ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION

Hyderabad

 

Dated:  09-07-2007

 

Present

 

Sri K. Swaminathan, Chairman

Sri Surinder Pal, Member

Sri. R. Radha Kishen, Member

 

O. P. No. 40 of  2006

and

I.A.No.2 of 2007

 

Between 

 

M/s. Hyderabad Chemical Products Limited,

# A-24/25, APIE, Balanagar, Hyderabad - 037.                                                                         …         Petitioner/petitioner

 

 

                                                                                                 and

 

 

M/s. A.P. Central Power Distribution Co. LTD.,

3rd Floor, Singareni Bhavan, Red Hills, Hyderabad                                                                       ...          Respondent

 

 

 

AND

 

 

O. P. No. 41 of  2006

and

I.A.No.3 of 2007

 

Between 

 

M/s. Hyderabad Chemical Limited,

Bank Street, Hyderabad - 095.                                                                                                 ...            Petitioner/Petitioner

 

                                                                        and

 

M/s. A.P. Central Power Distribution Co. LTD.,

3rd Floor, Singareni Bhavan, Red Hills, Hyderabad                                                                    ...             Respondent

 

 

 

 

These petitions and IAs coming on for hearing on 23.06.2007 in the presence of Sri C. Kodanda Ram, Advocate, for the petitioners in both the cases and Sri P. Shiva Rao, Advocate, for the respondent in both the cases and having stood over for consideration to this day, the Commission delivered the following common:

 

O R D E R

            Petitioners in the both these petitions set up wind-based power projects of different capacities at Kadavakallu Village, Anantapur district. The facts relating to establishment of these projects after obtaining sanctions, permissions and approvals from authorities concerned are not in dispute and therefore, it is not necessary to delve into those details.  

 

2.         The petitions and the IAs are filed under Section 86(1)(f) of the Electricity Act, 2003 (hereinafter, ‘the Act’) and are based on the same set of facts, with identical prayer. Therefore, they are clubbed together and decided by this common order. The common prayer in the two petitions is to direct the respondent, a distribution company / licensee (hereinafter also referred to as ‘APCPDCL’) to pay the petitioners for the power generated and pumped into the grid from their generating stations with effect from 31.03.2005 and to pass such other order or orders as deemed fit and proper by this Commission in the interest of justice.

 

3.         Earlier the petitioners herein had filed separate petitions in O.P.Nos.9 and 10 of 2006 respectively containing identical averments for directions to the respondent herein (i) to purchase electricity from the petitioners, and (ii) to pay the petitioners for the power pumped into the grid from the petitioners’ generating stations with effect from 31.03.2005.

 

4.         As the relief claimed by the petitioners herein is the same as in the earlier petitions referred to above, the present petitions were admitted subject to maintainability on res-judicata and notices were issued to the respondent.

 

5.         The Interlocutory Applications (I.A.Nos.2 & 3 of 2007 in O.P.Nos.40 & 41 of 2006 respectively) are filed on behalf of the petitioners herein stating that due to inadvertence, interest on the amounts due to the petitioners for the power generated and pumped into the grid from their generating stations was not claimed. Therefore, it is requested to permit the petitioners to amend the prayer in the main petitions and accordingly direct the respondent to pay the petitioners herein for the power generated and pumped into grid from their generating stations with effect from 31.03.2005 till 08.06.2006 along with interest at 16% per annum and pass such other order or orders as deems fit and proper in the interest of justice. The petitioners also requested that the IAs may be heard along with the main petitions. 

 

6.         Separate counters were filed on behalf of the respondent in I.A Nos.2 & 3 of 2007 with the similar objections on procedural as well as on merits of the case. On behalf of the respondent, it is stated that the applications ought to have been filed under clause 55 of the Commission’s Conduct of Business Regulations. The amendment sought is distinctly different from the claim made in the main petitions. The claim made by the petitioners in O.P.Nos.40 & 41 of 2006 is barred by the doctrine of res-judicata and therefore, interest on the said claim is also barred by law.  For the said reasons, it is requested that the IAs may be dismissed.

