I.A. No. 4 of 2007 in O.P.No.40 of 2006

Between

M/s. Hyderabad Chemical Products Limited ... Petitioner

and

Central Power Distribution Company of A. P. Ltd. … Respondent

I.A. No. 5 of 2007 in O.P.No.41 of 2006

M/s Hyderabad Chemicals Limited ... Petitioner

and

Central Power Distribution Company of A. P. Ltd. … Respondent

These Interlocutory Applications (IAs) coming on for hearing on 17.03.2007 in the presence of Sri C.Kodanda Ram and Sri Challa Guna Ranjan, Advocates 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 herein filed two separate, but identical petitions (O.P.Nos. 40 and 41 of 2006) u/s 86 (1) (f) of the Electricity Act, 2003 (hereinafter, “Act 2003”) with more or less similar averments and praying the Commission to direct the respondent to pay the petitioners for the power generated at their wind-based power generation projects and pumped into the grid with effect from the commercial operation date i.e., 31.03.2005 till 08.06.2006 (the petitioners entered into regular Power Purchase Agreements with the respondent on 09.06.2006). Subject to maintainability on res judicata, the said petitions were admitted and notices were issued to the petitioners and the respondent to appear before the Commission.

2. The respondent in both the above-mentioned O.Ps, and also the respondent herein, appeared through a counsel and filed two separate, but identical interlocutory applications, under Regulation 55 of the Commission’s Conduct of Business Regulations (for short, the ‘CBR’) r/w Order 7 Rule 11 of the Code of Civil Procedure, 1908 (hereinafter, “CPC”), with a prayer to reject the said two original petitions as the same are barred by res judicata, estoppel and on the ground of no cause of action. The said applications are taken on file as I.A.No.4 of 2007 in O.P.No.40 of 2006 and as I.A.No.5 of 2007 in O.P.No.41 of 2006.

3. The following are the common averments made in these IA Nos. 4 and 5 of 2007 by the respondent herein:

(a) The reliefs claimed in O.P. Nos. 40 and 41 of 2006 are already made in O.P. Nos. 9 and 10 of 2006 and particularly as issue No.2 framed by the Commission (in its Order dated 01.04.2006 in respect of O.P.Nos.9 and 10 of 2006), after considering the pleadings of both parties. The petitioners herein are not entitled for any amount or portion thereof and the respondent is not liable to pay any amount.

(b) Earlier O.P. Nos. 9 and 10 of 2006 were filed against the same respondent by the petitioners herein.

(c) The matter was considered by the Commission particularly the written commitment given by the petitioners to the effect that they would not claim any cost of the energy that is pumped by them into grid and that there was no agreement by the respondent to purchase such energy at all. Once the same matter in issue is found to have been already considered and finally decided by the Commission, and since no appeal is filed challenging the same, the Order became final. Therefore, the doctrine of res judicata precludes the Commission to entertain petitions in O.P. Nos. 40 and 41 of 2006.

(d) Further, the petitioners having addressed letters that they would not claim for the energy delivered, cannot turn round to make other statement, as the same is barred by doctrine of estoppel.

(e) The attempt of the petitioners, in view of the aforesaid facts, amounts to abuse of the process of law.

(f) When the matter can be decided on the facts borne out by the records of Commission, and when it is found that the proceedings are barred by any law, no meaningful purpose will be served in dragging the matters further.

(g) The Power Purchase Agreements (hereinafter “PPAs”) entered into by parties subsequent to decision of Commission does not give rise any cause of action.

4. The petitioners have not filed counter in both IA Nos.4 and 5 of 2007.

5. Heard the counsel for both the parties.

6. The counsel for respondent herein (also the respondent in O.P.Nos.40 and 41 of 2006) submitted that these IAs are filed for rejection of the main petitions on the ground of ‘res-judicata’. The petitioners herein had earlier filed petitions, which were considered and rejected by a common order of the Commission dated 01.04.2006 in O.P. Nos 9 and 10 of 2006. The basic contention and the issue that was raised before the Commission was in respect of letter dated 31.03.2005 given by the petitioners in respect of pumping of the power generated at their wind-based power generating plants into the grid, basing on which the earlier request of the petitioners herein were rejected. Since the issue was already decided against the petitioners herein, the ‘doctrine of res-judicata’ applies and the petitions in O.P.Nos. 40 and 41 of 2006 are liable to be rejected.

7. On the other hand, the counsel for the petitioner submitted that for the development of the power sector, the Commission is bestowed with several powers, including that of fixing tariff, which is a legislative exercise. While discharging its functions, the Commission should avoid strict implementation of judicial processes, not expected of a body which is regulating the sector. Section 94 of the Act 2003 enumerates the powers of a Civil Court with which the Commission is vested with for the purposes of any inquiry or proceedings. Clause (g) of sub-section (1) of Section 94 of the Act 2003 states that “any other matter which may be prescribed”. The word ‘prescribed’ is defined in Clause (52) of Section 2 of the Act 2003 which means prescribed by rules made by the Appropriate Government. Thus the CPC has limited applications vis-à-vis the proceedings of the Commission. Hence the respondent is not entitled to file the present IAs under Order 7 Rule 11 of C.P.C. and contend that the main petitions in O.P.No.40 of 2006 and O.P.No.41 of 2006 are liable to be rejected. The respondent is not entitled to file these IAs even under Rule 55 of the CBR.

