Karnataka High Court
Shree Renuka Sugars Ltd vs Mangalore Electricity Supply on 1 August, 2022
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 1st DAY OF AUGUST, 2022
BEFORE
THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION No.5990 OF 2018 (GM-KEB)
BETWEEN:
SHREE RENUKA SUGARS LTD.,
(A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956)
HAVING ITS REGISTERED OFFICE SITUATED
AT B.C. NO. 105, HAVELOCK ROAD
CAMP BELGAVI - 590 001
HAVING ITS ADMINISTRATIVE OFFICE AT
NO.7 (OLD NO. 24)
" SUNANAJAYA", I & II FLOOR
1ST CROSS, KUMARA COT ROAD
BEHIND HOTEL JANARDHANA
BENGALURU - 560 001.
REPRESENTED BY
SHRI. VINAYAK PURANIK.
...PETITIONER
(BY SRI. P.N.MANMOHAN, ADVOCATE)
AND:
1. MANGALORE ELECTRICITY SUPPLY
COMPANY LTD., (MESCOM)
CORPORATE OFFICE, 4TH FLOOR
MESCOM BHAVAN, BEJAL
KAVOOR CROSS, ROAD
MANGALURU - 575 005
BY SUPERINTENDING ENGINEER(ELE).
2. POWER COMPANY OF KARNATAKA LTD.,( PCKL)
(GOVERNMENT OF KARNATAKA UNDERTAKING)
ROOM NO. 501, 5TH FLOOR
KPTCL BUILDING, KAVERI BHAVAN
BENGALURU - 560 009
BY ADDITIONAL DIRECTOR(PROJECTS)
...RESPONDENTS
(BY SRI. S.SRIRANGA, SENIOR COUNSEL FOR SMT.SUMANA
NAGANAND, ADV. FOR R1 & R2)
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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER
DATED: 28.09.2017 PASSED BY THE R-1 VIDE ANNEX-N AND
ETC.,
THIS W.P. IS BEING HEARD AND RESERVED ON
03.06.2022, COMING ON FOR PRONOUNCEMENT OF ORDERS
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
In this petition, petitioner seeks quashing of the impugned order / communication at Annexure-M dated 01.09.2016 issued by the 2nd respondent as well as the impugned order / communication at Annexure-N dated 28.09.2017 issued by the 1st respondent-MESCOM and for a consequential direction to the 1st respondent to release a sum of Rs. 64,68,524/- together with interest @ 9% p.a. from the date of the petition till realisation and for other reliefs.
2. Brief facts leading to the case are as follows:-
The petitioner contends that on 21.08.2015, the 2nd respondent - Power Company of Karnataka Ltd., (for short 'PCKL') issued a letter of intent communicating approval on behalf of the distribution companies of Karnataka for procurement of RTC Firm power from M/s.JSW Power 3 Trading Company Ltd., (for short 'JSW PTCL') from the generating companies mentioned in the said letter of intent which included the petitioner also. The said letter of intent stipulated that Power Purchase Agreement (for short 'the PPA') would have to be executed and supply of power had to be commenced as indicated in the said letter.
2.1 On 20.07.2015, the petitioner addressed a communication to JSW PTCL stating that it would supply power for the period from 01.12.2015 to 31.05.2016.
Subsequently, the 1st respondent - MESCOM and other ESCOMs entered into the PPA dated 25.08.2015 with JSW PTCL for the purpose of supply of power for the period from 01.12.2015 to 31.05.2016. It is however relevant to state that the petitioner did not enter into any PPA either with 1st respondent - MESCOM or 2nd respondent - PCKL for the purpose of supply of power and the only Agreement / Understanding that existed was between the petitioner and JSW PTCL and not between the petitioner and / or respondents 1 and 2 herein between whom, there was no agreement or contract entered into for the purpose of supply of power by the petitioner.