 

7.         Leaving aside the facts relating to establishment of the wind-based power projects by the petitioners and other details which are not in dispute as stated above, the following are the similar averments made by the respective petitioners in the (main) petitions:

 

(i)         The projects of the petitioners were synchronized with the grid and commissioned on 31.03.2005. Even though both the petitioners were pumping power into the grid, the respondent did not come forward to enter into Power Purchase Agreements (for short, ‘PPAs’). On the other hand, the petitioners were advised to avail Open Access facility and sell the power generated to third parties stating that the respondent is not interested in purchasing electricity produced by the petitioners. Having no other alternative, the petitioners filed petitions in O.P.Nos.9 & 10 of 2006 as stated above, requesting the Commission to direct to the respondent to purchase electricity generated by the petitioners and to pay for the power pumped into the grid from the generating stations of the petitioners from 31.03.2005.     

 

(ii)        By a common order dated 01.04.2006 in O.P.Nos.9 & 10 of 2006, the Commission dismissed the said petitions. Subsequent to passing of the said order, the petitioners approached the respondent for entering into the PPAs and accordingly, the petitioners entered into separate PPAs with the respondent on 09.06.2006. Vide proceedings dated 24.06.2006, the Commission granted consent to the said PPAs as required under section 21(4)(b) of the A.P.Electricity Reform Act, 1998.        

 

(iii)       On 24.06.2006 itself, the petitioners wrote letters bringing to the notice of the respondent that the projects of the petitioners were synchronized with the grid in the month of March, 2005, joint tests of the meters installed at the inter-connection points at project switchyards were conducted, and joint meter test reports were obtained from the office of the Chief Electrical Inspector General, Government of Andhra Pradesh, and accordingly requested the respondent to pay for the electricity generated and pumped into the grid. 

 

(iv)       Subsequently, the petitioners wrote letters on 29.08.2006 requesting the respondent to expedite payments as the petitioners were in financial trouble. As per the advice of the respondent, the petitioner in O.P.No.41 of 2006 raised an invoice on behalf of itself as well as on behalf of the petitioner in O.P. No. 40 of 2006 for a total amount of Rs.2,94,07,860 for the energy delivered by them during the period 31.03.2005 to 21.08.2006. However, the Chief General Manager (Comml & RAC) of the respondent informed the petitioners vide letters dated 28.08.2006 and 29.08.2006 that the respondent would pay for the power received by it for the period after 09.06.2006, the day on which the PPAs were entered into. It was further informed that the bills of the petitioners were being processed accordingly, as per the agreed tariff and that no payment will be made in respect of the electricity pumped into the grid prior to entering into PPAs. Rejection of the claim of the petitioners for payment for the power drawn by the respondent during the period 31.03.2005 to 08.06.2006 is arbitrary, illegal and contrary to the terms of the PPAs dated 09.06.2006.

 

(v)        A plain reading of Articles 1.3, 1.4,1.8, 2.1, 2.2 and 4.10 of the PPAs would go to show that the electrical energy generated by the projects and delivered to the respondent at the interconnection point i.e., the point of metering will be purchased at the rate of Rs.2.70 per unit from and after the date of commercial operation (for short, ‘COD’) of the project. COD of the projects in the present cases is the date of synchronization of the 1st unit of the projects i.e., 31.03.2005 as is evidenced by the letter dated 15.04.2005 and meter readings furnished by the Divisional Engineer, Wind Farms Division, Anantapur.

 

(vii)      It is admitted case of the respondent that the power generated by the projects of the petitioners was pumped into the grid since 31.03.2005 and the power so exported has been recorded every month. Hence there is no dispute with regard to the quantum of the power pumped into the grid.

 

(vii)      The petitioners have incurred substantial sums of monies in setting up their wind energy projects after borrowing the same from the banks and financial institutions and have made infrastructure additions in one of the most underdeveloped parts of the State. The petitioners are obligated to service the loan amounts and as such they have been paying the interest by making further borrowings as the projects are not generating any cash flows.

 

8.         The respondent filed separate counter affidavits in both the petitions. The identical replies submitted by the respondent are as under:

 

(i).        The relief claimed in these two cases was subject matter of O.P.Nos.9 and 10 of 2006, vide Issue No.(ii) framed by the Commission in its order dated 01.04.2006 and after considering the pleadings of the parties concerned, the Commission held that the respondent is not liable to pay for the energy delivered by the petitioners from 31.03.2005 to the grid of the respondent. The order of the Commission dated 01.04.2006 had attained finality as the petitioners did not challenge it. Therefore, the petitioners are precluded from reagitating on the same issue once again. As such the petitions are barred by doctrine of res-judicata and are liable to be dismissed in limine.

