CLP INDIA PVT. LTD. versus GUJARAT URJA VIKAS NIGAM LTD. & ANR. on 6 May 2020

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[2020] 6 S.C.R. 598

SUPREME COURT REPORTS

[2020] 6 S.C.R.

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CLP INDIA PVT. LTD.

v.

GUJARAT URJA VIKAS NIGAM LTD. & ANR.

(Civil Appeal No. 2793 of 2010)

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MAY 06, 2020

[ARUN MISHRA, VINEET SARAN ANDS. RAVINDRA BHAT, JJ.]

Electricity Supply Act, 1948 – s.43(A) – Gujarat ElectricityBoard (Gujarat Urja) entered into a power purchase agreementC(PPA) with CLP on 03.02.1994 – In terms of the PPA, Gujarat Urjawas under an obligation to purchase and CLP was under thecorresponding obligation to supply electricity – Prior PPA, theCentral Government had issued notification on 30.03.1992, one ofthe conditions in it was the provision for incentive to units usingDnaphtha – After the signing of the PPA, an amendment notificationdated 06.11.1995 was issued by the Central Government amendingthe notification (dated 30.03.1992), which provided that there wouldno longer be any deemed Generation Incentive payable to anygenerating company on available declaration of naphtha as fuel –Gujarat Urja sought to enforce said notification – However, CLPEignored the amended notification and billed Gujarat Urja for thepower supplied, w.e.f. December, 1997 and Gujarat Urja paiddeemed Generation Incentive – Thereafter, Gujarat Urja filedapplication for recovery of the amounts from CLP paid during theperiod from 1997-1998 to 2005-06 – GERC, by its order held thatFthe notification of 06.11.1995 was applicable and deemedGeneration Incentive is not payable to CLP – However, it permittedrecovery of only for a period of three years prior to the date offiling of the petition: the recovery for the period prior to 14.09.2002was held to be time-barred – APTEL upheld the order of the GERC– On appeal, held: The two notifications dated 30.03.1992 andG06.11.1995 were issued u/s. 43(A) of the Electricity Supply Act, 1948– Concededly, these notifications are statutory and are binding onthe parties – Any PPA between a generating company and thepurchaser of electricity is subject to such statutory notifications;parties by agreement cannot override statutory provisions, or suchHnotifications, as far as they relate to matters of tariff – So, the notification amended on 06.11.1995 was a statutory one and wasbinding on both the parties – The effect of this statutoryincorporation by way of amendment was that incentive no longerbecame payable – Also, the concurrent findings of the GERC andAPTEL in granting restricted refund calculable for the 3 year periodprior to Gujarat Urja’s application are reasonable – The findingsof the lower authorities, therefore, are correct; no interferencerequired.

Electricity Supply Act, 1948 – s.43(A) – Gujarat ElectricityBoard (Gujarat Urja) entered into a power purchase agreement(PPA) with CLP on 03.02.1994 – In terms of the PPA, Gujarat Urjawas under an obligation to purchase and CLP was undercorresponding obligation to supply electricity – A supplementaryagreement was executed between the parties on 05.12.2003 – CLPstated that the amount, i.e Rs. 53.90 crores was in fact due as aloan – If it was deemed as a loan, then interest was payable on thebasis of normative repayment of principal amount during the periodof the loan, i.e. the loan would not remain as a constant – GujaratUrja resisted this claim – The GERC rejected the CLP’s argumenton a plain reading of the clause in the supplementary agreement,which stated that the agreement too recognized Rs.53.9 crores asown Capital for which the cost of Own Capital @ 14% was to be apass through – The effective date for such recognition was from01.07.2003 to 31.03.2009 and no amounts were due and payableas interest after that date – This excluded any liability on part ofGujarat Urja for the past period, i.e. December 1997 – The CLPLimited was aggrieved by that portion of GERC’s order whichrejected its claim on the deemed loan component prior to the period2003 – The APTEL concurred with the decision of GERC – Onappeal, held: The clear agreement between the parties was thatinterest on the sum of Rs.53.90 crores was payable for the specifiedperiod 01.07.2003 to 31.12.2009 – Therefore, CLP’s claim that anyamount was payable, for any period prior to 01.07.2003, was nottenable – Had CLP wished so, nothing prevented it to claim for itduring negotiations and have it included as a term of the contract –Once having settled for a specified sum, on an amount Rs.53.90crores that was only fictionally a loan - and treated as such, forpurpose of fixing interest payable, considering the equity infused,in excess of the tariff regulations, the absence of any like item, AB

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[2020] 6 S.C.R.

Asuch as interest for prior period, precludes a claim – The findingsof the lower authorities are therefore, sound and reasonable.

Dismissing the appeals, the Court

HELD: 1. The submissions of parties are with respect totwo notifications dated 30.03.1992 and 06.11.1995. TheseBNotifications were under Section 43(A) of the Supply Act.Concededly, these notifications are statutory and are binding onthe parties. Any PPA between a generating company and thepurchaser of electricity is subject to such statutory notifications;parties by agreement cannot override statutory provisions, orCsuch notifications, as far as they relate to matters of tariff.Therefore, the rights and obligations of the parties under thePPA have to be read subject to the statutory provisions. Theprovisions of the PPA, if they are contrary to the statutoryprovisions, cannot be given effect to. [Paras 19 and 20][611-D-F]

2. In view of the fact that the notification amended onD06.11.1995 was a statutory one, there cannot be any doubt that itwas binding upon the parties. Therefore, the earlier notificationwhich left it free to the parties to negotiate on various aspects,including on the incentive payable, stood amended by Note 2,which was added to clause 1.6 of the tariff. The effect of thisEstatutory incorporation by way of amendment was that incentiveno longer became payable. The arguments by the CLP, in theopinion of the Court, that the parties were bound only by theterms of the agreement and that the amendment notification beingprospective, could not have altered the terms of the tariff,Fespecially the incentive payable, are insubstantial and have noforce. The concurrent findings on this aspect, therefore, are soundand do not call for interference. Likewise, the change of lawprovision (Clause 6.5 of the PPA) clearly contemplated that anyamendment to the prevailing tariff notification (dated 30.03.1992)would bind the parties. Since Note (2) was an amendment, whichGdealt with the issue of incentive, it cannot now be said that it wasinapplicable. The findings of the lower authorities, therefore, arecorrect; no interference is called for. [Para 25][614-D-F;615-A-B]

