PSPCL got no relief from Supreme Court over high court’s judgment; private power plants won the case
Kanwar Inder Singh/ March 28,2023
In a major setback for Punjab state power corporation limited, the Supreme Court has dismissed a special leave petition (SLP) filed by the powercom against the directive of the Punjab and Haryana High Court to pay capacity charges to two private power plants- Nabha Power Limited of L&T group and Talwandi Sabo Power Limited of Vedanta group.
Punjab state power corporation limited got no relief from apex court for invoking force majeure (FM) for the period of the Covid-19 restrictions in 2020 on private power plants in the state.
Supreme court in its order dated March 20,2023 said “ We have heard the learned Counsel for the petitioner and find no reason to interfere in the order(s) impugned. The Special Leave Petitions are, accordingly, dismissed. Pending application(s), if any, shall stand disposed of.”
Whereas, Raj Mohan Singh, Judge, Punjab and Haryana High Court Judge has pronounced an order ” for the reasons recorded here in above, I am of the considered opinion that Punjab State Load Dispatch Centre has not performed its legal obligation as per mandate of the Electricity Act, 2003, Power Purchase Agreements and Punjab State Electricity Regulatory Commission (Punjab State Grid Code) Regulations, 2013. The inaction on behalf of Punjab State Load Dispatch Centre is liable to be deprecated. The impugned actions/notices are hereby quashed. However, Punjab State Load Dispatch Centre shall proceed to act in accordance with defined duties/obligations under the Electricity Act, 2003, Power Purchase Agreements and Punjab State Electricity Regulatory Commission (Punjab State Grid Code) Regulations, 2013 in the context of CWP Nos.7519 and 7715 of 2020(O&M) 46 scheduling the energy. In case of any objection in terms of Regulation 14.1.6 of the Punjab State Electricity Regulatory Commission (Punjab State Grid Code) Regulations, 2013, consequent action would follow” on July 7,2022.
The dispute arose when PSPCL invoked the force majeure clause in March 2020, citing Covid-19 restrictions, for the power purchase agreements with private thermal plants and hoped to save Rs 20 crore daily. PSPCL had served notices to all independent power producers including Nabha Power Limited, Talwandi Sabo Power Plant and GVK Goindwal. In total, notices was served to around 60 power producers, but eventually payment of only three thermal power plants was denied.
The PSPCL contended that imposition of the Covid-19 lockdown was beyond the control of PSPCL, and thus the situation qualifies as force majeure under the power purchase agreement (PPA).
The division bench consisting of Justice AG Masih and Justice Alok Jain in its order, last month, upheld the earlier order of the single-judge order, stating that the PSPCL was bound to make the payment. The bench emphasized that the capacity charges, which are incurred by the firms for setting up the plants, cannot be denied.
It further expressed surprise at PSPCL invoking the force majeure clause due to the lockdown imposed by the Central government, while ignoring the instructions issued by the Ministry of Power on the matter, which had directed the power plants to remain available to meet the energy demands of the state during the lockdown. The bench noted that if the plants had informed the appellant or the State Load Dispatch Centre (SLDC) that they could not supply electricity due to non-availability of staff and labor during the lockdown, the situation would have been different. The bench acknowledged that despite difficult circumstances, the plants fulfilled their responsibilities.
Legal experts noted that the misinterpretation of the force majeure clauses by PSPCL cost the corporation a whopping late payment surcharge of approximately Rs 190 crore, which it now has to pay to the three private power producers in addition to the amount deducted by invoking this clause which is around Rs 396 crore.
These experts contended that in general practice, in case of any dispute, the dispute amount is set aside in the accounts and is generally paid to the claimant until the pendency of the matter in court. Once the matter is settled by the court, the disputed amount is credited to the accounts of the party in whose favour the court decrees. In such circumstances, no late payments surcharge need to be paid, and such a practice could have saved PSPCL Rs 190 crore.
While NPL, Rajpura and TSPL, Talwandi had moved the court, GVK had filed a petitioned before the Punjab State Regulatory Commission, which held back its decision as the case was pending in the HC. The legal experts said that now that the case has been dismissed by the SC, GVK is all set to move the PSERC seeking relief which includes claiming of deductions of Rs 97 crore and late payment surcharge of around Rs 20 crore.
The experts in the power sector are dismayed at the casual and indifferent approach of the PSPCL that ultimately adds to the liabilities of the corporation. PSPCL needs to carefully follow clauses under the law to avoid such lapses.