8. The counsel for the petitioners nextly submitted that the matters were heard at SR stage on the issue of maintainability. Having so considered the same, the Commission admitted the petitions, numbered them and issued notice to the respondent. The issue before the Commission is with regard to interpretation of the letter dated 31.03.2005 by which the petitioners had sought synchronization of their generating plants with the grid, while committing that they would not claim for the generation that is pumped into the grid without finalizing the PPA with APTRANSCO. The commitment was given under peculiar circumstances and under duress and coercion. For several reasons, the projects of the petitioners had to be synchronized before 31.03.2005. Otherwise, they would not have got the benefit of depreciation and other financial benefits. The Order passed by the Commission on 01.04.2006 in O.P.Nos. 9 and 10 of 2006 was at a time when the PPAs were not existing and as such no directions could have been given by the Commission at that time, as rightly held by the Commission in that order.

9. However, subsequently petitioners entered into PPAs on 09.06.2006 and therefore, they are entitled for payment for the power generated by them and pumped into the grid with effect from commercial operation date i.e., 31.03.2005 till 08.06.2006. Artilce 1.3 of the said PPAs defines ‘Commercial Operation Date’ (hereinafter “COD”). The clear agreement arrived at by the parties is that the COD would be 31.03.2005 and that the same is in accordance with the guidelines of Ministry of Non-Conventional Energy Sources (hereinafter “MNES”). Article 2.1 states that all the delivered energy at the interconnection point for sale to the respondent will be purchased at the tariff provided for in Article 2.2 from and after the COD of the project. Thus the petitioners are entitled for payment for the energy generated and pumped into the grid from COD and the respondent is liable to be pay the same. For the said reasons, the doctrine of ‘res-judicata’ will not apply to the cases on hand.

10. It is further contended on behalf of the petitioners that Section 70 of the Indian Contract Act, 1872 (9 of 1872) clearly applies to the case on hand. Once the PPA is entered into, it is binding on the respondent to pay for the energy pumped into the grid in view of the definitions and other clauses set out in the PPA. The Hon’ble Supreme Court had occasion to deal with similar situations in some other works as reported in the judgments of AIR 1968 SC 1218 and AIR 1966 SC 1034. This is a simple case. The problem arose because of the arm-twisting attitude of the respondent as the power generated from the petitioners units cannot be sold to anyone except the respondent. The sale of energy to any other person is too costly as it involves wheeling charges, cross- subsidy charge and other charges which results in the price being much higher than at which the respondent is selling power to the consumers. In view of the above, it is prayed that the applications filed by the respondent may be dismissed.

11. In reply, the counsel for the respondent reiterated the application doctrine of ‘res-judicata’. The contention that the petitioners were forced by the respondent to give letter dated 31.03.2005 for synchronizing the generating units with the grid has no basis, as no evidence with regard to duress and coercion was produced in the earlier proceedings or even at present. There is no requirement of another decision on the same issue as the issue already stands decided. Thus there are no valid grounds for entertaining the petitions filed in O.P.Nos. 40 and 41 of 2006 and the same may be rejected at this stage on the ground of ‘res-judicata’.

12. Now the point that arises for consideration is –

“whether the respondent is entitled for the relief as prayed for in I.A.No.4 of 2007 in O.P.No.40 of 2006 and in I.A.No.5 of 2007 in O.P.No.41 of 2006.”

13. Before adverting to the rival contentions, it is necessary to briefly touch upon the earlier round of litigation between the parties herein. As mentioned above, the petitioners filed O.P.Nos.9 and 10 of 2006, inter-alia, praying the Commission to direct the respondent to pay for the power pumped into the grid from the petitioners generation station with effect from 31.03.2005. The Commission framed issue (ii) on this aspect and in its order dated 01.04.2006, the Commission came to the conclusion that:

“it is not under dispute that 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. As to the claim that such understanding was reached under duress or coercion, no evidence is produced in support of this contention”.

The said issue was decided accordingly while dismissing the petitions.

14. Subsequent to passing of the said order by the Commission, the petitioners herein entered into PPAs with the respondent on 09.06.2006. Under Article-1 - ‘Definitions’, of the PPAs, COD is defined in Article 1.3. ‘Explanation’ to Article 1.3 states in respect of Non-conventional based power projects the date of synchronization of the first unit of the project will be treated as COD of the project since MNES not specified any guidelines for declaration of the COD. Even though, the petitioners entered into PPAs on 09.06.2006, it is vehement contention on their behalf, that they are entitled for payment for the energy generated and pumped into grid from 31.03.2005 onwards till 08.06.2006 in view of the above definition read in conjuncture with Article 2.1 of the PPAs. In view of the same, and other grounds urged on behalf of the petitioners, doctrine of res-judicata will not apply to the case on hand.

