Power Company of Karnataka Ltd. vs Maharashtra Electricity Regulatory Commission & Ors. on 3 July 2026

J U D G M E N T

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. The issue which had arisen for our consideration during the hearing of these two appeals and is being addressed vide this order is :- “Whether these two appeals have become infructuous and not maintainable on account of the fact that M/s Global Energy Pvt. Ltd. (Respondent No. 4 in Appeal No. 244 of 2016 and Respondent No. 3 in Appeal No. 245 of 2016) has undergone Corporate Insolvency Resolution Process (CIRP) w.e.f. 2nd December, 2019 and the resolution plan also has been approved by the National Company Law Tribunal on 3rd July, 2024 in CP(IB) No. 2520/MB/IV/2018”.

2. It was contended on behalf of the 2nd Respondent – Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) that the proceedings in these two appeals pending before this Tribunal have been shown as first entry under the contingent liability

in schedule 7 of the resolution plan and, therefore, upon approval of the resolution plan under Section 31 of the Insolvency Bankruptcy Code (IBC) having the effect of extinguishing the pre-existing claims/liabilities including contingent claim/liability as well as proceedings against GEPL, the proceedings of the instant two appeals cannot be continued and the same ought to be disposed off as having become infructuous.

3. Learned Counsel for MSEDCL would submit that the IBC provides “Clean Slate Principle” whereby the successful resolution applicant takes over the corporate debtor free from past encumbrances in order to ensure the revival of corporate debtor without the burden of legacy disputes as envisaged under Section 30(2), 31 and 32A of the IBC. In this background, it is contended on behalf of the MSEDCL that the claims of the Appellants in these two appeals for refunds/adjustments under the Final Balancing and Settlement Mechanism (FBSM), or its challenge to deviation under the standby power agreements executed between MSEDCL and GEPL are pre-CIRP claims and thus cannot be agitated in law now for the reason that these are only directed against the GEPL and stand extinguished upon approval of resolution plan for GEPL by the NCLT.

4. These contentions on behalf of the MSEDCL have been vehemently refuted on behalf of the Appellants and GEPL.

5. It is argued that these contentions agitated on behalf of the MSEDCL are based on the mis-characterization of the prayers made by the Appellants in these appeals. It is submitted that mere perusal of the pleadings in these two appeals would make it clear that the thrust of the appeals is against the impugned orders dated 27th April, 2015 and 28th April, 2015 passed by the 1st Respondent – Maharashtra Electricity Regulatory Commission (hereinafter referred to as “the Commission”) as also against the legality of the standby power agreement executed between the MSEDCL and GEPL. In other words, it is argued that the prayer of the Appellants is against the Maharashtra State Load Despatch Centre (MSLDC)/MSEDCL, the beneficiary of the impugned orders passed by the Commission as well as standby power tariff reflected in the standby power agreements, and not GEPL. Accordingly, it is contended that the contentions of MSEDCL that the prayer of the Appellants in these two appeals is directed against the GEPL is totally false statement and runs in the teeth of the pleadings as well as prayer in their appeals.

6. We have heard Shri V.M. Kannan, Learned Counsel for the Appellants, Shri S.K. Rungta, Learned Senior Counsel appearing for

the Respondent Commission, Mr. G. Sai Kumar, Learned Senior Counsel appearing on behalf of Respondent No. 2 ( MSEDCL) and Mr. Sajan Poovayya, Learned Senior Counsel appearing on behalf of GEPL.

7. Before analyzing the rival submissions made on behalf of the parties by the learned counsels, we find it apposite to briefly advert to the facts and circumstances in which these two appeals came to be filed by the Appellants.

8. Appeal No. 244 of 2016 is directed against the order dated 27th April, 2015 passed by the Commission in case No. 181 of 2015 whereas Appeal No. 245 of 2016 is directed against the order dated 28th April, 2015 passed by the Commission in case No. 38 of 2015.

9. The appeals pertains to the issue of applicable commercial terms for the settlement of deviations that arose during the course of supply of power by GEPL to Bangalore Electricity Supply Company Limited (BESCOM) represented by the Appellant. The underlying power supply transaction was unique open access transaction for the reason that despite the end consumer i.e. BESCOM being situated in the State of Karnataka and the trader i.e. GEPL through whom the transaction was being implemented being situated in the State of Maharashtra. GEPL had approached MSEDCL for grant of

transmission open access. MSEDCL, initially insisted that deviations emanating during the course of power supply were to be settled as per the Maharashtra Final Balancing and Settlement Mechanism (FBSM) which is applicable to intrastate Maharashtra transactions. Appellants, acting as the authorized representatives of BESCOM, had agreed to the applicability of FBSM. However, eventually, MSEDCL refused to grant transmission of open access on the ground that as per order dated 17th May, 2007 passed by the Commission in case No. 42 of 2006 which introduced the Availability Based Tariff (ABT) Regime within Maharashtra, deviations of only State Pool Participants (SPPs) could be settled as per the FBSM, and since GEPL was a trader and not an SPP, it could not be accommodated within the FBSM.