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3. The next question is whether the GERC and APTEL fellinto error in granting restricted refund calculable for the 3 yearperiod prior to Gujarat Urja’s application. The concurred findingson this aspect, in the opinion of this court, are reasonable. Thereis merit in CPL’s submission that the earliest point in time, whenthe cause of action arose, was in May,1996, when Gujarat Urjarejected its contention that incentive was payable in terms of thePPA, notwithstanding the notification of 06.11.1995. Despite thisstated position, meetings continued to be held and, what is more,incentive amounts, were paid to CLP. No doubt, no documentconclusively stated that CLP’s claim was accepted. This Courtdoes not find any merit in the submission of Gujarat Urja that theissue was kept alive, due to a series of communications. In thisregard, APTEL’s findings about inapplicability of Section 18 ofthe Limitation Act, are correct. There was no admission on thepart of CLP, at least of the kind, that extended the time forpreferring an application for recovery of excess payments. It hasbeen consistently ruled by this court that repeated letters, orexchange of communications, do not extend the period oflimitation, provided by law. [Para 26][615-B-E]

4. The third, and last issue, is with respect to payment ofinterest on deemed equity. The debt-equity ratio in this case,was disturbed; accordingly Rs.53.9 crores was treated as“deemed” or normative loan, for which the parties had to agreethe rate of interest payable, in accordance with the tariffnotification. It was in the light of these developments that thesupplementary agreement was entered into. [Para 28][616-B]

5. It is apparent, that the parties did not harbor any doubtabout the period for which the specified interest was payable onsuch deemed loan. The rate of interest was fixed; likewise, thedate from which payment obligations were to arise, too wereknown. Also, the date upto which the interest on such deemedloan payments were to be made, was known and fixed. In thesecircumstances, CLP’s claim that the payment of interest for aprior period was outstanding, and constituted Gujarat Urja’sliability, is insubstantial. In a recent judgment a similar issue had ABC

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Aarisen. The court quoted from the decision in National ThermalPower Corporation Ltd. v. Madhya Pradesh State Electricity Boardwhere another previous decision was cited with approval on theissue that the express provision for something, in an agreement,meant that other similar matters stood excluded. [Para 29][616-D-F]B

6. In the present case, the clear agreement between theparties was that interest on the sum of Rs.53.90 crores waspayable for the specified period 01.07.2003 to 31.12.2009.Therefore, CLP’s claim that any amount was payable, for anyperiod prior to 01.07.2003, was not tenable. Had CLP wished so,Cnothing prevented it to claim for it during negotiations and haveit included as a term of the contract. Once having settled for aspecified sum, on an amount (Rs.53.90 crores) that was onlyfictionally a loan - and treated as such, for purpose of fixing interestpayable, considering the equity infused, in excess of the tariffDregulations, the absence of any like item, such as interest forprior period, precludes a claim. But it was really part of the equitycomponent. Therefore, interest was per se not payable, but couldbe paid in terms of the tariff notification or the agreement. Noclaim on any other legal or equitable considerations could havebeen made. The findings of the lower authorities are therefore,Esound and reasonable. [Para 31][619-E-G]

India Thermal Power Ltd. v. State of M.P. & Ors. (2000)3 SCC 379 : [2000] 1 SCR 925; Binani Zinc Ltd. v.Kerala State Electricity Board (2009) 11 SCC 244 :[2009] 4 SCR 636; Tata Power Company Ltd. v. AdaniFElectricity Mumbai Ltd. & Ors. 2019 (7) SCALE 297 :[2019] 6 SCR 845; Damodar Valley Corporation v.Central Electricity Regulatory Commission & Ors. 2018(15) SCALE 451 : [2018] 14 SCR 433 – relied on.

Hari Shankar Singhania v. Gaur Hari Singhania (2006)G4 SCC 658 : [2006] 3 SCR 726; Sri Ram Mills Ltd. v.Utility Premises Ltd. (2007) 4 SCC 599 : [2007] 4 SCR279; S.S. Rathore v. State of Madhya Pradesh (1989) 4SCC 582 : [1989] 1 Suppl. SCR 43; Union of India v.Har Dayal (2010) 1 SCC 394 : [2009] 15 SCR 1126; H

Schlumberger Asia Services Ltd. v. Oil and Natural GasCorporation Ltd. (2013) 7 SCC 562; Uttar HaryanaBijli Vitran Nigam Ltd. And Ors. v. Adani Power Ltd. &Ors. (2019) 5 SCC 325 : [2019] 4 SCR 487; NationalThermal Power Corporation Ltd. v. Madhya PradeshState Electricity Board (2011) 5 SCC 580 : [2011] 11SCR 651 – referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2793of 2010.

From the Judgment and Order dated 19.01.2010 of the AppellateTribunal for Electricity, New Delhi in Appeal No. 44 of 2009.

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C. A. No. 2969/2010

Sajjan Povaya, C. A. Sundaram, Sr. Advs., V. Mukherjee,Pukhrambam Ramesh Kumar, Ms. Raveena Dhamija, Karun Sharma,Akshat Jain, Prati Bhanu, Anand Ganesan, Ms. Hemantika Wahi,Shubham Arya, Ms. Jesal Wahi, Ms. Puja Singh, Ms. Rohini Musa,Abhishek Gupta, Zafar Inayat, Ms. Ranjitha Ramachandran, Ms. PujaSingh, Advs. for the appearing parties.

