# T.N. GENERATION & DISTBN. CORPN. LTD v. PPN POWER GEN. CO. PVT. LTD

- **Citation:** [2014] 4 S.C.R. 667
- **Court:** Supreme Court of India
- **Decided:** 2014-04-04
- **Case number:** Civil Appeal No. 4126 of 2013
- **Bench:** Surinder Singh Nijjar, A.K. SlKRI
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/t-n-generation-distbn-corpn-ltd-v-ppn-power-gen-co-pvt-ltd-29940
- **Pages:** 50

## Headnote

ELECTRIC/TY ACT, 2003:
A
B
s. 86 (1) (f) -- Discretion of State Commission either to c
adjudicate the dispute or to refer it to arbitration - Dispute
between parties with regard to accounting details, refund of
excess rebate etc. - State Commission exercising the
discretion to adjudicate the dispute - Held: It cannot be
accepted that since appellant had made a request for a 0
reference of dispute to arbitration, State Commission ought
to have made the reference - Appellant chose to contest the
claim of respondent on merits and filed written statement
before State Commission - Further, appellant participated in
the entire proceedings and invited the findings on ments -
E
Besides, applicability of Arbitration and Conciliation Act, 1996
and Arbitration Act, 1940 has been specifically excepted by
Article 16 (2) of the Power Purchase Agreement -
Commission is required to exercise its discretion reasonably
and not arbitrarily - In the instant case, State Commission
upon consideration of the entire matter has rightly exercised F
its discretion.
s.86 - Adjudication of dispute by State Commission -
Held: If the amount of invoice is disputed, the appellant is
obliged to make full payments of the invoice when due and G
then raise the dispute - Undoubtedly, early payment is
encouraged by offering rebate of 2.5% if paid within 5 days
of the date of the invoice -- Similarly, 1% rebate would be
available if the payment of the entire invoice is made within
667
H
668
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A
30 days - The rebate is in the form of incentive and is an
exception to the general rule requiring payment in full on due
date - Therefore, the appellant had no legal right to claim
rebate at the rate of 2. 5% not having paid the entire invoice
amount within 5 days - Similarly, the appellant would be
B
entitled to 1% rebate if payment is made within 30 days of
invoice - The findings of the Appellate Tribunal on this issue
do not call for any interference - As regard interest on late
payment, Appellate Tribunal has considered the entire matter
and has rightly come to the conclusion that interest is payable
c on compound rate basis in terms of Article 10.6 of the PPA.
DELA YILACHES:
Plea that claim of respondent was time baffed - Held:
Claim of respondents cannot be held to be time baffed -
D Principle of delay and /aches would not apply, by virtue of'the
adjustment of payments being made on FIFO (first in first out)
basis - Appellant was duly informed that the part payments
made would be adjusted by respondents under FIFO system
- It has been coffectly held that in such circumstances, s. 59
E of Contract Act would not be applicable - In any event,
Limitation Act is inapplicable to proceedings before State
Commission - There is no reason to interfere with the findings
recorded by Appellate Tribunal - Contract Act, 1872 - ss.
59,60 and 61 - Limitation Act, 1963.
F
ELECTRIC/TY ACT, 2003:
ss. 111 and 113 -- Appellate Tribunal for Electricity -
Appeal - Jurisdiction - Held: Appellate Tribunal exercises
jurisdiction over State Commission by way of a first appeal -
G Therefore, it is the bounden duty of Appellate Tribunal to
examine as to whether decisions rendered by State
Commission
suffer
from
vice
of
arbitrariness,
unreasonableness or perversity - It is a/ways open to Appellate
Tribunal to examine as to whether State Commission has
H exercised discretion with regard to referring the dispute to
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 669
GEN. CO. PVT. LTD.
arbitration, in accordance with well known norms for exercising
A
such discretion - In the instant case, Appellate Tribunal ought
not tc. have brushed aside the submissions of appellant with
the observation that State Commission having exercised its
discretion, the issue need not be investigated by Appellate
Tribunal - However, conclusions reached by Appellate
B
Tribunal, that jurisdiction has not been exercised by State
Commission arbitrarily, whimsically or against statutory
provi

## Text

_Characters 0–39,956 of 101,952. This is a partial read: ask again with offset=39956 for what follows._

[2014] 4 S.C.R. 667
T.N. GENERATION & DISTBN. CORPN. LTD.
V.
PPN POWER GEN. CO. PVT. LTD.