 

(ii).       Even though the petitioners entered into PPAs with the respondent after dismissal of O.P.Nos.9 and 10 of 2006, it would not give rise to any fresh cause of action to the petitioners, more particularly in view of their categorical commitment through letters dated 26.02.2005 and 31.03.2005 to the effect that till the PPAs come into being whatever energy that is pumped into the grid is free of cost, and held as such by the Commission as stated above. Basing on such commitments, and their confirmation, the respondent entered into PPAs with the petitioners. The petitioners are estopped from saying otherwise than what they already said and claim for the cost of power supplied to the grid prior to entering into PPAs.

 

(iii).      When the petitioners proposed to sell energy to the respondent, they were informed that they may opt for third party sales as is permitted under the Act. Yet the petitioners decided to sell energy generated by their projects to the respondent only which is obviously for their advantage. Without prejudice to the stand of the respondent not to purchase power from the petitioners, the petitioners were given evacuation arrangement which is necessary for commencement of the projects and also interconnection facility from the substation of the respondent. Thus, the respondent did not agree for banking of energy also. Extension of evacuation and interconnection facilities to the petitioners does not entitle them to claim for the energy pumped into the grid of the respondent as the petitioners had agreed to do so free of cost in writing, as stated above.

 

(iv)       Believing that the written commitments of the petitioners as contained in their letters dated 26.02.2005 and 31.03.2005 and the oral commitments made just prior to entering into agreements are bonafide, the parties entered into PPAs on 09.06.2006 with stipulations for future period. Nowhere is it agreed between the parties that PPAs have retrospective effect or that the energy pumped into the grid will be considered for billing. After grant of consent by the Commission to the PPAs entered into between the parties on 09.06.2006, through letters dated 24.06.2006 the petitioners requested the respondent to process the payment for the energy of future generation, but not for the energy generated that is already pumped into the grid.

 

(v)        Even the letter dated 29.08.2006 does not speak of anything about the energy already pumped by then and in fact, it is said that payment may be made for the energy being pumped. It is false to say that officers of the respondent company advised the petitioners to raise invoice for the energy already delivered. The petitioners are put to strict proof of the same. On 09.09.2006, the petitioners raised invoice for the energy pumped from 31.03.2005 to 21.08.2006, but the respondent categorically conveyed that it is not liable to pay for the energy pumped prior to the PPAs i.e., 09.06.2006 and passed the bill for payment for the energy pumped into the grid from 09.06.2006. The claim of the petitioners is contrary to their written commitments and amounts to criminal breach of trust.

 

(vi)       It is not correct to state that the various clauses in the PPAs show that the petitioners are entitled for payment for energy pumped with effect from COD of the projects. The clauses need to be read along with the two letters dated 26.02.2005 and 31.03.2005 and the order of the Commission dated 01.04.2006. The COD of the PPAs is unconnected to the energy already pumped free of cost to the respondent.

 

(vii)      Article 2.1 of the PPAs states that “All the delivered energy at the interconnection point for sale to APCPDCL will be purchased at the tariff provided…..”. In this case, the energy delivered for sale is from 09.06.2006, but not earlier to 09.06.2006. Similarly, Article 2.2 states that “…. the company shall be paid the tariff for the energy delivered at the interconnection point for sale to APCPDCL ……”. The said two clauses clearly exclude liability to pay for the energy that was agreed to be pumped in free of cost. The words “for sale to respondent” should not be divorced while interpreting the words “the payment of tariff of the energy from the COD”.

 

(viii)      The respondent is a public undertaking and the consumers are the ultimately affected persons. In view of the public interest involved, the principles governing the contracts between individuals are not applicable in these matters and the petitioners are not entitled for any interest.

 

(ix)              For all these reasons, it is prayed that the petitions may be dismissed.

 

9.         On behalf of the petitioners, identical rejoinders were filed stating that :

 

(i)         It is incorrect to state that the issue raised in the present cases has already been decided by the Commission in O.P.Nos.9 & 10 of 2006, and as such the petitioners are precluded from raising the very same issue once again. Be that as it may, subsequent to the above order of the Commission, the respondent has consciously entered into PPAs with the petitioners on 09.06.2006. In terms of the said PPAs, the energy generated from the projects of the petitioners from COD and delivered to the respondent at the inter-connection point is liable to be paid for by the respondent at the rate of Rs.2.70 per unit.

