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Karnataka Power Transmission Corporation Limited vs. JSW Energy Limited & Ors.

Civil Appeal · 2022 INSC 1219Decided 22 Nov 2022
Civil Appeal No. 8714 of 2022
K.M. Joseph · Aniruddha Bose · Hrishikesh Roy

Background

JSW Energy (earlier Jindal Thermal Power Company) was permitted by the Government of Karnataka to set up a thermal power plant at Bellary, originally meant to supply a dedicated steel-plant consumer, with any surplus power sellable to the Karnataka State Electricity Board (KEB, later KPTCL) under a "heads of terms" and a wheeling and banking agreement. A dispute arose over the tariff payable for power supplied to KPTCL and whether a "concluded contract" existed under the proviso to Section 27(2) of the Karnataka Electricity Reforms Act, 1999. The Karnataka Electricity Regulatory Commission passed orders on the tariff, but the Karnataka High Court, in an appeal under Section 41 of the Act, set these aside, holding there was a concluded contract, and directed KPTCL to pay/adjust amounts accordingly. KPTCL and the Regulatory Commission appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the High Court had erred in finding that a "concluded contract" existed within the meaning of the proviso to Section 27(2) of the Act: the arrangement contemplated only sale of "surplus power" after other categories of demand were met, and the elements of a concluded contract were not made out. It set aside the High Court's findings on this point, as well as its findings on alleged perversity/arbitrariness in the Commission's order and on whether the first respondent qualified as an Independent Power Producer (IPP), and remitted the matter back to the High Court to reconsider the remaining points (whether the Commission's findings warranted interference under its limited Section 41 jurisdiction, including the IPP/Captive Power Plant classification). On the interim question of Rs. 100 crores already paid to the first respondent under a bank guarantee pending appeal, the Court balanced equities and directed the first respondent to repay Rs. 50 crores of that amount within eight weeks, with the fate of the balance to depend on the High Court's eventual decision. KPTCL's appeal was thus partly allowed and the Commission's appeal was allowed to the extent that adverse remarks against it were expunged; parties were left to bear their own costs.

Lesson Learnt

In regulated sectors like electricity, whether a "concluded contract" exists depends strictly on statutory language and the actual terms agreed (e.g., an arrangement limited to "surplus" supply is not automatically a full concluded sale contract); appellate courts reviewing a regulator's order under a limited statutory jurisdiction must stay within that jurisdiction's boundaries, and courts can order interim/equitable adjustments of money already paid while the substantive dispute is remitted for fresh consideration.

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

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