(Civil Appeal No. 4126 of 2013)
APRIL 04, 2014
[SURINDER SINGH NIJJAR AND A.K. SlKRI, JJ]
ELECTRIC/TY ACT, 2003:
A
B
s. 86 (1) (f) -- Discretion of State Commission either to c
adjudicate the dispute or to refer it to arbitration - Dispute
between parties with regard to accounting details, refund of
excess rebate etc. - State Commission exercising the
discretion to adjudicate the dispute - Held: It cannot be
accepted that since appellant had made a request for a 0
reference of dispute to arbitration, State Commission ought
to have made the reference - Appellant chose to contest the
claim of respondent on merits and filed written statement
before State Commission - Further, appellant participated in
the entire proceedings and invited the findings on ments -
E
Besides, applicability of Arbitration and Conciliation Act, 1996
and Arbitration Act, 1940 has been specifically excepted by
Article 16 (2) of the Power Purchase Agreement -
Commission is required to exercise its discretion reasonably
and not arbitrarily - In the instant case, State Commission
upon consideration of the entire matter has rightly exercised F
its discretion.
s.86 - Adjudication of dispute by State Commission -
Held: If the amount of invoice is disputed, the appellant is
obliged to make full payments of the invoice when due and G
then raise the dispute - Undoubtedly, early payment is
encouraged by offering rebate of 2.5% if paid within 5 days
of the date of the invoice -- Similarly, 1% rebate would be
available if the payment of the entire invoice is made within
667
H
668
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A
30 days - The rebate is in the form of incentive and is an
exception to the general rule requiring payment in full on due
date - Therefore, the appellant had no legal right to claim
rebate at the rate of 2. 5% not having paid the entire invoice
amount within 5 days - Similarly, the appellant would be
B
entitled to 1% rebate if payment is made within 30 days of
invoice - The findings of the Appellate Tribunal on this issue
do not call for any interference - As regard interest on late
payment, Appellate Tribunal has considered the entire matter
and has rightly come to the conclusion that interest is payable
c on compound rate basis in terms of Article 10.6 of the PPA.
DELA YILACHES:
Plea that claim of respondent was time baffed - Held:
Claim of respondents cannot be held to be time baffed -
D Principle of delay and /aches would not apply, by virtue of'the
adjustment of payments being made on FIFO (first in first out)
basis - Appellant was duly informed that the part payments
made would be adjusted by respondents under FIFO system
- It has been coffectly held that in such circumstances, s. 59
E of Contract Act would not be applicable - In any event,
Limitation Act is inapplicable to proceedings before State
Commission - There is no reason to interfere with the findings
recorded by Appellate Tribunal - Contract Act, 1872 - ss.
59,60 and 61 - Limitation Act, 1963.
F
ELECTRIC/TY ACT, 2003:
ss. 111 and 113 -- Appellate Tribunal for Electricity -
Appeal - Jurisdiction - Held: Appellate Tribunal exercises
jurisdiction over State Commission by way of a first appeal -
G Therefore, it is the bounden duty of Appellate Tribunal to
examine as to whether decisions rendered by State
Commission
suffer
from
vice
of
arbitrariness,
unreasonableness or perversity - It is a/ways open to Appellate
Tribunal to examine as to whether State Commission has
H exercised discretion with regard to referring the dispute to
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 669
GEN. CO. PVT. LTD.
arbitration, in accordance with well known norms for exercising
A
such discretion - In the instant case, Appellate Tribunal ought
not tc. have brushed aside the submissions of appellant with
the observation that State Commission having exercised its
discretion, the issue need not be investigated by Appellate
Tribunal - However, conclusions reached by Appellate
B
Tribunal, that jurisdiction has not been exercised by State
Commission arbitrarily, whimsically or against statutory
provisions does not call for any interference.
s. 125 - Appeal to Supreme Court - Scope of -- Held:
C
Under s.125 appeal lies in Supreme Court on any one or
more of the grounds specified in s.100 of the Code of Civil
Procedure, 1908 - Therefore, unless the Court is satisfied that
the findings of fact recorded by the State Commission are
perverse, irrational and based on no evidence, it would not
interfere.
D
ss. 84 - Appointment of Chairperson of State Commission
- States of Tamil Nadu - Held: State Commission in deciding
a /is between appellant and respondent, discharges judicial
functions and exercises judicial power of State - It exercises
E
judicial functions of far reaching effect - Therefore, it must
have essential trapping of the court - State Government ought
to have exercised its power under sub-s. (2) of s. 84 to appoint
one or more Judicial Members in State Commission - Till date
no judicial Member has been appointed in the Tamil Nadu
State Commission - Matter needs to be considered, with some
urgency - s. 84 enables the State Government to appoint any
person as the Chairperson from amongst persons who is, or
has been, a Judge of a High Court - It would be advisable for
State Government to exercise this enabling power.
The respondent, a generating company, entered into
F
G
a Power Purchase Agreement (PPA) with the appellant
and as per PPA started raising monthly invoices from
26.4.2001 for the electricity supplied by it to the appellant.
There arose dispute between the parties with regard to
H
670
SUPRE:ME COURT REPORTS
[2014] 4 S.C.R
A accounting details. The respondents issued a notice of
dispute resolution on 26.4.2007. Since the dispute was
not resolved, the respondent filed a petition i.e. D.R.P. No.