 

(ii)        In the light of the governing provisions of the PPAs, without conceding to the objection raised by the respondent with respect to the letters dated  26.02.2005 and 31.03.2005 addressed by the petitioners, the petitioners are entitled for payment of the energy generated by them from COD i.e., 31.03.2005 till the PPAs were executed. The relevance or import of letters dated 26.02.2005 and 31.03.2005 on the subject matter is lost inasmuch as Article 11.7 of PPAs specifically prohibits to take into consideration any oral or written understanding, representations or commitments of any kind, expressed or implied, not set forth in the PPAs.

 

(iii)       The allegations of the respondent that the petitioners vide letters dated 24.06.2006 requested the respondent to process the payment for the energy generated for future, but not for the energy already generated is totally incorrect and contrary to contents of the said letters.  The respondent is intentionally trying to avoid the payment for the energy supplied by the petitioners on one pretext or other.

 

(iv)       The contention of the respondent that claim of the petitioners is opposed to public interest and as such the principles governing the contracts between individuals are not applicable is totally misconceived and contrary to the well established principles of law.         

 

10.       On the date of hearing i.e. on 23.06.2007, the counsel for the petitioners in the both the cases reiterated the identical averments made in both the petitions and stated that:

 

(i)         Even though  PPAs were entered into between the parties on 09.06.2006, the COD of the projects is 31.03.2005 as defined in Explanation to Article 1.3 of the said PPAs. 

 

(ii)        As per Article 2.1 of the PPAs, the petitioners are entitled for payment for all the delivered energy at the inter-connection point and such entitlement for price relates back to COD. 

 

(iii)       Even though, Issue No. (ii) framed by the Commission in its common order dated 01.04.2006 in O.P.Nos. 9 & 10 of 2006 relates to payment for the power pumped into the grid from the generating stations of the petitioner herein with effect from 31.03.2005, the conclusion arrived at by the Commission on this issue is relevant for the purpose of arriving at a decision in the present petitions filed before the Commission.  In this regard, it is concluded by the Commission   in its order dated 01.04.2006 that  “It is not under dispute that the petitioners have been pumping electricity into the grid with a clear written commitment that no payments will be claimed for such energy unless appropriate PPA(s) etc., are entered into. Since, no such PPA(s), etc., are in place, the Commission finds itself in no position at all to issue any direction in the matter”.  Now that the petitioners here entered into PPAs, they are entitled for payment for the goods supplied by them in terms of the said PPAs.

(iv)       The contention of the respondent that the petitioners agreed in writing not to claim money for the energy pumped into the grid and therefore, they are not entitled for payment prior to 09.06.2006 is not correct. The said written undertakings have to be looked in the context of series of letters written by the petitioners, which shows that the respondent is in a dominant position all along.  Except informing that the petitioners may opt for third party sale as per the provisions of the Act, subject to payment of wheeling charges and any such other charges as may be applicable by its letter dated 18.01.2005, the respondent did not respond to any of the innumerable letters written by the petitioners.

 

(v)        The contention of the respondent that in view of the letters dated 26.02.2005 and 31.03.2005, the petitioners are estopped from claiming for payment for the energy pumped into the grid from 31.03.2005 is not correct. The said letters do not disentitle the petitioners from receiving payment for the energy pumped into the grid from 31.03.2005. The claim of the petitioners is based on the terms of the PPAs. The petitioners either succeed or fail with reference to the definition of COD in the PPAs, but not with reference to the concessions given through letters. During this period, the petitioners have been giving one concession or the other to the respondent, including an undertaking that if the petitioners run their power plants without PPAs, then all such power generated and pumped into the grid shall be free of cost. 

 

(vi)       The letters dated 26.02.2005 and 31.03.2005 are qualified letters, wherein the petitioners stated that the generation that is going to be pumped into the grid will not be claimed for whenever the plant is under operation without finalizing the PPAs.  The petitioners never stated that they would give the power generated by them gratuitously. Under general law, unless it is intended to be gratis, the person who gives goods is entitled for fair cost of such goods.      