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AThe Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

1. The present judgment will dispose of two appeals preferredunder Section 125 of the Electricity Act, 2003. One appeal(CA 2969/2010) has been preferred by the Gujarat Urja Vikas NigamBLtd. (hereafter,”Gujarat Urja”or “GUVN”); the second (CA 2793/2010)has been preferred by CLP (India) Pvt. Ltd. (formerly, Gujarat TorrentEnergy Corporation Ltd; later, Gujarat Paguthan Energy CorporationLtd, a generating company, hereafter collectively “CLP”). Both appealschallenge a common order of the Appellate Tribunal forCElectricity”APTEL” hereafter).

2. The erstwhile Gujarat Electricity Board (GEB) (now “GujaratUrja”) entered into a power purchase agreement (“PPA”with CLP on03.02.1994. In terms of the PPA, Gujarat Urja was under an obligationto purchase - and CLP was under corresponding obligation to supply -D635 MW of electricity; the tenure of the agreement was 20 years. Interms of Section 43(A) of the Electricity Supply Act, 1948, (hereafter"the Act"), a generating company may enter into a contract for the saleof electricity with the Electricity Board and the tariff for the sale ofelectricity shall be determined by the authority through the notificationissued by the Central Government. Prior the PPA in this case, the CentralEGovernment had issued a notification under Section 43A, on 30.03.1992,specifying the controlling norms, terms and conditions for determinationof tariff for sale of electricity by the generating company to the ElectricityBoards. One of those conditions was the provision for incentive to unitsusing naphtha. On 17.01.1994, an amendment to the notification datedF30.03.1992 was made providing for Note (1) stating that the incentivefor generation above the target availability of 68.49% for fixed costrecovery was to be capped.

3. After the signing of the PPA between the parties, an amendmentnotification dated 06.11.1995 was issued by the Central GovernmentGamending the notification (dated 30.03.1992). By this, the CentralGovernment provided that there would no longer be any deemedGeneration Incentive payable to any generating company on availabledeclaration of Naphtha as fuel. Based on this notification, the ElectricityBoard sought to enforce the said notification claiming that this generatingcompany is not entitled to get the incentive for deemed generation. TheHElectricity Board also sent a letter dated 18.04.1996 informing the CLP, that it proposed to amend the Clause 7.5.2.1 of the PPA to the effectthat no deemed generation shall be admissible beyond the level ofgeneration in respect of Naphtha. CLP did not agree to the proposal andby its reply dated 24.04.1996 stated that the notification of 06.11.1995was inapplicable. Gujarat Urja did not agree to CLP’s position andreiterated its earlier position about the change in the incentive terms. Ameeting was held in respect of various issues on 06.10.1997 during whichseveral issues were discussed and decisions taken, between the parties.However, the minutes of meeting did not record any decision on theissue of incentive restricted in terms of the notification dated 06.11.1995.There was some more correspondence and meetings, which however,did not lead to any result in regard to both parties accepting that theincentive was payable in terms of the notification of November,1995.Ultimately, with effect from December 1997, CLP started billing GujaratUrja for the power supplied, including the incentive (ignoring the amendingnotification); Gujarat Urja continued to pay deemed generation incentivefrom June, 1998 to 2000.

4. The Union Ministry of Power issued a notification (dated09.06.1998) which clarified profits on operating norms; severalcomponents such as station heat rate, auxiliary consumption andsecondary fuel consumption were eliminated and income tax on incentiveswas no longer permitted (as a pass through in tariff). It was stated thatthis was prospective in operation and would apply to power purchaseagreements which were not executed and delivered by the parties by09.06.1998. For a long time, incentive continued to be paid, ignoring thenotification of 06.11.1995 by Gujarat Urja, to CLP. On 05.12.2003, CLPand Gujarat Urja entered into a supplementary agreement, amendingthe PPA, to incorporate concessions offered by CLP to reduce tariff.Pursuant to execution of the supplementary agreement dated 05.12.2003,Gujarat Urja issued a letter to CLP stating that all the outstanding issuesstood fully and finally resolved. Gujarat Urja continued to pay deemedgeneration incentive from 05.12.2003 to 23.02.2005. In February, 2005,a high-level committee was constituted to examine the issue of recoveryof excess payouts made on the basis of deemed generation incentive.The receipt of the report, of that committee, led Gujarat Urja to file anapplication for recovery of the amounts from CLP (Petition No.874/2006 under Section 86(1)(f) of the Act, before the Gujarat ElectricityRegulatory Commission (“GERC”), claiming for recovery of deemedgeneration incentive paid to CLP during the period from 1997-98 to 2005-06.

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A5. CLP resisted Gujarat Urja’s application, contending thatprinciples of estoppel precluded recovery; that in any event, parties hadnot agreed to change the terms of the PPA and that the previouscorrespondence evidenced that the matter had been closed, which meantthat Gujarat Urja could not claim recovery of any so-called excessamounts. The GERC, by its order held that Note 2 (introduced by theBnotification of 06.11.1995) was applicable to the project and thus deemedgeneration incentive is not payable to CLP. However, it permitted recoveryof only for a period of three years prior to the date of filing of the petition:the recovery for the period prior to 14.09.2002 were held to be time-barred.C6. The second appeal, i.e. CA 2793/2010 by CLP Limited, questionsthe impugned order of the APTEL which had upheld the rejection of itsclaim for interest on deemed loan component.