12 of 2009 before the T.N. Electricity Regulatory
Commission (the State Commission) seeking a direction
s to the appellant to make the payment. The State
Commission, by an order dated 17 .6.2011 allowed the
petition for refund of excess rebate availed by the
appellant contrary to the terms of PPA and also ordered
the respondent to redraw the monthly invoices. The
c Commission also held that it was competent to
adjudicate upon the dispute and that the limitation period
prescribed under the Limitation Act, 1963 was not
applicable to the proceedings. The appeal filed by the
appellant was dismissed by the Appellate Tribunal for
0 Electricity (Appellate Tribunal).
Dismissing the appeal, the Court
HELD: 1.1 The issues raised by the appellant with
regard to the constitution of the State Commission and
E its discretion to either adjudicate or refer a particular
dispute to arbitration is no longer res integra. This Court
has comprehensively addressed all the issues, on the
scope and ambit of s.86 in general and s. 86 (1) (f) in
particular of the Electricity Act, 2003. It cannot be
F accepted that since the appellant had made a request for
a reference of the dispute to arbitration, the State
Commission ought to have made the reference. It cannot
be accepted that the State Commission was dealing with
only a pure and simple money claim. The Appellate
G Tribunal in the impugned order has correctly culled out
the ratio of the judgment of this Court in Gujarat Urja*. It
is also correctly held that the appellant cannot dictate
that the State Commission ought to have referred the
dispute to arbitration. [Para 34] [699-B-F]
H
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER
671
GEN. CO. PVT. LTD.
*Gujarat Urja Vikas Nigam Ltd. Vs. Essar Power Ltd. 2008
A
(4) SCR 822 = (2008) 4 sec 755 - relied on.
1.2 The plea that the State Commission failed to
exercise its discretion by not making .a reference to
arbitration and the request made by the appellant, cannot
8
be countenanced in the particular facts of the case.
Having taken the plea that the matter ought to be referred
to arbitration, the appellant chose to contest the claim of
the respondent on merits and filed the written statement
before the State Commission. Not only this, the appellant
participated in the entire. proceedings and invited the
C
findings on merits. Therefore, the appellant cannot be
permitted to raise such a plea. Section 86(1) (f) specifically
confers jurisdiction on the State Commission to refer the
dispute. Undoubtedly, the Commission is required to
exercise its discretion reasonably and not arbitrarily. In
D
the instant case, the State Commission upon
consideration of the entire matter has exercised its
discretion. [Para 39 and 50] [701-G-H; 702-A; 708-A-C]
Svenska Handelsbanken vs. Indian Charge Chrome Ltd.
E
1994 (1) SCR 261 = 1994 (2) SCC 155 and Booz Allen &
Hamilton Inc. vs. SB/ Home Finance Ltd. 2011 (7) SCR 310
= 2011 (5) sec 532 - relied on.
1.3 Even if the reference had been made under Article
16 of the PPA, the applicability of the Arbitration and
Conciliation Act, 1996 and the Arbitration Act of 1940
have been specifically excepted under Article 16(2)(h).
Article 16 indeed provides for informal resolution of
disputes by way of arbitration. However, Article 16(2)
mandates that arbitration shall be conducted in
G
accordance with the ICC Rules. Under those rules, ICC
Court of arbitration is to make the appointment of Arbitral
Tribunal. It has been provided in Article 16.2(e) that the
seat of arbitration shall be in London. This fact alone
would make Part I of the Arbitration Act, 1996 inapplicable
F
H
672
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A to the arbitration proceedings. There is a further
provision that notwithstanding Article 17(8), the laws of
England shall govern the validity, interpretation,
construction, performance and the enforcement of the
provision contained in Article 16(2). Clearly then, the
B applicability of Arbitration Act, 1996 is totally ruled out by
the parties. Therefore, the appellant cannot claim the
benefit of s.43 of the Arbitration and Conciliation Act,
1996. [Para 52] [709-C-F; 711-C]
C
Bhatia International vs. Bulk Trading S.A. & Anr. 2002
(2) SCR 411 = 2002 (4) sec 105 - relied on .
D
. .
Bharat Aluminium Company vs. Kaisar Aluminium
Technical Services Inc 2012 (12) SCR 327 = 2012 (9) SCC
552 - referred to.
1.4 However, the Appellate Tribunal ought not to have
brushed aside the submissions of the appellant with the
observation that the State Commission having exercised
its discretion, the issue need not be investigated by the
E Appellate Tribunal. It would always be open to the
Appellate Tribunal to examine as to whether the State
Commission has exercised the discretion with regard to
the question whether the dispute ought to have been
referred to arbitration, in accordance with the well known
norms for exercising such discretion. The Appellate
F Tribunal exercises jurisdiction over the State Commission
by way of a First Appeal. Therefore, it is the bounden
duty of the Appellate Tribunal to examine as to whether
all the decisions rendered by the State Commission
suffer from the vice of arbitrariness, unreasonableness
G or perversity. This would be apart from examining as to
whether the State Commission has exercised powers in
accordance with the statutory provisions contained in
Electricity Act, 2003. However, the conclusions reached
by the Appellate Tribunal, that the jurisdiction has not
H been exercised by the State Commission arbitrarily,
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 67.3
GEN. CO. PVT. LTD.
whimsically or against the statutory provisions does not
A
call for any interference. [Para 39] [702-A-E]
2.1 The claim of the respondents cannot be held to
be time barred. On the facts of the case, the principle of
delay and laches would not apply, by virtue of the
adjustment of payments being made on FIFO (First in first
B
out) basis. The procedure adopted by the respondent, as
observed by the State Commission as well as by the
Appellate Tribunal, would be covered u/ss 60 and 61 of
the Contract Act. The Appellate Tribunal, upon a detailed
consideration of the correspondence between the parties,
C
has confirmed the findings of fact recorded by the State
Commission that the appellant had been only making part
payment of the invoices. It has been pointed out that the
payment of entire invoices was to be made each time
which was never adhered to by the appellant. Therefore,
D
the respondents were constrained to adopt FIFO method.