15. In the light of the above, rival contentions are examined as under. The main contention on behalf of the respondent is that the matter which is subject matter of petitions in O.P.Nos. 40 and 41 of 2006 was considered by the Commission earlier in O.P.Nos.9 and 10 of 2006, particularly the written commitment given by the petitioners to the effect that they would not claim any cost of the energy that is pumped into grid and that there was no agreement by the respondent to purchase such energy at all. As no appeal is filed challenging the said order, it became final. Therefore, doctrine of res judicata precludes the Commission from entertaining the petitions in O.P.Nos. 40 and 41 of 2006.

16. On the other hand, the contention of the petitioners is that the above finding of the Commission is qualified by the statement that “unless appropriate PPAs are entered into”. Order passed by the Commission on 01.04.2006 was at a time when the PPAs were not existing and hence, no direction for payment could be given by it. Now that PPAs are entered into between the parties, the Commission is entitled to give directions to the respondent. Therefore, doctrine of res judicata will not apply to the petitions in O.P.Nos. 40 and 41 of 2006.

17. Apart from merits of applicability of doctrine of res judicata with regard to the dispute between the parties or otherwise, the contention of the petitioners is that respondent is not entitled to file applications under Regulation 55 r/w Order 7 Rule 11 of the CPC. The powers of the Commission for the purposes of any inquiry or proceedings under the Act 2003 as a Civil Court are limited in respect of matters mentioned in Clauses (a) to (f) of sub-section (1) of section 94 of the Act 2003. In respect of the any other matter, like power to reject plaint by a Civil Court under Order 7 Rule 11, no powers are vested in the Commission u/s 94 ibid. In exercise of the residuary power vested in it under clause (g) of sub-section (1) of Section 94 of the Act 2003, the Government of Andhra Pradesh too did not lay down any rules empowering the Commission to reject plaints under Order 7 Rule 11 as can be done by a Civil Court. Thus the respondent is not entitled to file the present IAs. There is force in the said argument of the petitioners’ counsel. The Commission is also of the opinion that the respondent is not entitled to file the present applications under Regulation 55 of the CBR, since under the said regulation, the Commission is vested with inherent powers as specified therein. The respondent has not made out a case that the Commission has to pass orders in these IAs invoking the inherent powers vested with the Commission under the said Regulation.

18. Even assuming for argument’s sake that Order 7 Rule 11 is applicable, then also the respondent is not entitled to get any relief. The Order 7 Rule 11 deals with regard to rejection of a plaint where it does not disclose a cause of action, the relief claimed is under-valued, the relief claimed is properly valued but the plaint is written upon paper insufficiently stamped, the suit appears from the statement in the plaint to be barred by any law. In the instance case, it is not the contention of the respondent that the relief claimed is under-valued or the relief claimed is properly valued and the petition is written upon paper insufficiently stamped. The contention of the counsel appearing for the respondent is that the main petitions are liable to be rejected on the ground of res-judicata.

19. As the ground of res-judicata principally urged by the respondents is closely interwoven with the merits of the case, especially in the light of entering into PPAs on 09.06.2006, the petitions filed in O.P.Nos.40 and 41 of 2006 cannot be rejected at this stage. Moreover, in the case of APGPCL vs. APERC and another in W.P.Nos.11097 and 11098 of 2004, the Hon’ble High Court of A.P. in its order dated 27.07.2005 observed that the Commission, instead of determining the issues at preliminary and final stage, should always decide all the issues at one time. Therefore, the Commission is of the opinion that the aspect of res-judicata need not be dwelt upon while disposing of these applications as the said applications are even otherwise not maintainable under law, as discussed earlier. It is not out of place to mention here that even before admitting O.P.Nos.40 and 41 of 2006, notices were issued to the petitioners on the issue of maintainability and after hearing counsel for the petitioner with regard to the same, the Commission ordered to admit the petitions subject to maintainability on res-judicata. Therefore, the respondent is at liberty to raise its objection with regard to res-judicata along with its other contentions in the main petitions (i.e. O.P.Nos.40 and 41 of 2006). For all these reasons, the Commission is not inclined to give a finding on the applicability of doctrine of res judicata with regard to the dispute between the parties at this stage.

20. In view of the above, the respondent is not entitled for the relief as prayed for in I.A.No.4 of 2007 in O.P.No.40 of 2007 and in I.A.No.5 of 2007 in O.P.No.41 of 2006. Accordingly, the said applications are dismissed with the above observations.

The order is corrected and signed on this 28^th day of March, 2007

Sd/-	Sd/-	Sd/-
(R.RADHA KISHEN)	(SURINDER PAL)	(K.SWAMINATHAN)
MEMBER	MEMBER	CHAIRMAN

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