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CLP India Pvt. Ltd. v. Gujarat Urja Vikas Nigam Ltd.

Civil Appeal · 2020 INSC 383Decided 6 May 2020
Civil Appeal No. 2793 of 2010
Justice Arun Mishra · Justice Vineet Saran · Justice S. Ravindra Bhat

Background

CLP India (a power generating company, formerly Gujarat Torrent Energy) had a long-term power purchase agreement with the Gujarat electricity utility (Gujarat Urja). A dispute arose over two issues: whether CLP was wrongly paid a "generation incentive" after a 1995 government notification withdrew that incentive for naphtha-based plants, and whether CLP was separately owed extra interest on a sum treated as a "deemed loan" under a later supplementary agreement. Both the state electricity regulator (GERC) and the Appellate Tribunal for Electricity had ruled mostly against CLP, limiting any refund recovery and rejecting the extra interest claim, and both sides cross-appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the 1995 notification validly and statutorily reduced the incentive payable to CLP's plant (since it could use naphtha as fuel, even if not exclusively), and that any contrary clause in the power purchase agreement had to give way to the binding statutory notification. On recovery, the Court agreed the refund claim was time-barred beyond three years before Gujarat Urja's recovery petition, since routine correspondence between the parties does not extend a limitation period. On the interest claim, the Court held the parties' 2003 supplementary agreement fixed the exact period for which interest on the deemed loan was payable, with no basis to claim interest for any earlier period. Both appeals were dismissed.

Lesson Learnt

A statutory notification governing price/tariff terms overrides any conflicting term in a private contract between a generator and distributor, and parties cannot keep a stale monetary claim alive simply by continuing to exchange letters about it: clear, timely action is needed to stop a limitation period from running.

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

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