 

(vii)      The petitioners never intended to give power generated and pumped to the grid prior to 09.06.2006 gratuitously.  Therefore, in accordance with Section 70 of the Indian Contract Act, 1872, the respondent is bound to pay for such energy delivered to it. 

 

(viii)      In its order dated 21.04.2007 in O.P.No.27 of 2004 the Commission stated that the very fact that the respondents therein received power from the power plant of the petitioner therein, with or without a valid PPA, casts a duty on the respondents to compensate for such utilization of energy. 

 

(ix)       Similarly, in its order dated 19.05.2005 in O.P.No.3 of 2007 the Commission rightly held that the validity of the PPA between the parties therein is valid for 20 years from the COD of the first unit of the project of the petitioner therein.  

 

(x)         The petitioners were under duress and coercion to write the letters dated 26.02.2005 and 31.03.2005 as per the submissions already made before the Commission in O.P.Nos.9 and 10 of 2006. The petitioners were also under severe pressure to declare the COD as they did not intend to lose the benefit of depreciation for the financial year 2004-05.

            

xi)        Considering all the submissions, it is prayed that suitable orders be passed directing the respondent to pay the petitioners for the power pumped into the grid from the petitioners’ generating stations with effect from 31.03.2005, up to 08.06.2006.

 

11.       In response, the counsel for the respondent in both the petitions, reiterated identical replies mentioned in the counters filed on behalf of the respondent and stated further that

 

(i)         The identical relief sought by the petitioners herein is verbatim similar to the 2nd relief claimed by the self same petitioners in O.P.Nos.9 & 10 of 2006. The Commission after carefully considering the matters therein had not granted any relief for payment of any amount to the petitioners for the energy pumped into the grid with effect from 31.03.2005. Thus the present petitions are hit by doctrine of res-judicata. Therefore, the petitioners are precluded from reagitating the same issue once again.

 

(ii)        Article 2.1 of the PPAs states that “All the Delivered Energy at the interconnection point for sale to APCPDCL will be purchased ……..”.  Thus it is clear whatever energy is delivered ‘for sale’ will be purchased by the respondent.  Similarly, in Article 2.2, it is stated that “The Company shall be paid the tariff for the energy delivered at the interconnection point for sale to APCPDCL ……..”.  Likewise Explanation 3 to Article 1.4 also emphasis that payment will be made for the delivered energy for sale to the respondent. 

 

(iii)       Energy is delivered at inter-connection point for several purposes. Only that energy that is delivered for sale will be purchased by a licensee, the respondent herein.    

 

(iv)       In the letters, both dated 26.02.2005, the petitioners categorically stated that “We also state that if we run the power plant without the necessary PPA or wheeling cum banking agreement in place then all such power that is generated and pumped into the grid of APTRANSCO during such period shall be free of cost to APTRANCO” (emphasis supplied). The words ‘such period’ imply the periods when the PPAs are not in place. Thus it is clear that the period where there is no PPA, all the power that is pumped into the grid of the respondent shall be free of cost to it.  Therefore, the question of making payment for the energy pumped, for whatever reason, does not arise during the absence of the PPAs. The said commitment of the petitioners will not alter or change after entering into PPAs with the respondent. The principle of estoppel prohibits the petitioners from claiming payment now.  

 

(v)        The letters dated 26.02.2005 and 31.03.2005 clearly show that the petitioners intended to pump energy into the grid gratuitously. Therefore, Section 70 of the Indian Contract Act, 1872, does not come to the aid of the petitioners. 

 

(vi)       The petitioners induced the respondent to enter into PPAs on the condition that payment will not be claimed for the period there is no agreement. Petitioners cannot go back on such inducement and claim for the payment for the period from 31.03.2005 to 08.06.2006.  

 

(vii)      The orders of the Commission relied upon by the petitioners have no bearing on the cases on hand. The issue in the present cases is totally different from the issues that arose for consideration before the Commission in those two matters.  

 

(viii)      The letters dated 24.06.2006 and 29.08.2006 of the petitioners clearly reveal their intention that payment sought therein is not for the energy already pumped into the grid but to be pumped after entering into the PPAs. 

 

(ix)       For all these reasons, it is prayed that the petitions may be dismissed.