7. The facts as far as this appeal is concerned are that asupplementary agreement was executed between the parties onD05.12.2003. In terms of Article 4.6 of the Supplementary Agreement,original clause 7.5.14(a) of the PPA dated 03.02.1994 was substituted[1 ].CLP stated that the amount, i.e ` 53.90 crores was in fact due as a loan.If it was deemed as a loan, then interest was payable on the basis ofnormative repayment of principal amount during the period of the loan,Ei.e. the loan would not remain as a constant. In this regard, CLP hadrelied upon Clause 1.5 of the notification dated 30.03.1992[2]. The PPAdated 03.02.1994 by Schedule VII Clause 7.5.10 defined “Interest onLoan Capital” in the following terms:

7.5.10: Interest on Loan Capital-shall mean the sum of allFpayment of interest along with bank charges and allassociated financing costs paid to the bank annually on theoutstanding loans paid by GTEC, converted, as of the firstday of the fortnight for the applicable fixed charge, into the 1 The substituted term, i.e. the new clause 7.5.14(a) reads as follows:

“The parties have agreed to recognize an amount of Rs.53.90 crores as”OwnGCapital”deployed to meet with the Capital Cost and allowance of Payment of cost in theform of “Cost of Own Capital”@ the rate of 14% per annum effective from 1.7.2003 andup to 31.12.2009. No payment of any nature will accrue after the said date on the saidamount.”

2 Clause 1.5 reads as follows:

“1.5…………….(a) Interest on loan capital shall be computed on the outstanding loans,including the schedule of repayment, as per the financial package approved by theHAuthority…..”

CLP INDIA PVT LTD v. GUJARAT URJA VIKAS NIGAM LTD.[S. RAVINDRA BHAT, J.]

currencies in which it is payable employing exchange ratesat bank’s selling rate prevailing on that day obtained fromthe source mutually agreed.”

8. The CERC Tariff Regulations, 2001 which provided for“Interest on loan capital”[clause 2.7(a)] and CERC TariffRegulations, 2004 were relied upon.

They are set out below:

‘‘2.7(a)Interest on loan capital

Interest on loan capital shall be computed on the outstandingloans, duly taking into account the schedule of repayment asper the financial package approved by the Authority or anappropriate independent agency, as the case may be.”

9. CERC Tariff Regulations, 2004 inter alia provides as under:

“20.Debt-Equity Ratio:(1) In case of alia generatingstations, declared under commercial operation on or after1.4.2004,debt-equity ratio as on the date of commercialoperation shall be 70:30 for determination of tariff. Whereequity employed is more than 30%,the amount of equityfor determination of tariff shall be limited to 30% and thebalance amount shall be considered as the normative loan.

Provided that in case of a generating station where actualequity employed is less than 30%, the actual debt and equityshall be considered for determination of tariff.

(2) The debt and equity amount arrived at in accordancewith clause (1) shall be used for calculating interest onloan, return on equity, Advance against Depreciation andForeign Exchange Rate Variation.”

10. Gujarat Urja resisted this claim. After adjudication, the GERCrejected the CLP’s argument on a plain reading of the clause, sayingthat for the first time in the supplementary agreement, which stated thatthe agreement too recognized ` 53.9 crores as own Capital for whichthe cost of Own Capital @ 14% was to be a pass through. The effectivedate for such recognition was from 01.07.2003 to 31.03.2009 and noamounts were due and payable as interest after that date. It wasspecifically stated that this condition constituted the complete bargain to A

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Athe extent it provided for treatment of cost of Own Capital @ 14% perannum for a defined period. The agreement had to be and was givenprospective operation. This excluded any liability on part of Gujarat Urjafor the past period, i.e. December 1997. It was also held that the claimmade in 2010 was substantially barred to the extent it sought for anyamount of interest beyond a period of three years.B

11. The CLP claimed on another issue, i.e. interest on ` 14.48crores @ 16% per annum from July 2000 to 30.06.2003 was payable. Interms of the supplementary agreement, the condition specifically statedthat GPEC (i.e. CLC) had further deployed a sum of ` 14,48,40,831/-from its internal accrual to complete shortfall and disbursal of loan byCthe lenders, which agreed to allow payment on this amount @ 16% perannum from July 2000 to 30.06.2012. Gujarat Urja stated that this interestwas payable on reducing balance terms, not as bullet payment of interest.

12. The CERC ruled that it was quite clear that the parties hadagreed to allow interest at the said rate, @ 16% on the said sum, i.e.D14.48 crores. Therefore, Gujarat Urja could not argue that interest waspayable on the reducing balance method and that the payment of intereston a bullet repayment method was not permissible. The Commission,i.e. GERC noted that the statutory notification, i.e. clause 1.5 of thenotification dated 30.03.1992 did not prohibit calculation of interest onEbullet repayment as regards clause 7.5.10 in Schedule VII of the PPAdated 03.02.1994, the subject matter or its content was deemed loan.On this second aspect, therefore, the terms of the contract contained inthe supplementary agreement directing 16% per annum interest on `14.48crores is bullet repayment, was upheld.

F13. The CLP Limited was aggrieved by that portion of GERC’sorder which rejected its claim on the deemed loan component prior tothe period 2003. It appealed to the APTEL (Appeal No.44/2009). TheAPTEL concurred with the decision of the GERC and held that clause7.5.14(a) of the supplementary agreement did not oblige Gujarat Urja torefund interest paid upon the deemed loan component upon the equityGportion treated as deemed loan, i.e. ‘ 53.9 crores for any period prior to01.07.2003. Therefore, CLP’s appeal was rejected. It, therefore, hasappealed to this Court on the said findings.

Analysis and Findings

14. Section 43A of the Electricity (Supply) Act, 1948 (hereafterH“the Supply Act”) reads as follows:

“43A. Terms, conditions and tariff for sale of electricity byGenerating Company.-

(1) A Generating Company may enter into a contract for thesale of electricity generated by it- a) with the Board constituted for the State or any of the Statesin which a generating station owned or operated by thecompany is located;

b) with the Board constituted for any other State in which it iscarrying on its activities in pursuance of sub-section(3) ofsection 15A; and

(c) with any other person with consent of the competentgovernment or governments.

(2) The tariff for the sale of electricity by a GeneratingCompany to the Board shall be determined in accordance withthe norms regarding operation and the Plant Load Factor asmay be laid down by the Authority and in accordance withthe rates of depreciation and reasonable return and such otherfactors as may be determined, from time to time, by the CentralGovernment, by notification in the Official Gazette:

Provided that the terms, conditions and tariff for such saleshall, in respect of a Generating Company, wholly or partlyowned by the Central Government, be such as may bedetermined by the Central Government and in respect of aGenerating Company wholly or partly owned by one or moreState Governments be such as may be determined, from timeto time, by the government or governments concerned.”