In any event, the Limitation Act is inapplicable to
proceeding before the State Commission. [Para 48] [706F-H; 707-A-B, D]
2.2 It cannot be said that the appellants have wrongly
E
adopted the system of FIFO for adjustment of the
payments made by the appellant. The State Commission
as well as the Appellate Tribunal having considered the
matter in detail, it would not be appropriate to re-examine
the issue in these proceedings. Under s.125 of the
Electricity Act, 2003, the appeal lies in the Supreme Court
on any one or more of the grounds specified in s.100 of
F
the Code of Civil Procedure, 1908. Therefore, unless the
Court is satisfied that the findings of fact recorded by the
State Commission are perverse, irrational and based on
G
no evidence, it would not interfere. The findings recorded
by the State Commission and Appellate Tribunal would
not give rise to a substantial question of law. In any event,
the appellant never refuted or rejected the practice
adopted by the respondent. Rather the appellant claimed
H
'
674
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A that it was under temporary financial strain and,
therefore, requested to make only part payment. The
invoices having been accepted in full, the appellant
unilaterally withheld some of the payments on the ground
that the claims were disputed. Under Article 10 of the
8 PPA, the appellant was required to make the payment for
the entire invoice and, thereafter, raise the dispute. The
appellant had been duly informed that the part payments
made would be adjusted by the respondents under the
FIFO system. It has been correctly held that in such
C circumstances, s.59 of the Contract Act would not be
applicable. There is no reason to interfere with the
conclusions reached by the Appellate Tribunal. [Para 53]
[711-C-H; 712-A]
2.3 The real dispute between the parties is on the
D question whether the appellant was entitled to avail 2.5%
rebate on part payment of the monthly invoices within 5
business days. It was a pre- condition under Article 10
that the payment of the monthly invoice had to be made
in full. In addressing the issue of rebate, the Appellate
E Tribunal has come to the conclusion that merely because
substantial payment had been made in relation to monthly
invoices, it would not entitle the appellant to claim the
rebate of 2.5% on the invoice amount. There is no reason
to interfere with the findings recorded by the Appellate
F Tribunal. [Para 54] [712-B-D]
2.4 Under Article 10.2(b) (i), the payments have to be
made in full for every invoice by due date. Under Article
10.2(e), the payment had to be made in full when due even
if the entire portion or a portion of the invoice is disputed.
G Thus, it would be evident that even if the amount of
invoice is disputed, the appellant is obliged to make full
payments of the invoice when due and then raise the
dispute. Undoubtedly, early payment is encouraged by
offering rebate of 2.5% if paid within 5 days of the date
H of the invoice. Similarly, 1% rebate would be available if
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 675
GEN. CO. PVT LTD.
the payment of the entire invoice is made within 30 days. A
The rebate is in the form of incentive and is an exception
to the general rule requiring payment in full on due date.
Therefore, the appellant had no legal right to claim rebate
at the rate of 2.5% not having paid the entire invoice
amount within 5 days. Similarly, the appellant would be B
entitled to 1% rebate if payment is made within 30 days
of the invoice. The findings of the Appellate Tribunal on
this issue do not call for any interference. [Para 54] [712D, G-H; 713-A-B]
.
2.5 It is true that reconciliation is to be done annually C
but the payment is to be made on monthly basis. It
cannot be said that any prejudice has been caused to the
appellant by the delayed submission of annual invoice by
the ·respondents. Pursuant to the directions issued by the
State Commission, the monthly invoice and annual D
invoice for the respective years have been redrawn as on
30th September each year. Therefore, the benefit of
interest has been given on such annual invoices. [Para
55] [713-D-F]
3.1 With regard to the issue raised about the interest
on late payment, the Appellate Tribunal has considered
the entire matter and has riahtly come to the conclusion
that interest is payable on compound rate basis in terms
of Article 10.6 of the PPA. [Para 55] [713-F]
Central Bank of India vs. Ravindra & Ors. 2001 (4)
Suppl. SCR 323 = 2002 (1) SCC 367; Indian Council of
Enviro-Legal Action vs. Union of India & Ors. 2011 (9) SCR
146 = 2011 (8) sec 161 - referred to ..
E
F
3.2 The late payment clause only captures the G
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 has been pointed out H
676
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A
that bankers of the respondents have applied quarterly
compounding or monthly compounding for cash credits
during different periods on the basis of RBI norms.
Article 10.6 of the PPA has followed the norms of the
bank. This cannot be said to be unfair as the same
B
principle would also apply to the appellants. [Para 57]
[715-E-G]
4.1 This Court emphasizes that adjudicatory
functions generally ought not to be conducted by the
State Commission in the absence of a Judicial Member.
