The Supreme Court has declined to interfere with the judgment of the Appellate Tribunal for Electricity (APTEL) in a dispute involving Tata Power Trading Company Limited (TPTCL) and Karnataka electricity distribution companies. The Court upheld APTEL’s decision to sustain only the liquidated damages relating to short supply while setting aside findings concerning gaming compensation, Unscheduled Interchange (UI) charges and open access charges.
A Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe agreed with APTEL that the Karnataka Electricity Regulatory Commission (KERC) had travelled beyond the pleadings while deciding the issue of alleged gaming and awarding consequential compensation and open access charges. The Supreme Court thereby endorsed a narrower approach to the adjudicatory jurisdiction of the State Commission under Section 86(1)(f) of the Electricity Act, 2003.
The Court also upheld APTEL’s finding that a trading licensee, which acts as an intermediary between the generator and the distribution licensee, cannot automatically be made liable for gaming compensation or treated as the primary bearer of UI consequences under a Power Purchase Agreement merely because there were unusually high differences between scheduled and actual electricity supply.
The dispute arose from a short-term Power Purchase Agreement dated September 6, 2013, under which TPTCL agreed to supply electricity to Karnataka’s distribution licensees for the period from November 2013 to March 2014. TPTCL had entered into a back-to-back arrangement with Bhadrashree Steel and Power Limited, formerly known as Shantha Projects, for sourcing the contracted electricity.
During the PPA period, TPTCL allegedly failed to supply the contracted quantity and diverted electricity to power exchanges in breach of the agreement. The distribution companies raised claims for the shortfall. TPTCL attributed the failure to the generator’s default and invoked force majeure for November and December 2013.
The distribution companies subsequently made deductions from monthly invoices towards liquidated damages, UI charges and other amounts. Some recoveries were also made from two subsequent short-term PPAs on the basis of equitable set-off.
TPTCL approached KERC under Section 86(1)(f) of the Electricity Act, 2003, seeking a declaration that the recoveries were illegal and seeking refund with carrying cost at 15 per cent per annum. KERC rejected the petition and held TPTCL liable for compensation of approximately Rs. 4.88 crore.
APTEL subsequently interfered with several findings of KERC and limited the liability substantially. The Supreme Court has now declined to interfere with APTEL’s conclusions.
The Apex Court also confirmed that equitable set-off cannot ordinarily be claimed against cross-demands arising from successive and legally distinct short-term PPAs unless the claims arise from the same transaction. The ruling therefore reinforces the contractual boundaries governing electricity trading arrangements and limits the ability of regulatory adjudication to travel beyond the pleadings and contractual framework placed before it.