15. At the outset, it is noticeable that on the issue, whether amountspaid to CLP, for the period 1998 to 2005 onwards, were in excess ofwhat was actually payable by Gujarat Urja, the findings of GERC andthe APTEL are concurrent. This court does not discern anyunreasonableness or facial omission of material factors, to warrantappellate review. Nevertheless, the court would proceed to deal withthe submissions made on this aspect. Gujarat Urja contends that theconcurrent findings, to the extent they limit the refund to a period up-to2002 are erroneous, because in effect CLP has been unjustly enriched.Learned senior counsel for Gujarat Urja, Mr. C.A. Sundaram, argued A

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Athat once the GERC found, on a plain reading and interpretation of thetariff order of 1992 – as amended by the notification dated 06.11.1995,that incentive could not be paid in the same manner as was contemplatedby the parties, when they entered into the PPA (on 03.02.1994), as amatter of law, the amounts paid were excess; consequently, both in lawas well as in equity, CLP was under an obligation to refund the entireBexcess, from the time it was not entitled to those amounts.

16. On the question of limitation, learned senior counsel arguedthat the APTEL erred in law, in not following the decisions of this courtin Hari Shankar Singhania v. Gaur Hari Singhania[3]and Sri RamMills Ltd.v. Utility Premises Ltd.[4]in considering that the issue was notCtime-barred. Counsel submitted that the question was engaging theattention of the parties and CLP was aware of the fact that the CentralElectricity Authority and the Central Government had taken decisionson this aspect. Moreover, as a matter of law, by reason of the amendment,to the notification (dated 06.11.1995), CLP could not have legitimatelyDclaimed more tariff based on the incentive policy that was no longerapplicable. Therefore, the amounts paid to the extent they were not inconformity with the said amendment, had to be refunded in entirety.

17. On behalf of CLP it was urged, by Mr. Sajan Poovayya, learnedsenior counsel, that both the authorities below erred in their interpretationEof the terms of the PPA, the notification of 30.03.1992 and the amendmentof 06.11.1995. It was argued that CLP’s generation station is gas-basedand not a Naphtha based station. The notification dated 06.11.1995 appliedonly to 100% Naphtha based stations and not to gas based stations likethat of CLP, where Naphtha was used as a secondary fuel when theGas was not available. The expression “Naphtha based station” used inFthe notification is a term of art; it refers merely to the physicalcharacteristic of the plant and not to the nature of fuel to be used. It wasfurther contended that the amending notification of 06.11.1995 itselfmakes a distinction between gas based stations and naphtha basedstations. CLP’s plant, in terms of PPA is a gas based, not Naphtha based.GTherefore, the notification dated 06.11.1995 would not apply to its plant.Also, urged counsel, since the PPA was entered into on 03.02.1994, theamendment notification dated 06.11.1995 would not apply to the pre-existing PPA, since it has a prospective effect. It was lastly submitted 3 (2006) 4 SCC 658H4 (2007) 4 SCC 599

that Clause 6.5 of the PPA dated 03.02.1994 regarding change of law isclarificatory in nature. It deals only with the earlier part to protect theinterest of the GPEC for change in law. “The change in law” referred toin Clause 6.5 covers amendment to notification dated 30.03.1992.Therefore, the financial difficulties resulting from the amendmentnotification dated 06.11.1995 are to be compensated in favour of theCLP.

18. It was argued that Note(2) of the amended notification dated06.11.1995 unambiguously states that it applies only to Naphtha basedstations for whom generation incentive was inapplicable. Therefore, thegas based units like CLP were clearly not covered by Note(2) sincethey used naphtha only as an alternative fuel or substitute fuel. Therefore,the findings given by the GERC and APTEL to the effect that Naphthabased station include those that are capable of firing Naphtha also as afuel, and not mean those which are capable of firing only Naphtha, iswrong.

19. The submissions of parties are with respect to two notificationsdated 30.03.1992 and 06.11.1995. These Notifications were under Section43(A) of the Supply Act. Concededly, these notifications are statutoryand are binding on the parties. Any PPA between a generating companyand the purchaser of electricity is subject to such statutory notifications;parties by agreement cannot override statutory provisions, or suchnotifications, as far as they relate to matters of tariff.

20. Therefore, the rights and obligations of the parties under thePPA have to be read subject to the statutory provisions. The provisionsof the PPA, if they are contrary to the statutory provisions, cannot begiven effect to. In terms of the PPA of 03.02.1994, “fuel” is defined asfollows:

“Fuel natural gas and/or any liquid fuel selected by GujaratTorrant Electricity Company (GTEC) (now CLP) for use inpower station for generating electricity”

‘fuel management’ is defined as follows:

“Fuel Management:-The power station of the GTEC isdesigned to use natural gas and liquid fuel as fuel. GTECshall decide selection and use and proportion gas and otherfuel in best economic way depending on the situation fromtime to time.”

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A21. The kind of alternative fuel and its long-term purchase contractcould be jointly decided by CLP and Gujarat Urja. The cost of the alternatefuel when used by CLP shall be taken into account for calculation ofvariable charges as defined in Schedule VII (of the PPA). Clause 7.1and Clause 7.4 of Schedule VII to the PPA are relevant.[5]Under theformer, Gujarat Urja had to purchase power from CLP on the basis of theBnotification of 30.03.1992 of the Central Government. It further provided thatthe tariff for the first 6000 Kwh/kw (i.e 68.5% PLF – i.e. plant load factor) of netavailability in any year was to be the sum of (a) the fixed charge and (b) thevariable charge (i.e those terms defined by clauses 7.2 and 7.3). For all excessenergy of actual and deemed generation in excess of 68.5%, the tariff payablewas to be the sum of (a) incentive and (b) variable charge. Clause 7.4 providedCfor incentive, which was to be @ 0.575% for every 1% increase in the generationabove the normative level of 6000 hours per kWH/KW (i.e 68.5% PLF) inaccordance with the notification S.O. 251(E), dated 30.03.1992 (as amended on17.01.1994).

