Karnataka High Court
South West Hydro Power Private Limited vs Karnataka Electricity Regulatory ... on 15 April, 2024
Author: Hemant Chandangoudar
Bench: Hemant Chandangoudar
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WP No. 21755 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 15TH DAY OF APRIL, 2024
BEFORE
THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
WRIT PETITION NO. 21755 OF 2023 (GM-KEB)
BETWEEN:
SOUTH WEST HYDRO POWER PRIVATE LIMITED
A PRIVATE LIMITED COMPANY INCORPORATED
UNDER THE PRIVISIONS OF THE COMPANIES ACT 1956,
HAVING ITS REGISTERED OFFICE AT
UNIT NO 4806, 8TH FLOOR HIGH POINT 4
BASAVESWARA CIRCLE,
BENGALURU 560 001
ALSO AT NO 404, SRI NILAYA ENCLAVE,
AMEERPET, HYDERBAD 500 073
REPRESENTED BY ITS AUTHORIZED SIGNATORY
MR PRABHAKR REDDY
...PETITIONER
(BY SRI. SHRIDHAR PRABHU., ADVOCATE)
AND:
1. KARNATAKA ELECTRICITY REGULATORY COMMISSION
Digitally signed by B
(KERC), ESTABLISHED UNDER SECTION 19 OF THE
K
MAHENDRAKUMAR
KARNATAKA ELECTRICITY REFORMS ACT 1999 HAIVNG
Location: High ITS OFFICE AT, NO 16C-1, MILLER TANK BED AREA
Court of Karnataka
VASANTHNAGAR, BENGALURU 560 052
E mail: kerc-ka.nic.in
[REPRESENTED BY ITS CHAIRMAN]
2. GULBARGA ELECTRICITY SUPPLY COMPANY LIMITED
(GESCOM), A GOVERNMENT COMPANY
INCORPORATED UNDER THE PROVISIONS OF THE
COMPANIES ACT 1956,
HAVING ITS REGISTERED OFFICE AT
STATION ROAD, KALABURAGI 585 102
[REPRESENTED BY ITS MANAGING DIRECTOR]
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WP No. 21755 of 2023
3. KARNATAKA POWER TRANSMISSION CORPORATION
LIMITED (KPTCL)
A GOVERNMENT COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE COMPANIES ACT 1956,
HAVING ITS REGISTERED OFFICE AT
KAVERI BHAVAN K G ROAD,
BENGALURU 560 009
[REPRESENTED BY ITS MANAGING DIRECTOR]
4. STATE LOAD DISPATCH CENTRE
MANAGED BY, KARNATAKA POWER TRANSMISSION
CORPORATION LIMITED,
A BODY ESTABLISHED UNDER SECTION 31 OF THE
ELECTRICITY ACT 2003 SLDC,
RACECOURSE CROSS ROAD,
ANAND RAO CIRCLE, BENGALURU 560 009
[REPRESENTED BY ITS CHIEF ENGINEER]
5. BANGALORE ELECTRICITY SUPPLY COMAPNY LIMITED
(BESCOM) A GOVERNMENT COMPANY INCORPORATED
UNDER THE PROVISIONS OF THE COMPANIES ACT
1956, HAVING ITS REGISTERED OFFICE AT
K R CIRCLE, BENGALURU 560 001
[REPRESENTED BY ITS MANAGING DIRECTOR]
6. CHAMUNDESHWARI ELECTRICITY SUPPLY
CORPORATION (CESC)
A GOVERNMENT COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE COMPANIES ACT 1956
HAVING ITS REGISTERED OFFICE AT
NO 29, VIJAYANAGARA, 2ND STAGE, HINKAL
MYSURU 570 017
[REPRESENTED BY ITS MANAGING DIRECTOR]
...RESPONDENTS
(BY SRI. B N PRAKASH, ADVOCATE FOR R1;
SRI. S SRIRANGA, SENIOR COUNSEL FOR
SMT. SUMANA NAGANANDA, ADVOCATE FOR R2 TO R4;
SRI. SHAHBAZ HUSSAIN, ADVOCATE FOR R5 & R6)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED
ORDER DATED 04TH JANUARY 2023, PASSED BY THE R1
KARNATAKA ELECTRICITY REGULATORY COMMISSION, IN
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WP No. 21755 of 2023
OP.NO.38/2021, AT ANNEXURE-A, TO THE EXTENT OF REFUSAL
OF THE R1 KARNATAKA ELECTRICITY REGULATORY COMMISSION
TO GRANT FURTHER RELIEFS SOUGHT IN THAT PROCEEDINGS
BY THE PETITIONER, CONSEQUENTLY AND ETC.
