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A.P. Power Coordination Committee & Ors. v. M/s Lanco Kondapalli Power Ltd. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 6036 of 2012)Decided 16 Oct 2015
Civil Appeal No. 6036 of 2012
Justice Vikramajit Sen · Justice Shiva Kirti Singh

Background

M/s. Lanco Kondapalli Power Ltd., a power generator in Andhra Pradesh, raised disputed bills for "capacity charges" against the Power Coordination Committee and the distribution utilities (successors to the erstwhile AP State Electricity Board) under a 1997 Power Purchase Agreement. After years of jurisdictional wrangling over whether disputes should go to arbitration or to the State Electricity Regulatory Commission, Lanco's claims, including reimbursement of Minimum Alternate Tax (MAT) it had paid, were partly rejected by the Commission on limitation grounds, a decision the Appellate Tribunal for Electricity (APTEL) reversed. The utilities appealed to the Supreme Court, arguing the Limitation Act barred Lanco's claims and that MAT was not covered by the Agreement's tax-reimbursement clause.

Decision Breakdown

The Supreme Court held that while the Limitation Act does not strictly apply to proceedings before the Electricity Regulatory Commission (as it is not a "court" in the strict sense), the Commission had correctly applied the underlying principles of Section 14 of the Limitation Act (exclusion of time spent pursuing a remedy in the wrong forum, here the earlier arbitration application before the High Court) in Lanco's favour, so its claims were not time-barred. On the merits, the Court held that MAT paid by Lanco qualified as a tax "on income" under Article 3.8 of the Power Purchase Agreement, obliging the utilities to reimburse it, rejecting the utilities' argument that MAT should instead be routed through the separate, more onerous "change in law" claim procedure. All the appeals, including the lead Civil Appeal No. 6036 of 2012, were dismissed without costs.

Lesson Learnt

Where a power generator is forced to pursue the wrong legal forum (such as arbitration later found inapplicable) before reaching the correct regulatory body, the time spent in that earlier proceeding can still count in its favour even though the Limitation Act does not technically apply to the regulator, and a tax-reimbursement clause in a long-term contract will usually be read broadly enough to cover new forms of tax (like MAT) that did not exist when the contract was signed.

Official source (sci.gov.in)View Judgment (PDF)

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