22. The argument of CLP that its unit was essentially gas-based Dand that the definition of naphtha-based unit meant only that unit whichdepended entirely on naphtha as a fuel, or that which used naphtha atleast to the extent of 50%, in our opinion is not correct.

23. The judgment of this court in India Thermal Power Ltd. vs.State of M.P. & Ors.[6]is an authority for the proposition that parties can E5 For convenience,they are set out as follows:

“7.1 Tariff

GEB shall purchase power from GTEC, generally on the basis of GOI notificationNo.SO 251(E) dtd. 30-3-1992. The Tariff for the first 6,000 kWH/KW (i.e. 68.5 PLF) ofNet Availability in any year during the terms of this Agreement shall be the sum of (a)theFixed Charge and (b) the Variable Charge. For all the energy of actual and deemedFgeneration in excess of 68.4 % PLF in any Year ,the Tariff payable by GEB shall be thesum of (a) the Incentive described below and (b) the Variable Charge. Any tax or imposton or pertaining to sale of energy or capacity shall be payable by GEB over and abovethe Tariff.

…

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7.4 Incentive The incentive referred to in 7.1 above with respect to any fortnightshall be in the form of additional return on equity at the rate of 0.575% for every 1%Gincrease in the generation above the normative level of 6000 hours per kWH/KW(i.e68.5% PLF) in accordance with the amendment dated 17.1.94 to the said notificationNo.SO 251(E).”

6 (2000) 3 SCC 379, where it was held pertinently that:

“Section 43 empowers Electricity Board to enter into arrangement for purchaseof electricity on such terms as may be agreed. Section 43-A(1) provides that a generatingcompany may enter into a contract for the sale of electricity generated by it with ElectricityH

agree to terms as they deem appropriate, for generation and sale ofelectricity under Section 43A except that the tariff is to be in accordancewith the provision contained in Section 43A. The decision in BinaniZinc Ltd. v. Kerala State Electricity Board[7]; Tata Power CompanyLtd. vs. Adani Electricity Mumbai Ltd. and Ors.[8] too have taken asimilar approach.

24. Clause 6.5 of the PPA of 03.02.1994 dealt with a situationconcerning change of law. It also stated that any amendment in theCentral Government’s notification dated 30.03.1992 would be taken intoaccount for tariff calculation.[9] The relevant part of the notification of

Board. As regards the determination of tariff for the sale of electricity by a generatingcompany to the Board, Section 43(1)(2) provides that the tariff shall be determined inaccordance with the norms regarding operation and plant load factor as may be laiddown by the authority and in accordance with the rates of depreciation and reasonablereturn and such other factors as may be determined from time to time by the CentralGovernment by a notification in the official gazette. These provision clearly indicate thatthe agreement can be on such terms as may be agreed by the parties except that the tariffis to be determined in accordance with the provision contained in Section 43-A(2)andnotifications issued thereunder. Merely because a contract is entered into in exercise ofan enacting power conferred by a statute that by itself cannot render the contract astatutory contract. If entering into a contract containing prescribed terms and conditionsis a must under the statute than that contract becomes a statutory contract. If a contractincorporate certain terms and conditions in it which are statutory then the said contractto that extent is statutory. A contract may contain certain other terms and conditionswhich may not be of a statutory character and which have been incorporated therein asa result of a mutual agreement between the parties. Therefore, the PPAs can be regardedas statutory only to the extent that they contain provisions regarding determination oftariff and other statutory requirements of Section 43A(2).”

7 (2009) 11 SCC 244

8 2019(7) SCALE 297

9 The stipulation reads as follows:

“6.5 Change in Law: In the event that as a result of any laws or regulationsof any Governmental Authority or any national ,regional or municipal authority thereofcoming into effect after the date hereof, and in force at the date hereof being amended,modified or repealed, the interest of GTEC in the Project and/or GTEC’s projectedeconomic return net of tax (or other imposition) on its investment in the Project ismaterially reduced prejudiced or otherwise adversely affected (including withoutlimitation, any restriction on the ability to convert Rupees or remit funds in foreigncurrencies outside of India) then the parties hereto shall meet and endeavour to agreeon amendments to this Agreement to the effect that all of the increased cost or lost returnon investment incurred by GTEC that would result from complying with or beingsubject to any such change in law shall be passed through to GEB under GTEC Tariff.Any amendment in Government of India Notification No.S.O.251(E)dated 30.3.92 shallbe taken into account for Tariff calculation.”

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A30.03.1992 which dealt with charges recoverable by the generatingcompany was clause 1.6.[10]That condition was amended by the notificationdated 06.11.1995 which clearly stated, by Note(2) that:

“Note:2-For Naptha based thermal plants, the extent ofbacking down, as ordered by Regional Electricity Boards,Bbeyond plant Load Factor of 6000 kwh/kw/year, shall not bereckoned as generation achieved for incentive purpose.”

