Summary
Construing a competitively bid power-purchase agreement, the Court held that coal energy charges included washing and necessary transportation to the project site, and calorific value had to be measured there. It rejected additional incidental-cost heads and the claim for past interest. The Court explained strict limits on implied contractual terms but resolved this dispute through the express formula read as a whole.
Issues
- How the PPA’s purchasing, transportation and unloading formula treated washed coal and road carriage.
- Where calorific value should be measured.
- Whether incidental costs and interest were recoverable.
- When business efficacy permits implication of contractual terms.
Provisions considered
- Section 63, Electricity Act, 2003Provided the competitive-bidding tariff framework; the dispute concerned interpretation of the resulting PPA, rather than substitution of a different tariff. (¶¶ 1–2, 10–12)
Held
- An implied term must be reasonable and equitable, necessary for business efficacy, obvious, clearly expressible and consistent with express terms. Mere reasonableness does not authorise rewriting a commercial bargain. Express terms remain controlling, and clauses must be read harmoniously. Here the Court interpreted the existing formula rather than adding an implied term. (¶¶ 33–49, 72)
- The formula referred to actual purchasing, transporting and unloading costs for coal supplied to and at the project. Coal necessarily meant washed coal given the project’s requirements. Responsibility to arrange washing did not shift its cost outside the reimbursable coal price. Transfer of title at the mine did not alter the contractual project-site basis. (¶ 50–62)
- Transportation from the mine through the washery to the project was recoverable, including necessary road transport while the rail siding was unavailable. The contract did not confine reimbursement to carriage by rail, and operating the plant meanwhile served the project’s purpose. (¶ 63–65)
- The weighted average gross calorific value was that of coal delivered at the project site, not the mine. Joint sampling records supported that interpretation. Any separate complaint about the coal supplier’s billing remained between the generator and supplier. (¶ 66–69)
- Transit and handling losses, third-party testing and liaison charges were rejected because the formula contained only the three specified components. The past-interest claim was also rejected, having not been made earlier and concerning serious contractual disputes rather than unpaid undisputed bills. (¶ 70–71)
Result
Appeal partly allowed for coal washing, transportation via the washery and necessary road carriage, with project-site calorific value. Other claims rejected. Consequential sums payable within three months, failing which twelve per cent annual simple interest; no costs.