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Maharashtra State Electricity Distribution Company Limited vs. Ratnagiri Gas and Power Private Limited & Ors.

Civil Appeal · 2023 INSC 993Decided 9 Nov 2023
Civil Appeal No. 1922 of 2023
Dr Dhananjaya Y. Chandrachud · J.B. Pardiwala · Manoj Misra

Background

MSEDCL had a 25-year Power Purchase Agreement (PPA) with Ratnagiri Gas and Power Private Limited (RGPPL), which runs a gas-based power station. When domestic gas supply fell sharply after 2011 due to a nationwide shortage, RGPPL arranged alternate Recycled Liquid Natural Gas (RLNG) supply through GAIL and declared its power capacity based on this fuel. MSEDCL refused to pay fixed "capacity charges" for this declared capacity, arguing RGPPL needed its prior approval under the PPA before switching fuel arrangements: approval RGPPL never obtained. The Central Electricity Regulatory Commission (CERC) and the Appellate Tribunal for Electricity (APTEL) both ruled against MSEDCL, leading to this appeal.

Decision Breakdown

The Supreme Court held that the PPA's Clause 4.3 already listed both natural gas and RLNG as "primary fuel," and MSEDCL's prior consent was required only when RGPPL switched to liquid fuel (a different category), not when moving between two primary fuel types. It held that the separate approval requirement in Clause 5.9 (for the specific gas supply contract terms) does not import a consent condition into Clause 4.3's capacity-declaration mechanism, and that capacity/fixed charges are payable based on declared capacity regardless of whether MSEDCL actually scheduled and drew that power. Reading the PPA as a whole and in light of the commercial purpose of preserving the project's viability, the Court upheld CERC and APTEL's rulings and dismissed MSEDCL's appeal.

Lesson Learnt

In interpreting a long-term commercial contract, courts will not read in an implied consent requirement that contradicts the contract's plain terms merely because it would benefit one party: clauses dealing with different subject matter (choice of primary fuel vs. contracting terms of a supply agreement) are given their separate, intended effect.

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

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