J. Sagar Associates (JSA) successfully represented Bajaj Energy Ltd. (BEL) before the Appellate Tribunal for Electricity (APTEL) in Appeals filed by Uttar Pradesh Power Corporation Ltd. (UPPCL) challenging Uttar Pradesh ERC’s Order. APTEL by its judgement passed on 06.08.2021 dismissed the Appeals and declared termination of PPAs by UPPCL was invalid and directed UPPCL to pay fixed charges to BEL alongwith carrying cost.
Brief Background
- In terms of the PPAs executed between BEL and UPPCL, BEL supplies 100% of the power generated from its thermal plants in Uttar Pradesh to UPPCL. The tariff for BEL’s Projects have been determined under Section 62 of the Electricity Act, 2003 by UPERC.
- In July 2017, UPPCL issued what was euphemistically called Exit Notice to BEL terminating the PPAs in view of the allegedly high power procurement cost from BEL’s Projects. Resultantly, UPPCL withheld payment of fixed charges to BEL till January 2018 – the period during which the PPAs were unilaterally stated to have been terminated by UPPCL.
- UPERC by its Order dated 03.01.2018 had held that UPPCL’s action of unilaterally terminating the PPA was invalid and BEL was entitled to payment of fixed charges. UPPCL challenged UPERC’s Order before APTEL in these batch Appeals.
APTEL’s judgment dated 06.08.2021
- APTEL by its Judgment passed on 06.08.2021 dismissed the Appeals filed by UPPCL with the following salient directions:-
- It was open to BEL to choose a remedy of its own choice out of several remedies available under the PPA as well as general laws. BEL was also entitled to specific performance of the PPA.
- UPPCL was not justified to terminate PPAs by taking recourse to supervening public interest, which does not authorize UPPCL to exit out of its contractual obligations. PPAs were never terminated, and BEL is entitled for the fixed charges continuously for the entire period it declared capacity in accordance with Regulations and PPA. UPPCL has no right to repudiate the PPAs by issuing “exit notices”.
- PPA is a sacrosanct document since it is approved by a regulatory authority created under a statute after parties sign and submit the same for approval. Therefore, even a slightest change or modification to the PPA cannot be done without Commissions approval. Hence it cannot be terminated without the prior approval of the State Commission.
- BEL’s PPAs were never terminated and existed in continuity. BEL is entitled to the fixed charges as claimed by BEL and denied by UPPCL during which the PPAs were unilaterally exited by UPPCL.
- BEL will be entitled for carrying cost till UPPCL had received the invoices and thereafter Late Payment Surcharge shall be payable in accordance with the provisions of PPAs and UPERC Tariff Regulations.
Significance/Impact
- The judgment is significant since it upholds the sanctity of PPAs executed between Procurers and IPPs under Section 62 of the Electricity Act. Procurers cannot terminate/exit the PPAs at will on the alleged pretext of power being expensive since the contractual obligations cast upon the Procurers in terms of the statutory PPA must be performed.
- APTEL has held that generators, whose tariffs are determined by the Central/ State Commissions under Section 62 are statutorily entitled for or liable for interest or carrying on the under or over recovered amount of tariff. Lots of judicial time is spent by the generators and judicial authorities on discussing the carrying cost in Section 62 PPAs, whereas the cardinal principle that arises is that where there is an under or over recovery of tariff, an interest payable or receivable, which being a statutory right, need not be prayed for and pleaded for.
BEL was represented by JSA team comprising Joint Managing Partner & Lead Partner – Amit Kapur, Partner – Akshat Jain, and Associate Raghav Malhotra.
Akshat specializes in handling sector specific commercial litigation and his primary focus area is regulatory proceedings before statutory authorities, tribunals and courts, commercial litigation, and Constitutional & Administrative law litigation with focus on energy sector.