In a landmark decision by the Supreme Court of India, the case between the Himachal State Electricity Board (HSEB) and Magnum has been resolved. The judgment sheds light on the contractual obligations and disputes between the two parties, setting a precedent for similar cases in the future. Stay tuned to learn more about the details of the case and its implications for the energy sector. #SupremeCourt #LegalCase #HSEB #Magnum
Arguments
- Mr. Jayant Bhushan, argued that due to the Commission’s order of 12.08.2002, the appellant’s electrical energy was not a source of power that could be tapped, resulting in no power being supplied or sold to the respondent.
- He contended that the Commission’s order clarified that this was in the consumer interest but the appellant was entitled to recover fixed costs, which were overlooked by both the Commission and the Appellate Tribunal in the impugned order.
- Mr. Jayant Bhushan also argued that the reading of Clause 8.2 of the PPA by both the Commission and the Appellate Tribunal was faulty, as the clause indicated that once the power project was set up, fixed energy costs had to be paid regardless of supply conditions.
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Analysis
- Events constituting an event of default by the Company, unless due to breach by HSEB or force majeure: bankruptcy, unpaid amount due to HSEB, failure to employ qualified personnel, formulas for contracted electrical output and tariff.
- Events constituting an event of default by HSEB, unless due to breach by the Company or force majeure: revocation of required license or consent, serious breach of agreement, failure to provide necessary financial security.
- Clause 8.2 focuses on operation, including daily Dispatch Instructions and compensation for shortfalls in PLF.
- The Commission has not allowed any power to be sourced from Magnum despite fixed costs being allowed.
- HSEB shall have the option to extend the Agreement for an additional period at the end of the 15-year term with renegotiated tariff.
- The Appellant undertook to supply Contracted Capacity as defined in Schedule 3 of the PPA.
- The Commission issued a Tariff Order in 2003 which included clauses related to despatch procedures and availability declarations.
- An appeal from the Commission’s order was dismissed by the Appellate Tribunal.
- HVPNL proposed to procure 160 MUs from Magnum but it was disallowed due to being the most expensive source.
- Both parties were advised to involve a generation expert from the Central Electricity Authority to assess the plant’s state and work out a scheme for operationalizing it.
- HSEB has the first right to refusal to buy the Project at book value with PLF adjustments on a semi-annual basis.
- The fixed cost demanded by the appellant from the respondent was collected from the consumer but not paid over to the appellant.
- This would result in an unjust windfall for the respondent.
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Decision
- The impugned order is set aside and it is declared that the demanded amount towards fixed cost of running their unit @ Rs. 1.29 per unit must be paid by the appellant within 3 months.
- The appeals in Civil Appeal Nos. 7446-7447 OF 2012 have been partly allowed, and the appeals have been disposed accordingly.
- Appeals before the Appellate Tribunal were dismissed due to a 327-day delay that was not condoned.
- The appellant has lost in both the original forum and the appellate forum, which took over 15 years to decide.
- Considering the respondent is a Government-Company, the amount should be paid with simple interest @ 3% per annum.
- If the amounts are not paid within three months, the interest component will increase to 6% per annum for payments made beyond 3 months.
- The impugned judgment is set aside to the extent that the appeals are decided against the appellant.
- The appeals in Civil Appeal Nos. 4407-4408 OF 2011 are allowed.
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Case Title: HARYANA POWER PURCHASE CENTRE Vs. MAGNUM POWER GEN.LTD. (2020 INSC 73)
Case Number: C.A. No.-004407-004408 / 2011