 

 

12.       Heard the Counsel for both the parties.  

13.     It is not out of place here to mention that the respondent herein had filed separate, but identical, Interlocutory Applications requesting the Commission to reject the main petitions filed by the petitioners in O.P.Nos.40 and 41 of 2006 as the same are barred by res-judicata. The said applications were admitted, notices were issued to the petitioners herein and after hearing the parties concerned, the Commission passed a common order on 28.03.2007 in I.A.Nos.4 and 5 of 2007 dismissing the said applications for the reasons mentioned therein. However, the Commission left it open for the respondent herein to raise its objections with regard to res-judicata  in the main petitions.

 

14.       As the common relief claimed by the petitioners in I.A.Nos.2 & 3 of 2007 is coterminous with the main relief claimed in O.P. Nos. 40 &41 of 2006 respectively, the Commission decided to consider both the main petitions as well as the IAs together to arrive at a decision. 

 

15.       The issues that arise for consideration are --

 

Issue (i)  :         Whether the petitions are barred by the doctrine of res-judicata.

 

Issue (ii) :          Whether the respondent is liable to pay the petitioners for the power generated and pumped into the grid from the generating stations of the petitioners from 31.03.2005 to 08.06.2006.

 

Issue (iii):          Whether the petitioners are entitled for interest at 16% p.a., on the payment for the period from 31.03.2005 to 08.06.2006.

 

16.       Parties are well aware of the earlier adjudication of dispute by this Commission, also u/s 86(1)(f) of the Act between the self same parties, and that the common order dated 01.04.2006 passed by the Commission in O.P.Nos.9 and 10 of 2006 attained finality. Therefore, it is not necessary for the Commission to delve deep into the details with regard to genesis of the dispute now sought to be raised by the petitioners herein once again invoking the powers vested in the Commission u/s 86(1)(f) ibid.  It is also not in dispute that subsequent to passing of the order dated 01.04.2006 referred to above, the petitioners herein who were also the petitioners in O.P.Nos. 9 and 10 of 2006, entered into PPAs with the respondent on 09.06.2006, individually. 

 

17.       Therefore, the Commission proceeds to examine the rival contentions on the issues mentioned supra as follows.

 

Issue (i)

18.       The short point that arises for consideration of the Commission is, whether the entering into PPAs by the petitioners individually with the respondent on 09.06.2006, a date subsequent to the passing of the order dated 01.04.2006, confers a fresh cause of action on the petitioners to seek adjudication with regard to payment for the power generated and pumped into the grid prior to the date of entering into PPAs. Prima facie, the common relief claimed by the petitioners is based on the PPAs entered into by them with the respondent. Apart from the conduct and understanding of the parties prior to entering into PPAs, it is also contended that the terms of PPAs which came into existence only on 09.06.2006, require to be examined for adjudication of the dispute with regard to payment for the power pumped into the grid with effect from 31.03.2005. Notwithstanding the question whether the petitioners are entitled for the relief claimed in the present petitions, which can only be decided on the merits of the cases, the Commission is of the view that the fact of entering into PPAs between the petitioners with respondent does confer fresh cause of action on the said parties to seek adjudication by the Commission u/s 86 (1) (f) of the Act.

 

19.       Earlier the petitioners herein had invoked the jurisdiction of the Commission requesting it to direct the very same respondent to purchase electricity from the petitioners and to pay them for the power pumped into the grid from their generating stations from 31.03.2005 by filing O.P.Nos. 9 and 10 of 2006. Admittedly, at that time, the parties were not bound by any power purchase agreements between them. After about two months of the dismissal of the petitions in O.P.Nos.9 and 10 of 2006, the parties entered into PPAs and the claim of the petitioners for payment as claimed earlier is based on those PPAs. Therefore, the contention of the respondent that the present petitions are barred by res-judicata or that the petitions are not maintainable on the ground of lack of cause of action, is untenable and cannot be accepted. Had the parties not entered into PPAs subsequent to disposal of the earlier petitions by the Commission on 01.04.2006 and the present claim of the petitioners were not based on such agreements, the contention of the respondents that the present petitioners are barred by res-judicata would have carried weight. Issue (i) is answered accordingly, and it is held that the petitions are not hit by the doctrine of  res-judicata and are,  therefore, maintainable.