25. There is no dispute that the PPA which the parties enteredinto specifically referred to the notification of 30.03.1992 and furtherwent on to state that for the first Kwh/KW, a plant load factor of 68.5%Cfixed charges and variable charges were deployed. For generationachieved over and above this by the concerned unit – CLP, an incentive@ 5.75% for every 1% increase over and above the fixed and variablecharge payable was agreed to. Significantly, the fixed and variable chargesare in consonance with the statutory notification of 30.03.1992 (whichwas also later amended on 17.01.1994). This much is clear from a plainDreading of clause 7.1 of the Schedule VII to the PPA itself. In view ofthe fact that the notification amended on 06.11.1995 was a statutoryone, there cannot be any doubt that it was binding upon the parties.Therefore, the earlier notification which left it free to the parties tonegotiate on various aspects, including on the incentive payable, stoodEamended by Note 2, which was added to clause 1.6 of the tariff. Theeffect of this statutory incorporation by way of amendment was thatincentive no longer became payable. The arguments by the CLP, in theopinion of the Court, that the parties were bound only by the terms of theagreement and that the amendment notification being prospective, couldnot have altered the terms of the tariff, especially the incentive payable,Fare insubstantial and have no force. The concurrent findings on thisaspect, therefore, are sound and do not call for interference. Likewise, 10 ‘The said condition in the notification is as follows:

“1.6 Full fixed charges shall be recoverable at generation level of 5500-6000hours/KW/year: Payment of fixed charges below the level of 5500 KWh/KW/year shallGbe on pro-rata basis. There shall not be any payment of fixed charges for generationlevels above 6000 hours./KW/year: However generation above 6000 hours./KW/Yearshall be at negotiated rates between the Generating companies and the Board, whichshall not include fixed cost element. While computing the level of generation, the extentof backing down, as ordered by the Regional Electricity Board shall be reckoned asgeneration achieved. The payment of fixed charges shall be on monthly basis,proportionate to the electricity drawn by the respective Boards. Necessary adjustmentHbased on actual sales and deemed sales shall be made at the end of each year:”

the change of law provision (Clause 6.5 of the PPA) clearly contemplatedthat any amendment to the prevailing tariff notification (dated 30.03.1992)would bind the parties. Since Note (2) was an amendment, which dealtwith the issue of incentive, it cannot now be said that it was inapplicable.The findings of the lower authorities, therefore, are correct; nointerference is called for.

26. The next question is whether the GERC and APTEL fell intoerror in granting restricted refund calculable for the 3 year period priorto Gujarat Urja’s application. The concurred findings on this aspect, inthe opinion of this court, are reasonable. There is merit in CPL’ssubmission that the earliest point in time, when the cause of action arose,was in May,1996, when Gujarat Urja rejected its contention that incentivewas payable in terms of the PPA, notwithstanding the notification of06.11.1995. Despite this stated position, meetings continued to be heldand, what is more, incentive amounts, were paid to CLP. No doubt, nodocument conclusively stated that CLP’s claim was accepted. We donot find any merit in the submission of Gujarat Urja that the issue waskept alive, due to a series of communications. In this regard, APTEL’sfindings about inapplicability of Section 18 of the Limitation Act, arecorrect. There was no admission on the part of CLP, at least of the kind,that extended the time for preferring an application for recovery of excesspayments. It has been consistently ruled by this court that repeated letters,or exchange of communications, do not extend the period of limitation,provided by law.[11]

27. The third, and last issue, is with respect to payment of intereston deemed equity. Clause 1.5 of the 30.03.1992 notification provided forinterest on loan, as a component of tariff; it stipulated that interest (onoutstanding loan) shall be computed as per financial package approvedby the Authority (CEA). The PPA of 03.02.1994 (Schedule VII) clause7.5.10 defined interest on loan capital as the sum of all payments ofinterest along with bank charges and all associated financing costspaid to the bank annually on the outstanding loans paid byGTEC.…” The Central Commission’s order of 21.02.2000 led to astipulation in the tariff regulations of 2001. Eventually, the TariffRegulations of 2004 was brought into force; it provided for a debt ratioof 70:30 for determination of tariff. It also provided that:

11 S.S.Rathore v State of Madhya Pradesh 1989 (4) SCC 582; Union of India v HarDayal 2010 (1) SCC 394; Schlumberger Asia Services Ltd vs. Oil and Natural GasCorporation Ltd. 2013 (7) SCC 562.

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A“Where equity employed is more than 30%, the amount ofequity for determination of tariff shall be limited to 30% andthe balance amount shall be considered as the normative loan”

28. The debt-equity ratio in this case, was disturbed; accordingly` 53.9 crores was treated as “deemed” or normative loan, for which theBparties had to agree the rate of interest payable, in accordance with thetariff notification. It was in the light of these developments that thesupplementary agreement was entered into. That amended the existingPPA, to the following effect[12]:

“The parties have agreed to recognize an amount of Rs.53.90Ccrores as “Own Capital” deployed to meet with the CapitalCost and allowance of Payment of cost in the form of “Costof Own Capital”@ the rate of 14% per annum effective from1.7.2003 and up to 31.12.2009. No payment of any naturewill accrue after the said date on the said amount.”

D29. It is thus apparent, that the parties did not harbor any doubtabout the period for which the specified interest was payable on suchdeemed loan. The rate of interest was fixed; likewise, the date fromwhich payment obligations were to arise, too were known. Also, thedate upto which the interest on such deemed loan payments were to bemade, was known and fixed. In these circumstances, CLP’s claim thatEthe payment of interest for a prior period was outstanding, and constitutedGujarat Urja’s liability, is insubstantial. In a recent judgment[13] a similarissue had arisen. The court quoted from the decision in National ThermalPower Corporation Ltd. v. Madhya Pradesh State Electricity Board[14]where another previous decision was cited with approval on the issueFthat the express provision for something, in an agreement, meant thatother similar matters stood excluded.[15]

12 f.n.1 ibid.

13 Uttar Haryana Bijli Vitran Nigam Ltd.and Ors. vs. Adani Power Ltd. and Ors. 2019(5) SCC 325

14 (2011)15 SCC 580G15 The relevant portions of this court’s observations, in Uttar Haryana (f.n.13 ibid) areas under.:

“25. In this connection, it is material to note that the claim in South EasternCoalfields (2003) 8 SCC 6487 was essentially covered Under Section 61 of the Sale ofGoods Act,1930, and the interest by way of damages was payable as per this statutoryprovision itself. The liability had been crystallised and the interest had become payablebecause of the failure to pay the amount as per the liability. Besides, there was nothingH

CLP INDIA PVT LTD v. GUJARAT URJA VIKAS NIGAM LTD.[S. RAVINDRA BHAT, J.]

