned on the terms of the agreements. (¶¶ 2, 8, 9)
Held
- Clause 2 of the Connection Agreement, read with its preamble, shows that the applicant generator sought connection in joint mode with the two other generators and undertook to pay all charges and costs, namely the monthly tariff, costs of modification of infrastructure, damages, charges for construction of the bay (Clause 2.4) and O&M charges (Clause 2.5). The sole liability for these charges was therefore that of the applicant, both for itself and on behalf of the other two generators, who were not parties to the agreement. (¶¶ 16, 17, 18, 20, 21)
- Under the Internal Tripartite Agreement the three generators agreed to share the bay cost and O&M charges in proportion to installed capacity, with the applicant nominated to pay the licensee and to be reimbursed by the other two within fifteen days of bills being raised. The applicant thus took the primary responsibility towards the licensee and the right to recover proportionate amounts from the others. (¶¶ 19, 22, 23)
- The licensee, not being a party to the tripartite agreement, could not claim proportionate shares from the other two generators; the right to recover from them lay only with the applicant, and the licensee rightly raised its demand on the applicant alone. (¶ 24)
- Applying the doctrine of privity of contract (Tweddle v. Atkinson; Jamna Das; Essar Oil v. Hindustan Shipyard), a party that is not privy to a contract cannot, unless the context otherwise makes it apparent, be made liable for its terms. Had the applicant's contention been accepted, the licensee would have had no legal remedy against the other two generators in the event of default, since they owed it no contractual obligation in respect of the bay. (¶¶ 26, 27, 29)
- APTEL erred in disregarding the absence of privity of the other two generators to the Connection Agreement, particularly after itself holding that the licensee could not rely on the tripartite agreement; its judgment rested on wrong assumptions and a misreading of the agreement. The State Commission's order holding the applicant liable, and treating recovery from the other generators as an internal matter, was good in law. (¶¶ 28, 29, 30)
Result
Appeal allowed; APTEL judgment dated 17.03.2023 set aside; order of the Himachal Pradesh Electricity Regulatory Commission dated 27.12.2022 restored; no order as to costs; pending applications disposed of.