THIS PETITION, COMING ON FOR FURTHER DICTATION,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner entered into a power purchase agreement ("the PPA" or "the Agreement") on 18.11.2010 with respondent No.2 for the sale of power, initiating the agreement for a valid period of 20 years, extendable by another period of 10 years. During the subsistence of the PPA, the petitioner issued a notice calling upon the second respondent to pay the dues, failing which the PPA would stand terminated automatically, in terms of the agreement. With the second respondent not issuing a reply, the petitioner was compelled to issue a notice dated 07.07.2020, terminating the PPA for non-payment of dues and also for not opening the letter of credit as provided in the agreement.
2. In response to the termination notice, the second respondent issued a communication dated 31.07.2020, calling upon the petitioner to withdraw the default notice under Article-9.2.2 of the PPA and the termination notice issued on 07.07.2020, as there were no dues from the GULBARGA ELECTRICITY SUPPLY COMPANY LIMITED ("the GESCOM") and also to open the letter of credit in favor of the petitioner. The second respondent, disputing the termination of the PPA, prompted the petitioner to approach the KARNATAKA ELECTRICITY REGULATORY COMMISSION (for short "the KERC") under Section 86(1) (f) of the Karnataka Electricity Act, 2003. Before the KERC, the second respondent specifically contended that since the PPA had not been terminated as claimed, it continued to remain in force, and -4- NC: 2024:KHC:15139 WP No. 21755 of 2023 therefore, the petitioner could not approach the fourth respondent to enter into a wheeling and banking agreement as per the open access regulation.
3. The KERC framed two issues: firstly, whether the petitioner has made out a prima facie case for the grant of open access for the sale of energy to the third parties/third respondent as Hydel Project; and secondly, if the energy transmitted to the grid from July 2021 should be treated as banked energy as claimed by the petitioner.
4. Point No.1 was answered affirmatively, and point No.2 was answered in the negative, stating that the power injected into the grid after the termination of the Agreement cannot be considered banked energy. Taking exception to this, the present petition is preferred.
5. The learned counsel for the petitioner submits that the GESCOM, by disputing the termination of the agreement, compelled the petitioner to inject energy into the grid. With the energy injected into the grid being recorded through a joint meter reading in Form-B, the GESCOM cannot absolve itself of liability to pay the tariff for the energy injected into the grid from the date of termination of the Agreement until the grant of open access. He further submits that since there was no dispute regarding injecting power into the grid, the present petition filed without exhausting the alternative remedy of appeal provided under Section 111 of the Electricity Act, 2003, is maintainable.
6. Per contra, Mr. S. Sriranga, learned senior counsel representing the learned counsel for respondent No.2 submits that though there is no recording of the energy injected by the petitioner into the grid, the energy injected by the petitioner has not been utilized by the GESCOM. The quantum of energy consumed by a particular distribution -5- NC: 2024:KHC:15139 WP No. 21755 of 2023 licensee can only be ascertained through energy accounting done by the STATE LOAD DESPATCH CENTRE ("the SLDC") in accordance with the contract entered into between the Generator and the Licensee or the Open Access consumer.
7. He further submits that against the order passed by the KERC declining to grant the tariff for the energy injected for the above said period, there is a remedy of appeal under Section 111 of the Electricity Act, 2003. Therefore, without exhausting the alternative remedy of appeal, the same is not maintainable.
8. He further argues that Regulation 4A of the KERC (Terms & Conditions for Open Access) Regulations, 2004 states that no generating company shall be entitled to Open Access for the capacity (quantum of power) during the subsistence of a PPA.
9. I have considered the submissions of the learned counsel for the parties.
10. Article 9 of the PPA deals with Terms, Termination, and Default. Article 9.2.1 states that the occurrence of any of the following events at any time during the term of this Agreement shall constitute an 'event of default' by the Company; Article 9.2.2 states that the occurrence of any of the following events at any time during the Term of this Agreement shall constitute an 'event of default' by the Corporation. Sub-clause (2) of Article 9.2.2 states that in the event of any payment default by the GESCOM for a continuous period of three months, the Company shall be permitted to sell electricity to third parties by entering into a wheeling and banking Agreement with the GESCOM, for which it shall pay transmission and other charges to the GESCOM at the rates applicable from time to time and as approved by the Commission.