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2.2 On 16.09.2015, the State Government exercised its power under Section 11 of the Electricity Act, 2003 and directed all electricity generators including the petitioner herein to supply energy by fixing the Tariff for the same and passed a G.O. in this regard. Pursuant thereto, the KPTCL addressed a communication dated 18.09.2015 to the petitioner calling upon it to inject all the exportable power to the Karnataka State Grid as per the aforesaid G.O. dated 16.09.2015, pursuant to which, the petitioner started injecting power as directed by the KPTCL.
2.3 Petitioner contends that on account of the drought situation in the State, its sugar factories were severely affected and the Cauvery Niravari Nigam addressed a communication dated 21.01.2016 directing the petitioner not to draw water from the river by using pump sets. Subsequently, on 02.03.2016, the JSW PTCL issued a letter to the 2nd respondent - PCKL intimating it that on account of acute water shortage and restriction imposed by the State Government on lifting of water from rivers for industrial use, the generation of power from the petitioner's plants had been severely affected and was unable to 5 supply full power, in the light of existence of force majeure conditions in the PPA at Clause Nos.7.1 and 7.2, JSW PTCL had arranged power from an alternate source i.e., M/s.Thermal Power Tech Corporation India Ltd. At the request of PCKL, petitioner also issued a letter at Annexure-H dated 04.03.2016 that they would make maximum effort to supply power.
2.4 On 21.03.2016, the 2nd respondent - PCKL accepted and approved the said request made by JSW PTCL for supply of power from an alternative source i.e., M/s.Thermal Power Tech Corporation India Ltd. by quoting clause 5.1.4 of the PPA entered into between it and JSW PTCL. The said approval by PCKL was acknowledged by the petitioner by addressing a communication dated 24.03.2016 to PCKL. Subsequently, petitioner addressed one more communication dated 13.06.2016 to PCKL requesting it to direct all the ESCOMs to refund the compensation deducted from March, 2016 payment at the earliest.
2.5 Petitioner contends that despite the aforesaid facts and circumstances, the 2nd respondent - PCKL 6 addressed a communication dated 01.09.2016 calling upon all ESCOMs to disallow the energy supplied from the original source under Section 11 on the ground that the generating companies have misused the available provisions under the contractual agreements and thereby committed a breach of trust. Pursuant to the impugned communication dated 01.09.2016, the 1st respondent - MESCOM has proceeded to pass the impugned order / communication dated 28.09.2017 intimating the petitioner that a sum of Rs.57,57,158/- already paid to it would be adjusted in the next power purchase bill. Aggrieved by the impugned communications / orders dated 01.09.2016 and 28.09.2017, the petitioner is before this Court by way of the present petition.
3. The respondents 1 and 2 have filed separate statement of objections seeking dismissal of the petitioner inter alia contending that since the petitioner is a power generating company and the 1st respondent is a deemed licencee, in view of availability of equally efficacious and alternative remedy of approaching the Karnataka Electricity 7 Regulatory Commission (for short 'KERC') under Section 86(1)(f) of the Electricity Act, the petition was not maintainable. It is contended that the petitioner is one of the generators who is mentioned in the PPA between JSW PTCL and the ESCOMs and as such, there was a contractual obligation on the part of the petitioner to supply energy between 01.12.2015 and 31.05.2016 under the PPA.
3.1 It is further contended that the petitioner committed a breach of its contractual obligation and also breach of trust by supplying power under the G.O. under Section 11 dated 16.09.2015 and supplying of power by the petitioner only as per the said G.O. and not in terms of the PPA was only a ploy to wriggle out of its contractual obligation and as such, the respondents have treated the power supply by the petitioner to be a supply under the PPA and not pursuant to Section 11 G.O. and deducted excess payment made in favour of the petitioner. It is also contended that Section 11 G.O. does not apply to generators having valid PPAs and in view of the PPA between respondents and JSW PTCL, Section 11 G.O. 8 does not apply to the petitioner whose power supply cannot be construed as having been supplied under the said order. It is also contended that under these circumstances, respondents have rightly deducted the amount paid to the petitioner and have passed the impugned orders, which do not warrant interference by this Court in the present petition which is devoid of merit and liable to be dismissed.