C
Especially in relation to disputes which are not fairly
relative to tariff fixation or the advisory and
recommendatory functions of the Sta~ Commission. The
tribunal such as the State Commission in deciding a lis
between the appellant and the respondent, discharges
D judicial functions and exercises judicial power of State.
It exercises judicial functions of far reaching effect.
Therefore, it must have essential trapping of the court.
This can only be achieved by the presence of one or more
judicial members in the State Commission which is called
E
upon to decide complicated contractual or civil issues
which would normally have been decided by a civil court.
Not only the decisions of the State Commission have far
reaching consequences, they are final and binding
between the parties, subject, of course, to judicial review.
F
[Para 40 and 43] [702-E-F; 704-D-F]
Harinagar Sugar Mills Ltd. vs. Shyam Sundar
Jhunjhunwala 1962 (2) SCR 339 - relied on.
Kihoto Hof/oh an vs. Zachi/lhu 1992 (1) SCR 686 = (1992
G Supp. (2) SCC 651 - referred to.
4.2 Section 113 of the Act mandates that the
Chairman of the Appellate Tribunal shall be a person who
is or has been a Judge of the Supreme Court or the Chief
Justice of a High Court. This would clearly show that the
H
legislature was aware that the functions performed by the
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 677
GEN. CO. PVT. LTD.
State Commission as well as the Appellate Tribunal are
judicial in nature. Necessary provision has been made in
s. 113 to ensure that the Appellate Tribunal has the
'trapping of a court. This essential feature has not been
made mandatory uls 84 although provision has been
made in s.84(2) for appointment of any person as the
Chairperson from amongst persons who is or has been
A
B
a Judge of a High Court. Section 84(2) enables the State
Government to appoint any person as the Chairperson
from amongst persons who is, or has been, a Judge of a
High Court. Such appointment shall be made after c
consultation with the Chief Justice of the High Court. The
provision contained in s. 84 (2) is notwithstanding the
provision contained in s. 84 (1 ). Till date no judicial
Member has been appointed in the Tamil Nadu State
Commission. The matter needs to be considered, with
some urgency, by the appropriate State authorities. It
would be advisable for the State Government to exercise
D
the enabling power uls 84(2) to make appointment of a
person who is or has been a Judge of a High Court as
Chairperson of the State Commission. [para 44-46] (7040
F-G; 705-F-G, H; 706-A-D]
Union of India vs. R.Gandhi, President, Madras Bar
Association 2010 (6) SCR 857 = (2010 (11) SCC 1 ); Institute
of Chartered Accountants of India vs. LK.Ratna & Ors. 1986
(3) SCR 1048 = (1986) 4 SCC 537; Union Carbide
Corporation & Ors. vs. Union of India & Ors. 1991(1) Suppl.
SCR 251 = 1991 (4) SCC 584; Brahm Dutt vs. Union of India
2005 (2) SCC 431; S.P. Sampath Kumar vs. Union of India
& Ors. 1987 (1) SCR 435 = 1987 (1) sec 124; State of M.P.
vs. Bhailal Bhai & Ors. 1964 (6) SCR 261; Municipal
Corporation of greater Bombay vs. Bombay Tyres
International Ltd. & Ors. 1998 (4) SCC 100; Corporation Bank
& Anr. vs. Navin J. Shah 2000 (2) SCC 628; Consolidated
Engineering Enterprises Vs. Principal Secretary, Irrigation
Department & Ors. 2008(5) SCR 1108 = 2008 (7) SCC 169;
E
F
G
\
678
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A ·and Central Bank of India Vs. Ravindra & Ors. 2001 (4)
Suppl. SCR 323 = 2002 (1) sec 367 - cited.
Case Law Reference:
2008 (4) SCR 822
relied on ·
para 13
B
2010 (6) SCR 857
cited
para 20
1992 (1) SCR 686
referred to
para 20
1986 (3) SCR 1048
cited
para 20
c
1991 (1) Suppl. SCR 251
cited
para 20
2005 (2) sec 431
cited
para 20
1987 (1) SCR 435
cited
para 20
1964 (6) SCR 261
cited
para 22
D
1998 (4) sec 100
cited
para 22
2000 (2) sec 628
cited
para 22
1994 (1) SCR 261
relied on
Para 30
E
2011 (7) SCR 310
relied on
Para 30
2008 (5) SCR 1108
cited
Para 30
2001 (4) Suppl. SCR 323
cited
Para 30
1962 (2) SCR 339
relied on
para 42
F
2002 (2) SCR 411
relied on
para 52
2012 (12) SCR 327
referred to
para 52
2001 (4) Suppl. SCR 323
referred to
para 55
G
2011 (9) SCR 146
referred to
para 56
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4126 of 2013.
H
From the Judgment and Order dated 22.02.2013 of the
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 679
GEN. CO. PVT. LTD.
Appellate Tribunal for Electricity, New Delhi in Appeal No. 176
A
of2011.
Rohinton F. Nariman, Pravin H. Parekh, E.R. Kumar,
Vallinayagam, Faisal Sherwani, Utsav Trivedi, S. Lakshmi Iyer,
Vishal Prasad (for Parekh- & Co.) for the Appellant.