 

Issue (ii)

20.       To consider this issue, first of all, it is necessary to go into the point raised by the petitioners regarding the applicability of Section 70 of the Indian Contract Act, 1872, which is extracted below:

Section 70 Obligation of person enjoying benefit of non-gratuitous act

“Where a person lawfully does anything for another person, or delivers anything to him not intending to do so gratuitously and such other another person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.”

This Section embodies the equitable principle of restitution and unjust enrichment. 

 

21.       It requires to be examined whether this Section applies squarely to the facts of the present case.  For the Section to apply, it is a pre-requisite that the petitioners did not intend to supply power to the respondent gratuitously, and on the other hand, expected to be paid for it.  It is argued by the respondent that “in view of the categorical commitment of the petitioner through their letters dated 26.02.2005 and 31.03.2005, that till the PPA came into being, whatever energy that is pumped into the grid is free of cost to the APTRANSCO” (the predecessor-in-interest of the respondent herein). The conclusion that can be drawn from a reading of the above two letters which form part of the record, is that the stand of the respondents that the petitioners had agreed to pump their energy into the grid without expecting any payment in return is indeed correct. The contention of the petitioners, therefore, that Section 70 of the Indian Contract Act, 1872, applies in this case, cannot be accepted.  The two letters mentioned above clearly show that the petitioner had pumped energy into the grid without expecting to be paid for it.

 

22.       The other related point to be considered is that of the alleged duress or coercion under which the petitioner contend, they wrote the two letters mentioned above. Without going into this issue in detail and considering the arguments put forward by the petitioners, it requires to be mentioned here that this issue was dealt with and disposed of in the order of the Commission dated 01.04.2006 in O.P.Nos.9 and 10 of 2006. No new points or material has been brought out to the notice of the Commission to persuade it to modify its conclusion as arrived at in the order dated 01.04.2006 that “……..no evidence is produced in support of this contention”. Thus, there is no need for the Commission to again go into this issue, it having already been dealt with and disposed of in the Order mentioned above.

 

23.       For these reasons, the contention of the petitioners that Section 70 of the Indian Contract Act, 1872, makes it incumbent on the respondent to pay for the energy pumped in to the grid by them from dated 31.03.05 to 21.08.06, cannot be accepted.

 

24.       The petitioners’ generating units, being based on wind power, are NCE (non-conventional energy) projects. The petitioner claims that the COD of each of the projects is the date on which their first unit were synchronized with the grid i.e., 31.03.2005, in terms of Article 1.3 of the P.P.A. The date on which the PPAs were entered into i.e., 09.06.2006 is more than a year subsequent to the date on which the 1st units of the projects were synchronized with the grid.  The petitioners claim that payment for the energy supplied must be made from the date of synchronization of their projects with the grid even though the PPAs were entered into much later. 

 

25.       In seeking to understand and deal with this issue, it is necessary to study the normal practice followed in the electricity industry. In the natural course of events relating to a generating project that supplies power to the grid, the PPA is entered into first, and the COD declared subsequently in accordance with the terms and conditions of the PPA.  In this case, the petitioners themselves approached the respondent requesting the latter to provide grid connectivity. It is on record, and also admitted by the petitioners, that the respondent suggested to them that they should try to sell their power to third parties. However, the petitioners insisted on connecting their projects to the grid and kept trying to enter into the PPAs with the respondent. The counsel for the petitioners also stated before the Commission that the petitioners were also keen not to lose the benefit of depreciation for the financial year 2004-05 which would have been lost if the projects were not connected to the grid by 31.03.2005, (the last day of the financial year) and their COD not declared. The petitioners were so keen on obtaining grid connectivity and supplying power to the grid that they told the respondent on more than one occasion that the power pumped into the grid until the PPAs were entered into, need not be paid for.  Grid connectivity was provided to them, only after this was agreed to by the petitioners and the PPAs were executed much later. The conduct of the parties as mentioned above,  shows that for obtaining grid connectivity, in order to subsequently enter into PPAs with the respondent, the petitioners were quite prepared to supply power to the respondent without being paid for it. 