4. Heard Sri.P.N.Manmohan, learned counsel for the petitioner and Sri.S.Sriranga, learned Senior counsel appearing for the respondents and perused the material on record.
5. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner submits that the impugned communication / order at Annexure-M dated 01.09.2016 issued by the 2nd respondent to all the ESCOMs, pursuant to which, the 1st respondent - MESCOM issued the impugned communication / order at Annexure-N dated 28.09.2017 to the petitioner are illegal, 9 arbitrary and contrary to law as well as the material on record and the same deserve to be quashed.
5.1 It is submitted that so long as the petitioner was not a party to the PPA dated 25.08.2015 executed between JSW PTCL and 1st respondent - MESCOM, no contractual breach, liability or default can be attributed or invoked against the petitioner. It is also submitted that the respondents did not have jurisdiction or authority of law to pass the impugned orders and the availability of other remedies will not render the petition not maintainable in law.
5.2 It is further submitted that the conduct of the respondents in permitting supply of power by JSW PTCL from an alternative source viz., M/s.Thermal Tech Ltd., in view of the inability of the petitioner to supply energy on account of the State Government directions due to drought also indicates that the respondents are estopped from contending to the contrary and accordingly, the present petition deserves to be allowed. In support of his contentions, learned counsel for the petitioner has placed reliance upon the following judgments:-
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(i) ABL International vs. Exports Credit Guarantee Corporation - (2004) 3 SCC 553;
(ii) Kumari Srilekha Vidyarthi vs. State of U.P. - (1991) 1 SCC 212;
(iii) Zonal Manager vs. Devi Ispat Limited - (2010) 11 SCC 186;
(iv) Uttar Pradesh PTCL vs. CG Power -
(2021) SCC Online SC 383 and
(v) Alok Shankar Pandey vs. Union of India - (2007) 3 SCC 545.
6. Per contra, learned Senior counsel for the respondents in addition to reiterating the various contentions urged in the statement of objections and referring to the material on record, submits that the petition is not maintainable in view of not only the equally efficacious and alternative remedy provided under Section 86(1)(f) of the Electricity Act, 2003, but also in view of the arbitration clause at Article 8.3 of the PPA, the petition is liable to be dismissed. It is contended that the petitioner, though not a signatory to the PPA, is a privy to the same and there was privity of contract between the petitioner and respondents and the contention of the petitioner in this regard is liable to be rejected.
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6.1 It is further submitted that electricity is "goods" and there is a breach of warranty committed by the petitioner in not supplying electricity, pursuant to which, the respondents were entitled to claim damages under the Sales of Goods Act, 1930. It is further submitted that the 2nd respondent - PCKL did not accord permission to the petitioner to supply power under Section 11 G.O. during the term of PPA and the said supply made by the petitioner cannot be linked with the liability / obligation of the petitioner to supply power in terms of the PPA. It is therefore contended that there is no merit in the petition and the same is liable to be dismissed. In support of his contentions, learned Senior counsel for the respondents has placed reliance upon the following judgments:-
(i) Gujarat Urja Vikas Nigam vs. Amit Gupta - (2021) 7 SCC 209;
(ii) Hassan Thermal Power Pvt. Ltd., vs. State of Karnataka - ILR 2019 KAR 5126;
(iii) Padma Sundara Rao vs. State of Tamilnadu - (2002) 3 SCC 533;
(iv) KPTCL vs. KERC and others -
W.P.No.19663/2021 dated 10.12.2021;
(v) Cox and Kings Ltd., vs. SAP India -
2022 SCC Online SC 570;
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(vi) Utair Aviation vs. Jagson Airlines Ltd., - (2012) 129 DRJ 630;
(vii) Narayani Devi vs. Tagore Commercial Corporation - AIR 1973 CAL 401;
(viii) CST vs. MPEB - (1969) 1 SCC 200;
and
(ix) Svenska Handelsbanken vs. Indian Charge Crome - (1994) 1 SCC 502;
