Madras High Court
M/S.Mms Steel & Power Private Limited vs Tamil Nadu Generation And Distribution ... on 16 August, 2022
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
W.P. No.7457 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 16.08.2022
CORAM
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
W.P. No.7457 of 2015
and M.P. Nos.1, 2 and 3 of 2015
M/s.MMS Steel & Power Private Limited,
Rep. by its authorised representative,
17/2D ONGC Road,
Narimanam,
Nagapattinam Taluk,
Nagapattinam District. …Petitioner
Vs.
1.Tamil Nadu Generation and Distribution Company
Limited, Rep. by its Chairman & Managing Director,
144, Anna Salai, Chennai-600 002.
2.The Superintending Engineer,
Nagapattinam Electricity Distribution Circle,
Nagapattinam. …Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India
praying to issue a Writ of Mandamus directing the Respondents to forthwith
and in a time bound manner, release the dues under the respective Power
Purchase Agreements and 'Open Access Agreement for sale to TANGEDCO'
dated 07.10.2014 entered into between the petitioner and the respondent
without in any manner deducting any penalties for short supply, so long as the
Respondents do not make full payments within the due date against the
Invoices raised for supply of electricity from time to time, and pay interest on
the delayed payments at the contractual rate for the period of delay.
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https://www.mhc.tn.gov.in/judis
W.P. No.7457 of 2015
For Petitioner : Mr.Rahul Balaji
For Respondents : Mr.Abul Kalam
Standing Counsel for TNEB
ORDER
The writ petition is filed praying to issue a Writ of Mandamus directing the Respondents to forthwith and in a time bound manner, release the dues under the respective Power Purchase Agreements and Open Access Agreement for sale to TANGEDCO dated 07.10.2014 entered into between the petitioner and the Respondents without in any manner deducting any penalties for short supply, so long as the Respondents do not make full payments within the due date against the invoices raised for supply of electricity from time to time and pay interest on the delayed payments at the contractual rate for the period of delay.
2. The petitioner is a Company operating two Group owned captive gas based power plants in the State of Tamil Nadu with a combined installed capacity of 28 MW. The petitioner supplied power under a wheeling agreement to 8 Group Captive consumers. After meeting its internal 2/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 requirements, the petitioner had surplus power of 10 MW depending on availability of machine, gas etc.,
3. The State of Tamil Nadu faced with acute shortage of power, entered into Power Purchase Agreements (hereinafter referred to as "PPA") from time to time titled “Open Access Agreement for Sale” with generators such as the petitioner herein. The petitioner entered into a number of agreements commencing with the PPA dated 19.07.2013 until 17.10.2014. The Petitioner raised invoices in terms of the contractual clauses. However, the Respondent namely TANGEDCO has failed to comply with its part of the contractual obligation of making payments on time. The following statement in the affidavit is relevant and thus extracted below:-
S.No Month Agreement Actual Short fall Actual Less Less . Quantum Supply Supply in Supply Short fall System and Supply in Quantum Units Units supply Scheduling Units in Units claimed Amount penalty operating (Minimum by @ amount Charges 8.5 MW) TANGED Rs.5.50/ @ Rs.2000/-
CO Unit Rs.1.10/- per day
per unit
1 Oct-14 6324000 3280000 3044000 18040000 3348400 62000
2 Nov-14 6120000 2300000 3820000 12650000 4202000 60000
3 Dec-14 6324000 2926000 3398000 16093000 3737800 62000
4 Jan-15 6324000 1120000 5204000 6160000 5724400 62000
5 Feb-15 5712000 1800000 3912000 9900000 4303200 56000
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W.P. No.7457 of 2015
S.No Month Agreement Actual Short fall Actual Less Less
. Quantum Supply Supply in Supply Short fall System and
Supply in Quantum Units Units supply Scheduling
Units in Units claimed Amount penalty operating
(Minimum by @ amount Charges
8.5 MW) TANGED Rs.5.50/ @ Rs.2000/-
CO Unit Rs.1.10/- per day
per unit
Total 30804000 11426000 19378000 62843000 21315800 302000
The above statement would show that there has been substantial delay in making the contractually agreed payments and even when payments are made belatedly they were made without interest contrary to the judgment of the Hon'ble Supreme Court in the case of TANGEDCO vs. PPN Power Generating Company Private Limited reported in (2014) 11 SCC 53.
5. The petitioner being a gas based generating station was dependent upon supply of gas by GAIL and ONGC. Owing to the default in payments by TANGEDCO to the petitioner, the petitioner was unable to make the payments to GAIL and ONGC within the time lines stipulated under the contract with GAIL and ONGC which is evident from the correspondence exchanged between the petitioner and GAIL and Petitioner and ONGC. The delay/ default by the Respondentss in making the payment and refusal to pay interest has adversely impacted the financial position of the petitioner who 4/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 had to make payments to its Bankers, financial institutions apart from the payment to be made to GAIL/ONGC to procure gas.