30. A somewhat analogous issue, i.e. interest on normative deemedloan (i.e. deemed loan), in the context of changed debt-equity ratios,under tariff regimes was considered in a decision of this court[16], whereit was held that:

“20. In the order of the Appellate Tribunal dated 23.11.2007the matter came to be dealt with under the heading ‘debt equityratio’.The Tribunal went on to accept the case of the Appellantin respect of all old projects of DVC and normative debt equityof 50:50 was assigned, commissioned prior to 1992. In respectof recent projects such as Mejina, it was assigned debt equityratio of 70:30 on capital structure as specified in theRegulations. This finding has become final. It was contendedon behalf of the Appellant that equity has been the primarysource of capital. Thereafter,in paragraph A-10, it was foundby the Appellate Tribunal that owners take upon themselvesbusiness related risk and are entitled to interest on capitalinvestment,but the return is to be governed by the scheme ofdetermination of tariff for the supply of electricity as mandatedby the law in place. The Appellate Tribunal further proceedsto hold that the scheme provides for assured Return on Equity(ROE) which is at the rate of 14% on the equity employed forthe purpose of supplying electricity. The scheme does notpermit return on investment made on projects other than forsupply of electricity to be recovered from supply of electricity.The Tribunal went on to hold that the DVC Act does notrecognise capital as borrowings and there is no referenceabout repayment of such capital to the participatingGovernments. The Appellate Tribunal proceeds to hold thatthe capital infused by participating Governments is in thenature of equity capital and for the determination of tariff,

in the agreement between the parties to the contrary on the issue of grant of interest. Inthe present matter, we have the second proviso to Regulation 79(2) of the 1999Regulations which permitted the generating company to continue to charge the existingtariff for such period as may be specified in the notification by the Commission, and thenotifications permitted continuation of the existing tariff as on 31-3-2001, until the finaltariff was determined. There was no provision for payment of interest therein. The veryfact that interest came to be provided subsequently by a notification under the Regulationsof 2004 is also indicative of a contrary situation in the present matter viz. that interestwas not payable earlier.”

16 Damodar Valley Corporation vs. Central Electricity Regulatory Commission & Ors.2018 (15) SCALE 451.

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the same would be eligible for return on equity but theAppellate Tribunal does not end there. It clearly provides thatthe return on equity is as may be permitted by the tariffRegulation of 2004. It is thereafter that the Appellate Tribunalin para 15 proceeded to hold that the DVC Act provides forinterest on capital which is contributed by the participatingGovernments. The accrued interest due to the Governmentsapparently has been allowed to be retained by the Appellant.The same however came to be ploughed back into the capitalwith the tacit consent of the participating Governments.Thereafter, it is stated that this has to be provided to the DVCas per the provisions of Section 38 of the DVC Act. It isthereafter paragraph A-16 which we have already extracted,the Tribunal proceeded to observe that under the DVC Act ifthere is any deficit in the capital contributed by theparticipating Governments,it is to be made good by takingloan on behalf of the participating Governments. The saiddebt would attract interest. The average interest rate of therepayment payable is to be applied on a 50:50 normative debtcapital. This means that out of the aggregate equity includingreserves, equity considering the normative debt ratio of 50:50would be eligible for return on equity as specified in theRegulations and the excess of equity,if any, over the equityearning ratio of 14% is to be considered as interest bearingdebt. In the example which has been given it is shown that ifthe debt equity ratio is 40:60, return on equity at 14% will beavailable on 50% equity whereas interest would be availableat 10% portion of equity and 40% loan which were reducedby repayments.

21. On the basis of the remand, the Commission has workedout the debt equity ratio as directed by the Appellate Tribunal.It has further provided return on equity at the rate of 14% onthe equity portion, namely 50%. In respect of the debt portion,interest has been calculated no doubt after deductingdepreciation, the legality of which is the subject matter of theother contention which we will deal with separately. It is quiteclear to us that Appellant has already been given return onequity in terms of the tariff Regulation in respect of capitalon the basis of debt equity ratio which has been fixed by theAppellate Tribunal on a ratio which has become final betweenthe parties.

22. Though a perusal of para A-9 of order dated 23.11.2007may appear to show that equity has been found to be themain source of capital, a perusal of paragraph A-10,A-16and more importantly E-13 would show that capital UnderSection 38 of the DVC Act has been understood as the valueof the operating assets when they were first put to commercialuse. Capital is also understood not as equity alone but it hasbeen understood both as loan and equity. The ratio betweenloan and equity is also fixed in respect of the old projects at50:50 and under the new projects it is at 70:30.It is furtherclear from paragraph E-13 of the order of the AppellateTribunal dated 23.11.2007 that the appellate Tribunalcontemplated that the equity component would remain staticand it would earn the rate of return as provided in the tariffRegulation. As far as the loan component is concerned, itwould get reduced on account of repayments. Therefore, therecovery as contemplated under the Regulations was foundto be in two forms, namely, either as return on equity in respectof the equity portion and as interest on the loan component.”

31. In the present case, the clear agreement between the partieswas that interest on the sum of ` 53.90 crores was payable for thespecified period 01.07.2003 to 31.12.2009.Therefore, CLP’s claim thatany amount was payable, for any period prior to 01.07.2003, was nottenable. Had CLP wished so, nothing prevented it to claim for it duringnegotiations and have it included as a term of the contract. Once havingsettled for a specified sum, on an amount (` 53.90 crores) that was onlyfictionally a loan - and treated as such, for purpose of fixing interestpayable, considering the equity infused, in excess of the tariff regulations,the absence of any like item, such as interest for prior period, precludesa claim. But it was really part of the equity component. Therefore, interestwas per se not payable, but could be paid in terms of the tariff notificationor the agreement. No claim on any other legal or equitable considerationscould have been made. The findings of the lower authorities are therefore,sound and reasonable.

32. In view of the foregoing analysis and conclusions, both appealshave to fail. They are accordingly dismissed, without order on costs.

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