 

26.       It is true, as submitted by the petitioners, that  according to the Explanation to Article 1.3 of the PPAs “In respect of Non-conventional based power projects the date of synchronization of the first unit of the project will be treated as the Commercial Operation Date of the project since Ministry of Non-conventional Energy Sources not specified any guidelines for declaration of the Commercial Operation Date (COD).”  However, it does not follow that the COD in the case of NCE projects can have retrospective operation. The COD is defined in the PPAs and unless there is a specific clause in the agreement to the effect that it will have operation from a date prior to the PPAs, it cannot be a date anterior to the PPAs. On the contrary, the COD has to be determined in accordance with the agreement between the parties.  As discussed earlier, there is no agreement between the parties that payment would be made for energy supplied prior to the date of the PPAs. On the other hand, there is a clear commitment on the part of the petitioners that supply of energy prior to the date of the PPAs shall be free of cost to the respondent.

 

27.       In this connection, Article 7 of the PPAs which deals with “Duration of agreement” is also relevant. This clause states that this agreement “…….shall be effective upon its execution and delivery thereof between parties and shall continue in force from the Commercial Operation Date……..”. Thus, the agreement becomes operational upon its execution and delivery and not prior to this “zero-date”.  In the present case, this “zero-date” is 09.06.2006. Obviously, the COD has to be a date subsequent to the signing of the PPAs and cannot be a date prior to the signing “execution and delivery” of the PPAs. Such an interpretation is also supported by a reading of other clauses of the PPAs. For example, Article 5.4 dealing with Letter of Credit provides that “Not later than 30 days prior to the Scheduled COD of the first Generating Unit, APCPDCL shall cause to be in effect an irrevocable revolving Letter of Credit ………” This too makes it clear that the Letter of Credit has to be opened prior to the COD, and subsequent to the singing of the PPA. Thus, it is clear that the COD, in accordance with the practice in the electricity industry, as well as according to the PPAs,  is intended to be a date subsequent to the execution of the PPAs.

 

28.       In support of the claim of the petitioners, their counsel has sought to rely on the reasoning given by the Commission in its order dated 19.05.2007 in O.P.No.3/2007. Though the issue relating to COD indeed came up for discussion in the said Order, the same cannot be applied to the present case as the issue involved therein was determination of the COD in respect of the second generating unit (yet to be commissioned) of the same project of the petitioner therein, and not for treating it for effecting payment for the power to be generated delivered as is the case in the present petitions. The learned counsel also referred to the Commission’s Order dated 21.04.2007 in O.P.No.27/2004. The issue raised in the  petition decided upon in that Order was about payment for the energy delivered by the petitioner therein, which was pursuant to a direction given by this Commission on reduction of captive consumption by the petitioner therein and which was not paid for by the licensee.  Also, in that case there was no commitment on the part of the petitioner therein to supply energy to the respondents therein gratuitously.  Such is not the case here and instead, as mentioned earlier, the petitioners had made commitments that they would not claim payment for the energy pumped into the grid by them in  the period prior to the date of PPAs.  The decisions sought to be invoked by the petitioners are not relevant to the facts and circumstances of the petitioners herein. 

 

29.       The Commission also finds merit in the contentions of the respondent that (i) under Article 2.1 of the PPAs, its obligation is to purchase only that energy that is delivered  “at the interconnection point for sale” (emphasis supplied) to it, and (ii) Article 2.2 requires the petitioners to be “paid the tariff for energy delivered at the interconnection point for sale” (emphasis supplied) to the respondent.  And as discussed earlier, since the petitioners had made a commitment that they would not claim payment for the energy pumped into the grid prior to the execution of PPAs, the energy delivered at the respective interconnection points cannot be construed as having been delivered “for sale”.

 

30.       Thus viewed from any angle, the petitioners are not entitled to any payment for the power generated and pumped into the grid from their generating stations during the period from 31.03.2005 to 08.06.2006 and the Issue (ii) is decided against the petitioners.

 

 

Issue(iii)

31.       In view of the conclusion as arrived at above in regard to Issue (ii), the Issue (iii) need not be traversed. 

 

32.       For all these reasons, the Commission holds that the petitioners have failed to make out a case for the grant of any of the reliefs sought for by them, and accordingly, dismisses the petitions as well as the IAs.

 

            This Order is corrected and signed this 9th day of July, 2007.

 

Sd/-

Sd/-

Sd/-

(R.RADHA KISHEN)

(SURINDER PAL)

(K.SWAMINATHAN)

MEMBER

MEMBER

CHAIRMAN

 

 

 

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