7. I have given my anxious consideration to the rival submissions and perused the material on record.
8. In my considered opinion, the impugned orders passed by the respondents are illegal, arbitrary and without jurisdiction or authority of law and the same deserve to be quashed for the following reasons:-
(i) The material on record discloses that undisputedly the petitioner is not a party to the PPA dated 25.08.2015 entered into between the JSW PTCL and the 1st respondent - MESCOM; none of the clauses / covenants of the said PPA even refer to the petitioner herein, much less create any right in favour of MESCOM nor any corresponding obligation upon the petitioner; so also, no breach or default committed by the petitioner is even 13 referred to in the said PPA which is only between 1st respondent - MESCOM who is referred to as procurer No.2 and JSW PTCL who is referred to as the seller; it is also relevant to state that the expression "seller" has been defined as the successful bidder, who shall supply power to the procurer (MESCOM) and shall include only successors and permitted assigns of JSW PTCL and the petitioner herein is clearly neither a successor nor a permitted assign / assignee from JSW PTCL. Under these circumstances, in the absence of the terms and conditions of the PPA entered into only between JSW PTCL and 1st respondent -
MESCOM, to which, petitioner is not a party nor referred to, it cannot be said that the petitioner has committed any breach of the terms and conditions of the said PPA by not supplying power in terms of the said PPA and consequently, the impugned orders which proceed on the basis that the petitioner has committed breach of the terms and conditions of the PPA are illegal and contrary to the PPA and the same deserve to be quashed.
(ii) A perusal of the PPA will also indicate that Schedule - 1 and Schedule - 2 merely refer to the 14 petitioner and other power generators as being generation sources and the allocation is as per the State Government orders. Apart from this, there is no other reference to the petitioner and consequently, in the absence of any term or condition in the contract in the PPA which casts any obligation or duty upon the petitioner, who was undisputedly not a party to the same, the respondents were not entitled to pass the impugned orders on the erroneous premise that the petitioner has committed the breach of the terms and conditions of the PPA.
(iii) The PPA also clearly indicates that all duties and obligations are entirely cast and fastened upon the seller i.e., JSW PTCL and not on anybody else connected or related to it; the primary duty of supplying electricity is on JSW PTCL and the petitioner and the other generators are merely generation sources from whom JSW PTCL procures electricity for the purpose of fulfilling its duties and obligations under the PPA. Under these circumstances, in the absence of any express or implied duty or obligation cast upon the petitioner to supply electricity qua 1st respondent or 2nd respondent and in the absence of any 15 contractual obligation or liability between them, the impugned orders which proceed on the erroneous basis that the petitioner is guilty of breach of contract deserve to be quashed; needless to state that the allegation of breach of trust is also completely misconceived and ill-founded and without any factual or legal basis and the same is also liable to be rejected.
