GUJARAT URJA VIKAS NIGAM LIMITED versus ESSAR POWER LIMITED AND ANOTHER

Summary

In the long-running dispute over Essar Power's diversion of GUVNL's allocated share of electricity to its sister company, the Supreme Court, reading its 2016 decision as a whole, held that GUVNL is entitled to reimbursement of proportionate fixed charges for the diverted power on the principle of restitution, in addition to compensation at the HTP-1 energy charge, and that the diversion must be computed on a half-hourly basis from 23.02.2005, as the parties had adopted that metering on the CEA's recommendation sought by Essar itself.

Issues

1. How the Court's earlier decision in Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (2016), restoring GERC's order, was to be understood and applied.
2. Whether GUVNL could claim compensation beyond the HTP-1 energy charge methodology, including on the basis of Section 73 of the Contract Act.
3. Whether GUVNL was entitled to reimbursement of fixed charges paid for electricity diverted from its allocated share.
4. Whether the diverted electricity should be computed on an hourly or half-hourly basis.
5. Whether the APTEL rightly remitted to GERC issues on Deemed Generation Incentive and the amounts deducted from invoices.

Provisions considered

• Section 125, Electricity Act, 2003The appeals were held maintainable because the rival interpretations of the Court's earlier decision, on which both sides relied, raised a substantial question of law. (¶¶ 2, 11)
• Section 73, illustration (j), Indian Contract Act, 1872GUVNL's plea for compensation on the parameters of Section 73 was rejected because the methodology in para 9.13 of GERC's order, affirmed by the Court in the earlier round, bound the parties and could not be reopened. (¶ 29)
• Article 7.1.1 of Schedule VII and Articles 5.2 and 5.3.2, Power Purchase Agreement dated 30.05.1996 (GEB/GUVNL and EPL)Fixed charges were payable monthly as one-twelfth of annual fixed charges and adjustable at year end if generation fell short of allocated capacity; the Court held that payment of fixed charges was tied to actual supply of the allocated share, so a shortfall attracted proportionate reimbursement. (¶¶ 30, 32, 33)
• Article 1 (Availability Period) and Article 12.1, Power Purchase Agreement dated 30.05.1996 (GEB/GUVNL and EPL)Although the PPAs defined the availability period as 60 minutes and were never amended in writing, the parties had adopted half-hourly metering on the CEA's recommendation from 23.02.2005, and Essar, which sought that advice, could not resist its use for computing diversion. (¶¶ 39, 40, 41)

Held

• A prior judgment must be read as a whole to find its findings and ratio; isolated paragraphs or sentences read out of context do not give its true import. (¶ 12)
• The HTP-1 energy charge methodology, agreed in the settlement for April 1998 to September 2004 and approved by GERC and the Court for the later period, binds GUVNL as the measure of compensation for diversion and cannot be reopened, even though the Rs 64 crore figure was not a final settlement. (¶¶ 29, 34)
• Reimbursement of fixed charges is distinct from compensation: it flows from the PPA itself and from GERC's order restored by the Court, which required proportionate fixed charges to be reimbursed when GUVNL's share was supplied to the sister company; the principle applies equally where Essar wrongfully diverted the power without GUVNL's knowledge. (¶¶ 31, 32, 33, 35)
• GERC and the APTEL erred in denying reimbursement of fixed charges by treating it as part of compensation; GUVNL is entitled to it on the principle of restitution, as the payment was not due for electricity never supplied, and Essar cannot retain fixed charges from both GUVNL and its sister company for the same power. (¶¶ 37, 38)
• The Court did not build a new case contrary to the pleadings but gave effect to the clear findings of its earlier decision, which the parties had misread. (¶ 36)
• Diversion from 23.02.2005 must be computed on the half-hourly basis that all parties adopted on the CEA's recommendation sought by Essar; GERC's earlier passing reference to hourly computation, made without regard to that recommendation and on a point not in issue, was not binding, and the APTEL erred in reversing GERC on the ground that the PPA was not amended. (¶¶ 39, 40, 41)
• The APTEL's remand of the disputed Rs 2.2 crore of Deemed Generation Incentive and of the actual deductions from invoices was not interfered with, as these were matters of record that GERC could verify. (¶ 42)

Result

Appeals disposed of; GERC's order dated 27.12.2019 and the APTEL's judgment dated 21.03.2025 modified to allow reimbursement of fixed charges in addition to compensation and to restore half-hourly computation of diversion; the APTEL's other remand directions left undisturbed; parties to bear their own costs.