8
Harish N. Salve, Jayant Bhushan, Senthil Jagadeesan,
Rahul Balaji, Sony Bhatt, Govind Manoharan for the
Respondent.
The Judgment of the Court was delivered by
c
SURINDER SINGH NIJJAR, J. 1. This statutory appeal
under Section 125 of the Electricity Act, 2003 (hereinafter
referred to as the "Act") is directed against the final judgment
and order dated 22nd February, 2013 passed by the Appellate
Tribunal for Electricity (hereinafter referred to as "APTEL" or D
"Appellate Tribunal"), at New Delhi in Appeal No. 176 of 2011,
whereby it has dismissed the appeal preferred by the appellant
against the final judgment and order dated 17th June, 2011 of
Tamil Nadu Electricity Regulatory Commission (hereinafter
referred to as the "State Commission") in D.R.P. No. 12 of E
2009. The facts have been noticed in detail both by the State
Commission and the APTEL, therefore, we shall make a
reference only to the very essential facts necessary for deciding
this appeal.
2. The respondent, a generating company, has entered
into a Power Purchase Agreement (PPA) with the appellant on
F
3rd January, 1997 for the supply of the entire Electricity to be
generated by the respondent for a period of 30 years. The
respondent commenced commercial operations on 26th April,
G
2001. Under the PPA, the respondent has to submit an annual
invoice indicating the amounts owed under the Tariff. The
amounts receivable from the appellant for the previous year are
to be reconciled against the sum of monthly estimated payment
made by the appellant as soon as possible after the end of H
680
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A
each year. Accordingly, respondent started raising monthly
invoices from 26th April, 2001 for the Electricity supplied by it
to the appellant. According to the appellant, invoices of the
respondent inter alia included interest on debt sanctioned but
not disbursed, charges towards energy consumed at the
B
residential quarters at the generating station etc. The appellant
claims that substantial payments towards the monthly invoices
raised by the Respondent for every month were paid against
the admitted amount in the invoice. The disputed amount was
withheld. The respondent accepted the admitted amount paid
C
against each invoice without raising any dispute either with
respect to the disputed amount or the substantial payment
made by the appellant.
· 3. Government of India by Notification dated 30th March,
1992 incorporated a rebate scheme on the receivables. Under
D this scheme, the purchaser, i.e., appellant is entitled to a rebate
@ 2.5% if the payment is released within 5 days from the date
of invoice and @ 1 % if the payment is released within 30 days
from the date of invoice. Accordingly, while making the payment
of the admitted amount under each invoice, the appellant
E
deducted the 2.5% rebate, as payments were made within 5
days from the date of the receipt of the invoice. These payments
were accepted by the appellants. On the other hand,
respondent adjusted the amount received by it in the following
month against the unpaid amount of the previous month. The
F
balance was carried forward by the respondent. Since June,
2001, the appellant had been making payments as noticed
above, and the respondent had been adjusting the same on a
"FIFO" basis. The appellant claims that the monthly invoices
raised by the respondent were only estimated invoices. On the
G
other hand, the respondent claims that the appellant, from
inception only made adhoc payments periodically against the
monthly invoices raised. Therefore, each side is claiming that
the other did not provide any details with regard to the amounts
due and the amounts paid. It is also the claim of the respondent
H
that the appellant had unilaterally made several disallowances
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 681
GEN. CO. PVT. LTD. [SURINDER SINGH NIJJAR, J.]
without informing the respondent of the same.
A
4. It appears that both the parties were dissatisfied with
accounting details provided by the other. Ultimately, the
respondent issued a notice of dispute resolution on 26th April,
2007 and appointed its Vice President, Shri B. Sundaramurthy
8
as the representative. Continuous correspondence was
exchanged between the parties from August, 2007 to March,
2009. On 1st April, 2009, respondent sent a Notice to the
appellant in terms of Article 16 of the PPA claiming amounts
due/overdue from the appellant and interest on late payments.
C
The Notice gives a summary of claims of the respondent till 30th
March, 2009 other than towards specified taxes, which was
stated to be subjudice, and, therefore, not included therein. The
balance of amount payable, according to the respondent was
Rs.1, 787,272,534. The appellant in reply informed the
respondent on 16th April, 2009 that the matter was under
D
scrutiny and examination. Since, there was no response, the
respondent sent a reminder. Instead of making the payment of
the amounts claimed, the appellant issued letter dated 4/5th
May, 2009 claiming that according to its accounts, sum of
Rs.31.12 crores was due to the appellant. On 8th May, 2009,
E
the respondent requested the appellant "to provide the
particulars and details forming the basis of your claim before
15th May, 2009." The respondent also requested the appellant
to fix a meeting on or before 19th May, 2009 to discuss the
issues and resolve the same. A meeting took place on 19th
F
May, 2009 but the dispute was not resolved.