(iv) A perusal of the impugned order at Annexure-M dated 01.09.2016 will clearly indicate that at paragraph-4 of the said order, the 2nd respondent - PCKL has come to the conclusion that supplying power by the generators pursuant to Section 11 G.O. and not in terms of the PPA, amounted to misrepresentation as well as breach of contract and breach of trust. In this context, it is relevant to state that apart from the fact that the said finding / observation does not bind or impact the petitioner who was not a party to the PPA and no obligation / liability can be cast upon it, the said finding / observation could not have been made the basis by 2nd respondent - PCKL to direct disallowing of the energy supplied by the petitioner under Section 11 G.O. and directing recovery of the said amount from the 16 petitioner @ Rs.5.08/- per unit for energy supplied by the petitioner under the said Section 11 G.O.; in other words, there is no nexus or connection or link whatsoever between the liability of the petitioner to supply electricity in terms of the mandatory directions issued under Section 11 G.O. by the State Government and non-supply of electricity by the petitioner to JSW PTCL in terms of the understanding exclusively between them. The only liability / duty / obligation on the part of the petitioner was only towards JSW PTCL and not towards either of the respondents and in the absence of any factual or legal relationship / link / nexus between the supply / non supply of electricity by the petitioner qua JSW PTCL and the supply by the petitioner pursuant to Section 11 G.O. passed by the State Government. Under these circumstances, merely because the petitioner supplied electricity as directed by Section 11 G.O. and did not supply electricity qua JSW PTCL, the said non-supply cannot be treated as a breach of contract or trust by the respondents, who are attempting to illegally connect and link both independent and mutually exclusive and distinct transactions for the purpose of passing the 17 impugned orders, which deserve to be quashed on this ground also.
(v) The impugned order at Annexure-M summarily directing disallowing of energy supplied by the petitioner, pursuant to Section 11 G.O. and recovery of the amount specified in the said G.O. is violative of principles of natural justice, in that the same is unreasoned, non-speaking and bereft of sufficient or valid reasons and the impugned order deserves to be quashed.
(vi) The material on record also discloses that pursuant to Section 11 G.O. dated 16.09.2015, the KPTCL has addressed a communication dated 18.09.2015 calling upon the petitioner to supply all exportable power to State Grid subject to the conditions mentioned in the G.O.; pursuant to the same, petitioner was constrained to supply the power generated by it to the Karnataka State Grid and after doing so, petitioner was not in a position to inject additional power as sought for by JSW PTCL in view of shortage of water due to drought. The inability on the part of the petitioner to generate additional power and the mandatory requirement imposed upon the petitioner to 18 inject all the power generated only to the State Grid as per Section 11 G.O. was due to circumstances beyond the control of the petitioner who cannot be fastened with the liability of not injecting power as sought for by the JSW PTCL and as such, the impugned order which does not take into account these facts and circumstances, deserve to be quashed.
(vii) A perusal of the material on record will also indicate that the JSW PTCL had addressed a communication dated 02.03.2016 indicating its inability to supply power which was accompanied by a Letter of Comfort dated 04.03.2016 written by the petitioner, whereby the PCKL was intimated that power would be supplied from an alternative source i.e., M/s. Thermal Power Tech Corporation India Ltd., instead of the petitioner herein. Having received the said letters, the 2nd respondent
- PCKL took note of Clause 5.1.4 of the PPA in order to accept and approve the said request of JSW PTCL by also accepting the non-supply by it on the ground of force majeure. Undisputedly, pursuant thereto, JSW PTCL started supplying power from the aforesaid alternative 19 source and consequently, having accepted the same without any protest or demur, the conduct of the respondents in passing the impugned orders is clearly barred by the principles of estoppel and acquiescence.
(viii) Clauses 7.1 and 7.2 of the PPA deal with force majeure events and duty of the parties to take steps and make efforts to litigate the force majeure events. Clause 10.11 contemplates that the liability of either party shall be limited to that explicitly provided in the agreement, which further provides that under no event, shall either party claim from one another any indirect or consequential loss or damages. Clause 10.2 also contemplates that the agreement was solely for the benefit of the parties and their respective successors and permitted assigns and shall not be construed or creating any duty or standard of care or any liability to any person not a party to the agreement. A conjoint reading of the terms and conditions of the PPA, in particular, the aforesaid clauses are sufficient to show that in the light of the undisputed fact that the petitioner is not a party to the PPA coupled with the impugned orders, which are clearly in the nature of indirect, consequential or remote 20 loss / damage said to have been caused to the respondents, the impugned orders fastening and casting liability upon the petitioner are clearly illegal, arbitrary and without jurisdiction or authority of law and the same deserve to be quashed.