6. While so, the Government of Tamil Nadu issued G.O.Ms.No.10 Energy Department dated 27.02.2009 under Section 11 of the Electricity Act, 2003, whereby all power generating units in Tamil Nadu shall operate and maintain generating stations to the maximum capacity and plant load factor.
The generating stations would also supply exportable electricity to the State Grid for supply to either TNEB or to a H.T. consumer within the State. The said Government order was withdrawn in the year 2014 but restored shortly. Resultantly, the petitioner was under a compulsion to supply substantial if not the entire power generated to TANGEDCO and delay by TANGEDCO in effecting the payments due in terms of the contract adversely affected the financial position of the Company so much so, it is submitted that the very functioning and existence of the Company itself became very challenging. It is further submitted that in addition to the above factors, there was no payment security mechanism which again caused prejudice to the petitioner.
7. It may be relevant to note that the Wind Power Producers 5/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 Association filed a petition before TNERC seeking directions to be issued to TANGEDCO to pay interest on late payments, which was resisted by TANGEDCO on the premise that there was no provision in the Tariff Order for payment of interest, the said issue stood resolved by APTEL in Appeal No.11 of 2012 dated 17.04.2012, wherein it was concluded that Wind Power Generators are entitled for payment of interest on delayed payment made by the appellant for the purchase of the power from the generator. It is submitted that the case of the petitioner is afortiorari inasmuch as there is a specific position in the PPA providing for payment of interest on delayed payment, reliance was also on the judgment of the Hon'ble Supreme Court in the case of TANGEDCO vs. PPN Power Generating Company Private Limited reported in (2014) 11 SCC 53 wherein it was held as under:
"75. The late payment clause only captures the principle that a person denied the benefit of money, that ought to have been paid on due dates should get compensated on the same basis as his bank would charge him for funds lent together with a deterrent of 0.5% in order to prevent delays. It is submitted by Mr Salve and Mr Bhushan that bankers of the respondents have applied quarterly compounding or monthly compounding for cash credits during different periods on the basis of RBI norms. 6/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 Article 10.6 of the PPA has followed the norms of the bank. This cannot be said to be unfair as the same principle would also apply to the appellants. "
8. To the contrary, it was submitted by the learned counsel for the Respondents that the payment of interest would involve huge commitment and thus requested for waiver for the belated payment on the power Bills raised. The delay in settling / making the payment by the Respondents was only due to the financial crisis/ position it was faced with, as the Respondents has been supplying electricity at a subsidised rates in discharge of its obligation/ duty to generate and supply electricity. That there is no specific clause regarding the payment security mechanism.
9. It is further submitted by the learned counsel for the petitioner that unmindful of the difficulty which the petitioner had to undergo in view of the failure on the part of the Respondents in making payments to the power supplied in terms of the PPA, the Respondents had claimed deduction towards penalty for shortfall in supply. Though, there is a dispute as to the extent of the penalty that has been charged on account of alleged shortfall supply. The petitioner submitted that the above action of the Respondents is 7/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 arbitrary and unfair and thus unsustainable and contrary to the order of Appellate Tribunal for Electricity (hereinafter referred to as "APTEL") in Appeal No.181 of 2013 wherein it was held that the transaction was in the nature of reciprocal promise and having failed to perform its own reciprocal promise it is not open to the other party committing default to assert a claim for performance.
10. The learned counsel for the Respondents submitted that the penalty for shortfall supply limit was deducted only to the extent of Rs.1.13 Crores and not Rs.2.13 Crores as stated by the petitioner. It was submitted that with regard to the refund of compensation amount an appeal petition is pending before the Hon'ble Supreme Court in the matter of Mrs. Raghurama Renewable Energy.
11. Heard both sides, perused the materials on record.
12. This Court finds that insofar as interest towards belated payment is concerned, similar issue has been decided by this Court in W.P. No. 27680 of 2015 wherein this Court on consideration of the affidavit filed by the 8/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 Respondents and taking into account the financial constraints of the Respondents had directed the Respondents to pay the amount due towards interest within a period of 12 months in 12 equal monthly instalments.
13. Taking into account the above order of this Court in W.P.No.27680 of 2015, I am inclined to direct the Respondents to pay any/ all sums due towards supply of electricity under the PPA within 6 months in 6 equal instalments starting from 15.09.2022 and insofar interest is concerned the same shall be worked out and shall be paid in 6 equal monthly instalments, the first of such monthly instalment being on 15.09.2022.