5. Since the dispute was not resolved, the respondent filed
the petition - D.R.P. No. 12 of 2009 before the State
commission, seeking a direction to the appellant to make a
G
payment of sum of Rs. 1,89,91,17,264 being a sum due as on
19th March, 2009, under the invoices raised under the PPA and
interest thereon in terms of Article 10.6 of the PPA from the
due date till the date of actual payment. After setting out the
details of the amounts due as narrated above, the respondent
H
682
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A claimed that, under Article 10.2{b) of the PPA. in the event of
any dispute as to all or any of the portion of an invoice, the
appellant was required to pay the full amount of the disputed
charges and thereafter serve a notice on the respondent
indicating the amount in dispute. The dispute is to be resolved
s under Article 16, which provides for informal resolution of
dispute. Firstly, under Article 16(1 ), by mutual discussions
through the designated representatives of the parties.
Secondly, in case the parties are unable to resolve the dispute
pursuant to Article 16.1, it is to be resolved through finally by
c arbitration in accordance with Article 16.2.
6. Under Article 16.2, the arbitration has to be conduced
in accordance with the rules of Conciliation and Arbitration of
International Chamber of Commerce (ICC), in effect on the date
of the agreement. The Arbitration Tribunal is to consist of three
D arbitrators, of whom each party should select one. The two
arbitrators appointed by the parties shall select the third
arbitrator, to act as the Chairman of the Tribunal. If the two
arbitrators appointed by the parties, fail to agree on a third
arbitrator, the ICC Court of Arbitration shall make the
E appointment. The arbitration shall be held in England. It is
further provided that notwithstanding Article 16.8, the laws of
England shall govern the validity, interpretation, construction,
performance and enforcement of the provisions contained in
Article 16.2. The arbitration proceedings shall be conducted
F and the award shall be rendered in English language. It is
further provided that the rights and obligations of the parties
shall remain in full force and effect pending the award in any
arbitration proceedings. The costs of the arbitration shall be
determined by the arbitral tribunal in accordance with the Rules.
G The arbitration clause specifically provides that the Indian
Arbitration Act (Act No. X(10) of 1940/The Arbitration and
Conciliation Act, 1996 shall not be applicable to this arbitration
provision, to any arbitration proceedings or award rendered or
any dispute or difference arising out of or in relation to the
H agreement. It is further provided that award rendered hereunder
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 683
GEN. CO. PVT. LTD. [SURINDER SINGH NIJJAR, J.]
shall be a foreign award within the meaning of the Foreign
A
Awards Act, 1961.
7. Clause 16.2(i) specifically provides that the parties
hereby waive any rights of application or appeal to the Courts
of India to the fullest extent permitted by law in connection with
8
any question of law arising in the course of arbitration or with
respect to any award made.
8. Clause 16.3 of the arbitration agreement provides that
the award of the arbitrators shall be final and binding. The other
provisions with regard to the arbitration clause are incidental
C
and, therefore, not necessary to be mentioned. Article 17 .8 of
the PPA provides as under:-
"17.8 Governing Law: Subject to Sections 16.2(b) and
16.2(e) hereof, this agreement and the rights and o
obligations hereunder shall be interpreted, construed and
governed by the substantive laws of India."
9. As noticed above, Article 16.2(b) provides that the
arbitration shall be conducted in accordance with the ICC Rules
notwithstanding Article 17.8. Similarly, Article 16.2(e) provides
for exclusion of Article 17.8.
E
10. Upon completion of the pleadings and after hearing the
parties, the State Commission by an order dated 17th June,
2011, allowed the petition filed by the respondent for refund of
F
the excess rebate availed by the appellant contrary to the terms
of PPA and also ordered the respondent to redraw the monthly
invoices in accordance with the directions issued by the State
Commission. The State Commission held that it is competent
to adjudicate upon the dispute. The limitation period prescribed
G
in the Limitation Act, 1963 would not apply to the proceeding
before the Commission, delay and !aches would apply. The
appellant is liable to pay interest to the respondent in terms of
Clause 10.6 of the PPA till payment. Conversely, if the appellant
has made excess payment against each monthly invoice
H
684
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A compared to the corresponding redrawn monthly invoice, the
respondent is liable to pay interest in terms of Article 10.6 of
the PPA. The rebate would be admissible to the appellant, if
the redrawn monthly invoice and the original payment made by
the appellant against the invoice of that month matches or if the
. B appellant has made excess payment, the respondents were
directed to redraw the annual invoice for 2001~2002, 20022003, 2003-2004, 2004-2005, 2005-2006 and 2006-2007, as
at September of each year to capture the gains to the appellant
on account of lower interest rates and gains to the respondent
c on account of higher floating rate. Certain other directions were
also issued. The petition was accordingly disposed of.
11. Aggrieved by the aforesaid directions, the appellant
filed Appeal No. 176 of 2011 before the APTEL. Before the
D
APTEL, in the appeal, the appellant raised the following issues:-
(a)
Entitlement of the Appellant to Rebate.
(b)
Jurisdiction of the State Commission u/s 86(1 )(f) of
the Act, 2003;
E
(c)
First in First Out method; for adjustment of payment.
(d)
Limitation, delay and laches;
(e)
Bar under Order 2 Rule 2 CPC;
F
(f)
Non filing of Annual Invoices;
(g)
Determination of capital cost;
(h)
Deduction on the monthly invoices;
G
(i)
Excess Claims in the monthly invoice - unjust
enrichment;
Q)
Interest on Late Payments.
