Delhi High Court: The Single Judge Bench of V. Kameswar Rao, J., in a civil suit commercial application filed under Order VII Rule 11 of the Code of Civil Procedure, 1908 (‘CPC'), held that the agreement for procurement of electricity between the plaintiff and the applicant stood terminated, therefore, no agreement existed between the plaintiff and defendant 2, thus, no dispute with respect to tariff existed to be adjudicated by CERC. The disputes between the parties arose out of the PPA, therefore, the contention to adjudicate the matter under Section 79 (1)(b) of the Act by the CERC was rejected.
PTC India Limited (‘applicant') entered into Power Supply Agreement (‘PSA') with the Tamil Nadu Generation and Distribution Corporation Limited (‘defendant 3') and immediately entered into Power Purchase Agreement (‘PPA') with MB Power (Madhya Pradesh) Limited (‘plaintiff'). Defendant 1 issued a performance security in the form of Bank Guarantee (‘BG') in favour of the applicant. Plaintiff alleged that the applicant was unlawfully withholding the BG after the lapse of PPA and filed a suit for declaration, mandatory and permanent injunction against the defendants from invoking the BG. Applicant issued a Letter of Credit in accordance with clause 12.1 of the PPA, whereof, the plaintiff sought amendment for the same which was obliged by the applicant. However, plaintiff terminated the PPA in terms of Article 4.4 which was allegedly terminated with a view to avoid the supply of power at ₹3.26/- per unit as the prevailing rate of power at power exchanges were much higher.
Article 4.4 inter alia stipulated that if the appointed date did not occur, on expiry of 120 days from the date of the PPA, the PPA would automatically deem to be terminated with the mutual consent of the parties without requiring any positive action on the part of either party.
Plaintiff alleged that in view of the termination, PPA never commenced as the appointed date had not been fixed, however, the aforesaid position was disputed by the defendant 2 and 3, stating that the PPA had not come to an end.
Whether the suit filed by the plaintiff needs to be rejected on the ground that it is barred by law?
Whether the dispute falls within the ambit of Section 79(1)(b) to enable the Central Electricity Regulatory Commission (‘CERC') to adjudicate the same under Section 79(1)(f) of the Act.
Court's Analysis and Observation
While dealing with the issue of maintainability, the Court clarified that it was not the case of the parties that dispute between them needed to be adjudicated by the State Commission in terms of functions stipulated in Section 86 of the Electricity Act, 2003 (‘The Act'). The Court stated that the agreement for procurement of electricity between the plaintiff and the applicant stood terminated, therefore, no agreement or a composite scheme existed governing the plaintiff and defendant 2, thus, no dispute with respect to tariff existed to be adjudicated by CERC.
Further, the Court accepted the contention of defendant 3 which stated that since the composite scheme for generation and sale arises out of the PPA entered into by the plaintiff, the disputes forming the subject matter of the present suit arising out of the PPA was clearly in regard to matters connected with generating companies having a composite scheme for generation under Section 79(1)(b) of the Act, therefore, the contention to adjudicate the matter under Section 79 (1)(b) of the Act by the CERC was rejected.
However, the Court rejected the contention forwarded by defendant 3 under Order VII Rule 11 of the CPC to the effect that the present issue had an impact on tariff, as the actions of the plaintiff had prevented the applicant from supplying power to defendant 3 under the PSA resulting into defendant 3 being forced to secure power from the open market at rates much higher than the tariff determined. The Court was of the view that since the PPA had not commenced, therefore PSA could not be put into operation which leads to no issue relating to tariff arising in the suit for determination by CERC.
The Court, noted that there are no averments in the plaint filed by the plaintiff which showed that the dispute was with regard to tariff of the plaintiff, whereof the prayer made was with regard to return of the BG pursuant to termination of the PPA by the plaintiff. Therefore, held that the suit filed by the plaintiff was maintainable.
The Court while dismissing the application held that the termination of the PPA was not relatable to the issue of tariff, in order to attract the provisions contained in sub-clauses (b) or (f) of Section 79(1) of the Act.
[MB Power (Madhya Pradesh) Limited v. State Bank of India, 2023 SCC OnLine Del 149, decided on 13-01-2023]
Judgement by Justice V. Kameswar Rao
Advocates who appeared in this case :
For the Plaintiff- Senior Advocate Sandeep Sethi with Advocate Amit Kapur Advocate Rishi Agrawala, Advocate Akshat Jain Advocate Vaibhav Mishra Advocate Niyati Kohli Advocate Pratyush Singh Advocate Pratham V. Aggarwal and Advocate Manvi Agarwal
For the Defendants- Advocate Ravi Kishore, Advocate Niraj Singh, Advocate Deepak Jaiswal, Advocate Anusha Nagarajan and Advocate Aakanksha Bhola
*Simran Singh, Editorial Assistant has reported this brief