While upholding Tata Power’s liability only to the extent of liquidated damages of Rs. 2.02 crores payable to the ESCOMs under the Power Purchase Agreement (PPA), the Appellate Tribunal for Electricity (APTEL) has set aside the Karnataka Electricity Regulatory Commission’s findings holding Tata Power liable for compensation for gaming, UI charges, and open access charges. It also set aside the approval given to deductions of UI-related amounts from invoices under subsequent PPAs.
The Tribunal held that a regulatory authority cannot impose liability or grant monetary relief beyond the pleadings and prayers of the parties. Where the respondents had given up claims for UI charges and open access charges, and had not sought compensation for gaming by way of counterclaim, the Commission could not nevertheless award those amounts against the trader. The Tribunal also held that equitable set-off cannot be used to deduct alleged dues arising under one PPA from payments due under separate later PPAs unless the claims arise from the same transaction or are so closely connected that equity justifies it, and even then such set-off is not automatic and requires proper adjudication.
Importantly, the Tribunal clarified that under Article 6.2.4 of the PPA, liquidated damages for short supply are to be computed on the shortfall beyond the permitted 15% deviation, meaning the difference between 85% of contracted capacity and actual energy injected, and not on the basis suggested by the appellant. The Tribunal therefore upheld the liquidated damages component while rejecting the other heads of liability.
On the allegation of “gaming”, the Coram of Seema Gupta (Officiating Chairperson) and Virender Bhat (Judicial Member) found that the Commission had erred both in holding Tata Power guilty of gaming and in directing it to pay compensation on that basis. The Tribunal noted that the Commission itself understood gaming in this case to mean an intentional failure to timely revise the energy schedule in order to secure undue commercial gain. The Tribunal observed that Tata Power was only a trading licensee and not the generator. Therefore, the responsibility to provide a revised schedule when generation became impossible or reduced lay primarily with the generator, Shantha Projects. The Commission failed to properly appreciate this distinction, especially when even the respondent side had stated that the generator had not revised the schedule.
The Tribunal also held that even assuming gaming could be alleged, the Commission could not have awarded compensation for gaming in the absence of any counterclaim or prayer by the ESCOMs seeking such relief. A judicial or regulatory forum cannot grant a relief that was never specifically pleaded or sought. On this ground alone, the compensation for gaming was unsustainable.
On liquidated damages under Article 6.2.4 of the PPA, however, the Tribunal agreed with the Commission’s interpretation. It held that where deviation from the seller’s side exceeds 15% of contracted energy, compensation at 20% of tariff per kWh is payable on the shortfall beyond the permitted 15% deviation. Therefore, the correct basis was the gap between 85% of contracted capacity and the actual energy injected into the grid, provided open access had been allocated on that basis.
The Tribunal rejected Tata Power’s argument that damages should instead be calculated by comparing 85% of contracted energy with the scheduled energy. It held that this interpretation directly conflicted with the text of Article 6.2.4, and therefore the Commission’s view on liquidated damages was correct. On UI charges, the Tribunal found a serious contradiction in the Commission’s reasoning. The Commission itself had recorded that the ESCOMs had given up their claims towards UI charges and open access charges. Once that was the recorded position, the Commission could not still fasten UI liability on Tata Power.
The Tribunal further noted that the Commission had also held that the ABT order or UI Regulations, 2009 were not applicable in their entirety to this dispute. In that situation, Tata Power could not have been made liable under those principles in the manner the Commission had done. Although Article 4.2.3 of the PPA contemplated accounting of variation through UI, the Tribunal ultimately held that UI charges could not be awarded here because the ESCOMs had abandoned that claim in the proceedings.
On open access charges, the Tribunal held that there were no pleadings or prayers by Tata Power concerning such charges, and the Commission itself had noted that the ESCOMs had not claimed reimbursement of open access charges and had given up that claim. Even then, the Commission discussed and awarded them. That amounted to going beyond the pleadings and reliefs before it, which the Tribunal found impermissible. On BESCOM’s deduction of Rs. 1,56,44,949 from payments under later PPAs, the Tribunal held that such deduction was invalid. Since UI charges themselves were not payable to the ESCOMs in the circumstances of this case, their deduction from later invoices could not be sustained.
The Tribunal also held that, in any case, such adjustment could not be justified as equitable set-off because the claim under the 2013 PPA and the bills under the later 2014 and 2015 PPAs did not arise from the same transaction. Referring to Jitendra Kumar Khan v. Peerless General Finance & Investment Co. Ltd. [(2013) 8 SCC 769], the Tribunal emphasized that equitable set-off is not a matter of right and ordinarily requires cross-demands arising from the same transaction or closely connected circumstances, along with adjudication by the competent forum before deduction.
Briefly, Tata Power Trading Company Limited, a licensed electricity trader, challenged the Karnataka Electricity Regulatory Commission’s order dated Aug 01, 2017, whereby the Commission had held Tata Power liable to pay compensation to Karnataka ESCOMs for short supply of electricity under a short-term Power Purchase Agreement dated Sep 06, 2013, along with UI charges, open access charges, and additional compensation on the ground of alleged “gaming.”
The underlying dispute arose from a 2013 tender floated for short-term procurement of 500 MW RTC power in Karnataka. Tata Power emerged as a successful bidder and was awarded supply of 57 MW from multiple generating sources. One component of this supply was 10 MW to be sourced from Shantha Projects Limited from Nov 11, 2013 to March 31, 2014, and the parties entered into the PPA dated Sep 06, 2013 at a firm tariff of Rs. 5.50 per unit.
According to the record, Shantha Projects failed to supply the required quantum during November–December 2013 due to alleged grid disturbances and transformer tripping. Because of this, the total scheduling under the PPA fell below 85% of the contracted quantity in a month. The ESCOMs then raised compensation demands against Tata Power under Article 6.2.4 of the PPA and also adjusted amounts from Tata Power’s invoices under subsequent PPAs. Further claims were raised by BESCOM and others, including excess payment towards scheduled energy, higher-cost replacement power, UI-related claims, and encashment of Tata Power’s performance bank guarantee. Later, BESCOM also deducted Rs. 1.56 crores from Tata Power’s March 2015 bill under later PPAs, asserting dues connected to the earlier 2013 transaction.
Tata Power approached the Commission seeking declarations that the deductions and recoveries were illegal, refund of deducted amounts with surcharge, refund of compensation recovered for November and December 2013 on the basis of force majeure, and a declaration that the ESCOMs could not recover amounts beyond what was permitted under the PPAs. The Commission framed issues on applicability of intra-state ABT/UI principles, liability for short delivery, force majeure, alleged gaming, validity of deductions and bank guarantee encashment, and validity of deduction from later PPAs. It then held Tata Power liable for UI charges, liquidated damages, open access charges, and compensation for gaming, although it also accepted limited force majeure for six hours in each of November and December 2013.