H
12. After hearing the learned counsel for the parties,
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 685
GEN. CO. PVT. LTD. [SURINDER SINGH NIJJAR, J.]
APTEL has held that under Article 10.2(a), 10.2(b)(i) and
A
10.2(e), the appellant is obliged to pay full amount of the invoice
within the due date to be eligible for the rebate of 2.5% or 1 %
as the case may be. Admittedly, the appellant neither paid the
full amount for every invoice nor raised the dispute within one
year. The appellant was held to be not eligible for rebate for
B
reduction of the invoice funds.
13. With regard to the second issue, i.e., jurisdiction and
scope of Section 86(1 )(f) of the Act, relying on the judgment of
this Court in the case of Gujarat Urja Vikas Nigam Ltd. Vs.
C
Essar Power Ltd. 1, it is held that the State Commission has the
discretion to decide as to whether the dispute should be
adjudicated by itself or it should be referred to an arbitrator. The
appellant can not dictate that the State Commission ought to
have referred the dispute to an arbitrator. It is further held that
the State Commission can adjudicate all the disputes including
D
the dispute on money claims between the Licensees and the
Generating Companies. In coming to the aforesaid conclusion,
APTEL relied on its earlier order rendered in Neyveli Ignite
Corporation Vs. Tamil Nadu Electricity Board in Appeal No.
49 of 2010 dated 10th September, 2010.
E
14. On the third issue on the method adopted by the
respondent for adjustment of the payment made by the
appellant on the "FIFO" basis, APTEL has approved the
decision of the State Commission that the respondent was
F
justified in adopting the aforesaid method, in accordance with
Section 60 of the Indian Contract Act, 1872.
15. On the fourth issue relating to the applicability of the
limitation Act or delay and laches, it has been held that the
Limitation Act would not apply to the proceedings under the
G
Electricity Act. On facts, it has been held that the issue of
limitation does not arise since Sections 60 and 61 of the Indian
Contract Act would permit the creditor to adjust the amount on
1.
(2ooai 4 sec 755.
H
686
SUPREME COURT REPORTS
[2014] 4 S.C.R.
A "FIFO" method. APTEL has also held that the bar under Order
2 Rule 2 of the CPC would not be applicable in the facts of this
case .. With regard to the non-filing of the annual invoices by the
respondent, it has been held that the respondent should have
filed the annual invoices in time. Therefore, the direction issued
B by the State Commission to the respondent to redraw the
annual invoices has been affirmed. The seventh issue related
to determination of capital costs, the State Commission in its
order under appeal had directed the appellant to pay the
invoice in full as claimed by the respondent without determining
c the capital costs by getting the petition for finalization of capital
costs, which was pending in the State Commission finally
adjudicated. APTEL has approved the findings of the State
Commission that the appellant had adopted delaying tactics by
not cooperating in the finalization of the capital costs.
D
16. On issue No. 9, it has been held that as the respondent
has given up the claim on account of capital costs incurred on
Gas Boosting Station and Conditioning System and that the
· Power Company has been directed to redraw the monthly
invoices by the State Commission, the issue would not survive.
E Finally, on issue No. 10, which related to interest on late
payments, it has been held that the respondent company is
entitled to interest on late payment of dues under the provisions
of the PPA.
F
17. The present appeal is directed against the aforesaid
directions issued by APTEL.
18. We have heard learned counsel for the parties.
19. Mr. R.F.Nariman, learned senior counsel appearing for
G the appellant has submitted that the disputes raised in the
present proceeding are not adjudicable by the State
Commission. Mr. Nariman submitted that the primary functions
of the State Commission being advisory, regulatory and
recommendatory, the adjudication permitted under Section
H 86(1)(f) is only restricted to the disputes which are fairly relatable
• •
-..
T.N. GENERATION & DISTBN. CORPN. LTD. v. PPN POWER 687
GEN. CO. PVT LTD. [SURINDER SINGH NIJJAR, J.]
to the primary functions. The cardinal issue, according to Mr.
A
Nariman, which ought to have been decided by the State
Commission, was with regard to the nature ofa dispute. The
State Commission has failed to address the issue whether the
dispute is unconnected to advisory functions. This was
necessary as the respondent had made only a pure money
B
claim which could only be adjudicated either by the Civil Court
or the Arbitral Tribunal upon a reference being made to that
effect. Mr. Nariman submits that the State Commission illegally
declined to exercise its discretion to refer the dispute to
arbitration. The dispute between the parties being purely of civil c
nature required decision on complex issues of fact and law.
Since the dispute arises out of the working and interpretation
of the PPA, the State Commission would not have sufficient
knowledge of law to adjudicate the issues involved.
20. The next submission of Mr. Nariman is that the State
D
Commission cannot be an adjudicatory body, as it does not
have the trappings of a court, which is normally manned
exclusively by Judges. Under Section 84, there is no
requirement for the Chairperson or member of the State
Commission to be a Judge of a High Court. The Members are
E
required to be persons of ability, integrity and standing who
have adequate knowledge of, and have shown capacity in
dealing with problems relating to engineering, finance,
commerce, economics, law or management.