10. Aggrieved by such refusal, GEPL approached the Commission by way of Petition No. 71 of 2014 seeking grant of transmission open access. The petition was disposed off by the Commission vide order dated 2nd June, 2014 observing therein that the underlying power supply transaction was an intrastate transaction in Maharashtra and directed MSEDCL to grant transmission open access for the same. The Commission directed that “suitable changes should be done by MSEDCL for commercial settlements in the existing FBSM of

Maharashtra State in order to accommodate this particular STOA transaction”.

11. Accordingly, the transaction in question was found to be an intrastate transaction within Maharashtra and required the parties to seek intra-state transmission open access from MSEDCL.

12. However, it is to be noted that the Commission did not grant any blanket direction for grant of Short Term Open Access (STOA) to GEPL for supply of Electricity to the Appellant. In fact the Commission directed GEPL to submit the documents for requirement of STOA upon noticing that the generator M/s Gupta Energy Private Ltd. which has issued NOC for STOA to GEPL was in default with respect to the payment of monthly charges. The Commission also observed that in case GEPL wishes to continue with the same generator, M/s Gupta Energy Pvt. Ltd. will have to clear all dues.

13. In pursuance to the said order dated 2nd June, 2014 of the Commission, Maharashtra State Load Despatch Centre (MSLDC) issued letter dated 9th June, 2014 requiring GEPL and the Appellant to comply with the certain conditions and submit necessary documents including a standby agreement with MSEDCL. Subsequent thereto, a standby agreement dated 13th June, 2015 was reached between GEPL and MSEDCL for supply of electricity to the

Appellant. In terms of the said agreement, MSEDCL was made entitled to charge either the temporary tariff or UI charges whichever is higher in the event of over-drawl by the Appellant. Further clause 1 of the agreement made it obligatory upon GEPL to ensure that the complete requirement of open access in normal course shall be met through its own generator without depending upon MSEDCL.

14. Thus GEPL and the Appellant agreed for levy of either temporary tariff or UI charges whichever is higher in the event of over- drawl for supply of electricity to the Appellant. Accordingly, power supply to the Appellant w.e.f. 11th July, 2014 was in terms of the said standby power agreement. GEPL had even made part payments in this regard to MSEDCL.

15. The Power Purchase Agreement (PPA) executed between GEPL and BESCOM was also duly amended in order to textually and fully incorporate the FBSM.

16. It appears that subsequently, GEPL felt aggrieved by the fact that inspite of order dated 2nd June, 2014 of the Commission mandating the transaction to be accommodated within FBSM, MSEDCL commenced charging non FBSM and high penal tariffs for over-drawl by BESCOM and also treated the underdrawn units as lapsed. GEPL filed case bearing No. 181 of 2014 before the

Commission praying for direction for settlement of deviations in terms of the FBSM. A similar prayer appears to have been made by GEPL in another case No. 38 of 2015 filed before the Commission.

17. Both these petitions were dismissed by the Commission vide orders dated 27th April, 2015 and 28th April, 2015 respectively thereby upholding the charging of temporary tariffs for supply of electricity to the Appellant in terms of the said standby power agreement and holding that the arrangements between the parties as incorporated in the standby power agreement is within the FBSM mechanism in the peculiar facts of the case.

18. GEPL assailed both these orders by way of separate appeals before this Tribunal. Order dated 27th April, 2015 passed in case No. 181 of 2014 was challenged in Appeal No. 111 of 2015 and order dated 28th April, 2015 passed in case No. 38 of 2015 was impugned in appeal No. 112 of 2015.

19. During the pendency of these appeals before this Tribunal, GEPL entered into a fresh standby agreement dated 29th August, 2015 which contained terms and conditions for supply of electricity to the Appellant w.e.f. 1st July, 2015. At the same time, the Appellant entered into a supplemental PPA dated 1st October, 2015 with GEPL. At this juncture, the Appellant herein sought to intervene in

these two appeals and filed applications bearing IA No. 399 of 2015 (in Appeal No. 111 of 2015) and IA No. 400 of 205 (in Appeal No. 112 of 2015) in this regard.

20. However, it appears that there had been some agreement between GEPL and MSEDCL requiring GEPL to withdraw these two appeals and accordingly based upon such agreements between the parties, both the appeals came to be dismissed as withdrawn by this Tribunal vide order dated 28th October, 2015. As a sequitur, the IA No. 399 of 2015 and IA No. 400 of 2015 filed by the Appellant were disposed off having become infructuous. The relevant portion of the said order dated 28th October, 2015 of this Tribunal is extracted herein below:- “Since as per the agreement of the parties, both these appeals are to be withdrawn unconditionally and there is no dispute between the rival parties regarding execution of this document. This document is accordingly, accepted and both the appeals being Nos. 111 of 2015 and 112 of 2015 are hereby ordered to be withdrawn. However, there is no order as to costs. So far as I.A. No.400 of 2015 in Appeal No.111 of 2015 and I.A. No.399 of 2015 in Appeal No.112 of 2015 seeking impleadment on behalf of power company of Karnataka Ltd. and Bangalore Electricity Supply company Ltd. as respondents in these appeals is concerned, the same are

already on record of these appeals. Since the main appeals have been ordered to be withdrawn and there remains to substance now in allowing the aforesaid impleadment applications. In view of above, the aforementioned interim applications (IAs) are hereby disposed of as being infructuous.”