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11. Article 9.3 deals with Termination, and Article 9.3.1 states that upon the occurrence of an event of default as set out in sub-clause 9.3.1 above, the GESCOM may deliver a default notice to the Company in writing, which shall specify in reasonable detail the 'event of default' giving rise to the default notice and calling upon the Company to remedy the same. After the expiry of 90 days from the delivery of the default notice and unless the parties have agreed otherwise, or the 'event of default' giving rise to the default notice has been remedied, the GESCOM may deliver a termination notice to the Company and intimate the same to the Commission. Upon the delivery of the Termination Notice, the Agreement shall stand terminated, and the GESCOM shall stand discharged of all its obligations.
12. The petitioner herein asserts that the GESCOM has not paid tariffs for a continued period of 4 months and hence issued default notices dated 7th April 2020 and 4th May 2020 in terms of Article 9.2.2. In turn, since the GESCOM did not remedy the default notices, the petitioner issued a termination notice dated 7th July 2020 invoking Article 9.3.2 of the Agreement dated 18th November 2020 for default in non- payment of tariffs for a period of 4 months as contemplated under Article 9.3.2.
13. The GESCOM, in turn, issued a communication dated 31st July 2020 stating that there are no dues payable to the petitioner and called upon the petitioner to withdraw the default notices under Article 9.2.2 of the PPA, as well as the termination notice issued on 07.07.2020.
14. The GESCOM, having disputed the Termination of the agreement, prompted the petitioner to approach the KERC under Section 86(1)(f) of the Electricity Act, 2003. The KERC declared the termination -7- NC: 2024:KHC:15139 WP No. 21755 of 2023 of the agreement dated 18.11.2010 to be lawful but, however, declined any reliefs in terms of deeming the energy generated from July 2021 as banked energy, by giving necessary credits for the same and allowing the energy to be wheeled to the intended installations as per the wheeling and banking agreement to be executed.
15. Admittedly, the GESCOM, which had contended that there is no termination of the contract, prompted the petitioner to inject power into the grid and also recorded the energy injected by the petitioner into the grid through a joint meter reading in Form-B.
16. The GESCOM issued a communication dated 20.01.2021, calling upon the petitioner not to inject energy into the grid of the GESCOM, since the PPA has been terminated as per the letter dated 07.07.2020 and also since the termination of the PPA was not withdrawn by the petitioner.
17. Before the KERC, the GESCOM disputed that the termination notice dated 07.07.2020 issued by the petitioner is illegal and the Agreement, having not been terminated in a manner contemplated, continues to remain in force. The averments made in the petition that despite the receipt of default notices, the GESCOM failed to rectify the default, are untenable and denied.
18. The GESCOM, by taking the contention that the PPA was in force and by prompting the petitioner to inject power into the grid, as well as recording the power injected into the grid through a joint meter reading in Form-B, cannot now escape liability to account for the banked energy injected into the grid from July 2021 until the date of the order -8- NC: 2024:KHC:15139 WP No. 21755 of 2023 passed by the KERC declaring that the termination of the agreement was lawful.
Regarding Maintainability:
19. Section 86(1)(f) of the Electricity Act provides the remedy for the adjudication of disputes between the licensees and the generating companies by the State Electricity Companies, i.e., the KERC. The dispute between the Petitioner and the GESCOM is with regard to crediting banked energy injected into the grid from the date of termination of the PPA until the order passed by the KERC declaring that the termination of the Agreement was valid.
20. The quantum of power injected into the grid was recorded by the KPTCL and GESCOM in the presence of the petitioner through a joint meter reading in Form-B.
21. Once it is established that the Petitioner has injected the power which has been recorded and the quantity of the power injected is also not disputed (as recorded in Form-B), the petitioner cannot be relegated to file an appeal before the Appellate Authority under Section 111 of the Electricity Act, 2003.
22. In the absence of any undisputed question of fact involved in this petition, the present petition filed without availing the alternative remedy of appeal under Section 111 of the Electricity Act, 2003, is held to be maintainable.
23. Accordingly, I pass the following:
ORDER
i) The writ petition is allowed. -9-
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ii) Respondent Nos.2, 3 and 4 are hereby directed to deem the energy generated by the Petitioner from July, 2021 as 'banked energy' by giving necessary credits for the same and allow the energy to be wheeled to the intended installations, as per the Wheeling and Banking Agreement to be executed.
iii) The said exercise shall be completed within the period of three months from the date of receipt of a certified copy of this order.
Sd/-
JUDGE HR