(ix) Insofar as the contentions urged by the respondents with regard to maintainability of the petition due to availability of alternative remedy under Section 86(1)(f) of the Electricity Act and the arbitration clause in the PPA is concerned, as stated supra, so long as the petitioner is not a party to the PPA, which is limited and restricted to JSW PTCL and the 2nd respondent herein, the said remedies cannot be said to be available to the petitioner for the purpose of coming to the conclusion that the present petition was not maintainable. So also, the contention that though the petitioner is not a signatory to the arbitration agreement contained in the PPA, it can still be subject to arbitration in view of the judgments of the Apex Court is clearly misconceived and untenable, since there is no reference to the agreements / understanding between the petitioner and JSW PTCL in the PPA, to 21 which, the petitioner is not a party and the judgments of the Apex Court relied upon by the respondents are clearly distinguishable on facts and not applicable to the facts of the instant case.
(x) The contention of the respondents that though the petitioner was not a party to the PPA, the Letter of Comfort dated 04.03.2016 issued by the petitioner as well as the letter of authorisation dated 20.07.2015 issued by the petitioner to JSW PTCL makes the petitioner a privy to the PPA also cannot be accepted, since there is no agreement / contract / consensus between the three parties viz., petitioner, JSW PTCL and 2nd respondent - PCKL which makes the petitioner obligated or liable for any default or breach committed by it; as stated earlier, there is no breach or default committed by the petitioner of any of the terms of the PPA, to which it is not a party, which entitles the 2nd respondent - PCKL to take action against the petitioner, who does not have any legal or factual relationship of any type / kind qua 2nd respondent - PCKL; further, reliance placed on the judgments in this regard by the respondents is also misconceived having regard to the facts and 22 circumstances obtaining in the said cases, which were completely different from the facts and circumstances obtaining in the instant case and as such, even this contention of the respondents cannot be accepted.
(xi) Insofar as the contention urged by the respondents that there is a breach of warranty committed by the petitioner in not supplying electricity in terms of the PPA, thereby entitling the respondents to claim damages is concerned, as stated supra, in the absence of any breach / default committed by the petitioner qua respondents, much less any legally enforceable breach or default by the petitioner of the PPA, even this contention urged by the respondents cannot be accepted.
(xii) A perusal of the impugned communication / order at Annexure-N dated 28.09.2017 issued by the 1st respondent - MESCOM will indicate that it has directed deduction and adjustment of the amounts payable to the petitioner from the amounts payable towards the energy / power supplied by the petitioner, pursuant to Section 11 G.O. In this context, the aforesaid direction is said to have been issued solely on the request made by JSW PTCL who 23 are supposed to have stated that instead of deducting and adjusting the amounts payable to them, the same is to be done from out of the amounts payable to the petitioner. The impugned communication is clearly illegal and arbitrary, in as much as in the absence of any reference to any agreement / understanding between the petitioner and JSW
- PTCL qua 1st respondent - MESCOM and its right to deduct and adjust the amounts payable to petitioner from out of the amounts payable to JSW PTCL, it is clearly impermissible in law to issue the said directions in the impugned communication / order, which deserves to be quashed on this ground also.
9. In the result, I pass the following:-
ORDER
(i) Petition is hereby allowed.
(ii) The impugned orders/communication at Annexure-N dated 28.09.2017 passed / issued by 1st respondent-MESCOM as well as the impugned communication / order at Annexure-M dated 01.09.2016 24 issued / passed by 2nd respondent-PCKL insofar as the petitioner is concerned are hereby quashed.
(iii) The respondents are hereby directed to pay and release a sum of Rs.64,68,524/- together with interest @ 9% p.a. from the date of this petition till realisation in favour of the petitioner as expeditiously as possible and at any rate within a period of three months from the date of receipt of a copy of this order.
Sd/-
JUDGE Srl.