Summary
Jindal Thermal (now JSW Energy) negotiated in 1998–99 to sell surplus power from its Bellary plant to the Karnataka Electricity Board. A Government Order of 12.05.1999 approved Rs 2.60 per unit with 5% annual escalation for five years and let the Board finalise a power purchase agreement. The Karnataka Electricity Reform Act took effect on 01.06.1999, and the Commission later approved the PPA at a lower tariff. The High Court held that a contract had been concluded before that date, which under the Section 27(2) proviso would have put the tariff beyond the Commission. The Supreme Court disagreed. A concluded contract needs agreement on all essential terms, not just rate, tenure and quantum, and here penalties, threshold supply and escrow were expressly left to a PPA that all parties treated as indispensable. It remanded the remaining issues and directed JSW to repay Rs 50 crore.
Issues
- Whether a contract for sale of power was 'concluded' with the Karnataka Electricity Board before 01.06.1999 within the proviso to Section 27(2) of the Karnataka Electricity Reform Act, 1999, ousting the Commission's tariff jurisdiction.
- Whether the High Court, in a Section 41 appeal limited to questions of law, could set aside the Commission's tariff findings.
Provisions considered
- Section 27(2), proviso, Karnataka Electricity Reform Act, 1999Contracts concluded by the Government or the Board with generating companies before the Act are deemed approved, but 'concluded' requires consensus on all essential terms; where the parties contemplated a PPA as a condition of the bargain, none was concluded before 01.06.1999. (¶¶ 51, 64, 78, 79, 83)
- Section 41, Karnataka Electricity Reform Act, 1999An appeal lies only on questions of law; findings of the expert Commission deserve deference and may be disturbed for perversity, absence of reasons or conflict with a statutory injunction. (¶¶ 87, 88, 89)
- Sections 2 and 10, Indian Contract Act, 1872A contract needs no writing unless law requires it, but whether a future formal agreement is a condition of the bargain depends on the parties' intention (Kollipara Sriramulu); Brogden was distinguished. (¶¶ 56, 80, 81, 82)
Held
- The proviso protects concluded contracts against retrospective regulation, but courts cannot gloss over the statutory requirement in the name of pragmatism; the contract must have been concluded before 01.06.1999, and the omission of 'power purchase agreement' from the proviso does not mean a bare agreement on tariff suffices. (¶¶ 51, 63, 64, 65, 79)
- The Board's letter of 23.04.1999 expressly left seven matters, including threshold supply, penalties, assured off-take, fuel escalation and escrow, to be negotiated while finalising the PPA, and none was negotiated before 01.06.1999; the GO of 12.05.1999 only permitted the Board to finalise a PPA for further approval, and later supply was a stop-gap arrangement; there was no concluded contract. (¶¶ 70, 71, 73, 75, 77, 79, 83)
- The High Court's findings of perversity were influenced by its erroneous premise and gave no independent reasons within the limited Section 41 jurisdiction; those findings and the finding that JSW was an independent rather than captive producer are set aside for reconsideration, including JSW's alleged claim of captive status for tax concessions. (¶¶ 93, 94, 95, 111)
- Balancing equities, JSW must repay Rs 50 crore of the Rs 100 crore withdrawn within eight weeks, subject to the High Court's final decision; observations against the Commission are expunged. (¶¶ 86, 115, 116, 117, 119)
Result
Civil Appeal No. 8714 of 2022 partly allowed; the Karnataka High Court judgment of 08.04.2004 (modified 16.04.2004) in MFA No. 4795 of 2002 set aside, with a declaration that no contract was concluded under the Section 27(2) proviso and remand on Points 3 and 4; JSW to pay Rs 50 crore within eight weeks; Civil Appeal No. 8715 of 2022 by the Commission allowed to expunge remarks; parties to bear their costs.