21. The Appellant approached Hon’ble Supreme Court challenging the said dismissal of its applications by the Tribunal vide said order dated 28th October, 2015. The Civil Appeal Nos. 911 & 912 of 2016 filed in this regard by the Appellant were disposed off by the Apex court vide order dated 15th February, 2016, relevant part of which is reproduced herein below”- “Mr. Mukul Rohatgi, the learned Attorney General for India, appearing on behalf of the appellant, has submitted that the appellant would like to withdraw these appeals so as to file appeals before the Appellate Tribunal for Electricity, Principal Bench, New Delhi. Permission is granted with liberty to approach the Tribunal. The civil appeals are disposed of as withdrawn.”

22. It is in these circumstances that the Appellant has approached this Tribunal by way of the instant two appeals. The Appeal No. 244 of 2016 is directed against the order dated 28th April, 2015 passed by the Commission which had earlier been impugned in Appeal No. 112 of 2015 whereas Appeal No. 245 of 2016 is directed against the order

dated 27th April, 2015 passed by the Commission which had earlier been impugned by way of Appeal No. 111 of 2015.

23. It cannot be gainsaid that both the Impugned orders dated 27th April, 2015 and 28th April, 2015 of the Commission are in favour of MSEDCL and against the GEPL. These orders uphold the levy of standby power purchase/temporary tariff by MSEDCL in contrast to FBSM rates due to which MSEDCL as well as MSLDC have become richer. The prayer of the Appellant in the two appeals is to direct that the commercial settlement of overdrawl/underdrawl/standby power qua transactions between the Appellant and MSLDC has to be commercially settled based upon FBSM mechanism vide order dated 2nd June, 2014 passed in case No. 71 of 2014.

24. We feel in agreement with the submission of the Learned Counsel for the Appellant that the thrust of the appeal is against the legality as well as validity of the orders dated 27th April, 2015 and 28th April, 2015 passed by the Commission as well as that of standby power agreement executed between the GEPL and MSEDCL. It is, therefore, evident that the appeals assail the action of MSEDCL/MSLDC whereby MSEDCL has been levying temporary tariff for the power supply by GEPL to Appellant instead of resorting to FBSM mechanism. Thus, the prayer of the Appellant in the two

appeals is not directly against the GEPL and is manifestly against the MSEDCL which has been the beneficiary under the two impugned orders passed by the Commission.

25. It is also evident that in case the Appellant succeeds in these two appeals, MSEDCL would be required to reimburse excess money levied by it from GEPL, to GEPL.

26. Perusal of relevant clauses of the resolution plan approved by NCLT, Mumbai would reveal that any claim of 3rd party against GEPL does not survive as on date of the approval of the said plan but on the other hand, the claims initiated by GEPL against any 3rd party would continue to exist.

27. “Clean Slate” Principle or Doctrine as elucidated in various judgement of the Hon’ble Supreme Court envisages that the claims against the corporate debtor stand extinguished upon approval of the resolution plan under Section 31 of IBC. However, it does not apply to the proceedings which, if successful, would enhance and protect the assets or rights of the corporate debtor or which are against the 3rd party and not against the corporate debtor.

28. The adjudication of these two appeals and any final order passed thereupon would not result in crystallization of any liability upon GEPL. On the contrary, if the appeals are allowed and the

impugned orders are set aside, the GEPL would stand to benefit as it would be entitled to receive some money from MSEDCL.

29. In the light of the above discussion, we hold that there is no merit in the contentions agitated on behalf of MSEDCL that the instant appeals have become infructuous as well as non-maintainable upon approval of resolution plan qua GEPL by the NCLT, Mumbai.

30. It is manifest that the approval of resolution plan for GEPL by NCLT, Mumbai on 3rd July, 2014 will not have any impact upon these two appeals as well as their outcome for the reason that any final order to be passed in these two appeals would not fasten any liability upon GEPL and to the contrary, GEPL would stand to benefit from such order as it may be entitled to receive some money from MSEDCL.

31. Therefore, let the proceedings of these two appeals continue. The appeals shall be heard on merits.

32. List the appeals for hearing before the Regular Bench of Court- II on 13.08.2026.

(Virender Bhat)

(Seema Gupta)

Judicial Member

Officiating Chairperson

✓ REPORTABLE / NON REPORTABLE js