14.1. This Court finds that insofar as deduction towards penalty for alleged short supply which was a result of the failure on the part of the Respondents to make payments within the agreed/ prescribed period in terms of the contract is concerned, the issue stands covered by the order of the APTEL in Appeal No.181 of 2013 dated 11.07.2014 wherein after placing reliance on the judgment of the Hon'ble Supreme Court in the case of Sikkim Subbha Associates vs. State of Sikkim reported in (2001) 5 SCC 629 , it was held that the agreement is such that its fulfilment depends upon the mutual performance of reciprocal promise constituting the consideration for one 9/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 another. The party who fails to perform his part of the promise viz., the 1st Respondent herein cannot insist the performance of the other party i.e., the petitioner, nor claim damages for non-compliance by the other party. In this regard, it may be useful to refer to the following portions of the order:
"37. Hon'ble Supreme Court in (2001) 5 SCC 629 - Sikkim Subba Associates vs. State of Sikkim held as under:
"The agreement between the parties in this case is such that its fulfilment depends upon the mutual performance of reciprocal promises constituting the consideration for one another and the reciprocity envisaged and engrafted is such that one party who fails to perform his own reciprocal promise cannot assert a claim for performance of the other party and go to the extent of claiming even damages for non-performance by the other party. He who seeks equity must do equity and when the condonation or acceptance of belated performance was conditional upon the future good conduct and adherence to the promises of the defaulter, the so-called waiver cannot be considered to be forever and complete in itself so as to deprive the State, in this case, of its power to legitimately repudiate and refuse to perform its part on the admitted fact that the default of the appellants continued till even the passing of the award in this case. So far as the defaults and consequent entitlement or right of the State to have had the lotteries either foreclosed or stopped further, the State in order to safeguard its own stakes and reputation has continued the operation of lotteries even undergoing the miseries arising out of the persistent defaults of the appellants. The same cannot be availed of by the appellants or used as a ground by the arbitrator to claim any immunity permanently for being pardoned, condoned and waived of their subsequent recurring and persistent defaults so as to deny or denude forever the power of the State as the other party to the contract to put an end to the agreement and thereby relieve themselves of the misfortunes they were made to suffer due to such defaults. Once the appellants failed to deposit the prize money in advance within the stipulated time, the time being of the essence since the prizes announced after the draw have to be paid from out of only the prize money deposited, the State was well within its rights to repudiate not only due to continuing wrongs or defaults but taking into account the past conduct and violations also despite the fact that those draws have been completed by declaration or disbursement of prize amounts by the State from out of its own funds. The conclusion to the contrary that the State has committed breach of the contract is nothing but sheer perversity and contradiction in terms."
38. The above findings will be applicable in the present case too where TANGEDCO prevented the Appellant to fulfill its 10/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 commitment to maintain the scheduled supply of power by not meeting its obligation under the EPA by not making any payment for several months due to which the Appellant could not arrange fuel for sustained operation of the power plant. TANGEDCO did not care to respond to the repeated letters by the Appellant in this regard and their offer to make up supply from the alternate source of generating stations of their group companies. Whenever the payment was made by TANGEDCO at its own whims and fancy, the surcharge for delayed payment as per the EPA was not made. Even after the impugned order dated 04.06.2013 directing the Appellant to pay delayed payment surcharge, the same has not been paid as yet. TANGEDCO cannot claim compensation for short supply when TANGEDCO itself was responsible for creating circumstances for the Appellant for not being able to make the contracted supply." 14.2. To sum up, this Court issues the following directions:
i) Respondents shall pay any/ all the sums due towards supply of electricity under the PPA within a period of 6 months in 6 equal monthly instalments, the first of such monthly instalment being on 15.09.2022.
ii) Insofar as interest towards the above sum is concerned, the same shall be paid within a period of 6 months in 6 equal monthly instalments, the first of such monthly instalment being on 15.09.2022.
iii) The levy of penalty and any deduction towards the same is unsustainable therefore, it is made clear that any amount deducted towards 11/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 the said penalty shall be adjusted towards future Current Consumption bills of the petitioner.
15. With the above directions, the writ petition stands disposed of. No Costs. Consequently, connected miscellaneous petitions are closed.
16.08.2022 Speaking (or) Non Speaking Order Index : Yes/ No mka 12/14 https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 To:
1.The Chairman & Managing Director, Tamil Nadu Generation and Distribution Company Limited, 144, Anna Salai, Chennai-600 002.
2.The Superintending Engineer, Nagapattinam Electricity Distribution Circle, Nagapattinam.
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https://www.mhc.tn.gov.in/judis W.P. No.7457 of 2015 MOHAMMED SHAFFIQ, J.
mka W.P. No.7457 of 2015 and M.P. Nos.1, 2 and 3 of 2015 16.08.2022 14/14 https://www.mhc.tn.gov.in/judis