TMI Blog2020 (5) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... e 6.5 of the PPA) clearly contemplated that any amendment to the prevailing tariff notification (dated 30.03.1992) would bind the parties. Since Note (2) was an amendment, which dealt with the issue of incentive, it cannot now be said that it was inapplicable. The findings of the lower authorities, therefore, are correct; no interference is called for. Whether the GERC and APTEL fell into error in granting restricted refund calculable for the 3 year period prior to Gujarat Urja's application? - HELD THAT:- 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 excess payments. 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. Payment of interest on deemed equity - HELD THAT:- The parties did not harbor any doubt about the period for which the specified interest was payable on such deemed loan. The rate of interest was fixed; likewise, the date from which payment obligations were to arise, too were known. Also, the date upto which the interest on such deemed loan payments were to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 43(A) of the Electricity Supply Act, 1948, (hereafter the Act ), a generating company may enter into a contract for the sale of electricity with the Electricity Board and the tariff for the sale of electricity shall be determined by the authority through the notification issued by the Central Government. Prior the PPA in this case, the Central Government had issued a notification under Section 43A, on 30.03.1992, specifying the controlling norms, terms and conditions for determination of tariff for sale of electricity by the generating company to the Electricity Boards. One of those conditions was the provision for incentive to units using naphtha. On 17.01.1994, an amendment to the notification dated 30.03.1992 was made providing for Note (1) stating that the incentive for generation above the target availability of 68.49% for fixed cost recovery was to be capped. 3. After the signing of the PPA between the parties, an amendment notification dated 06.11.1995 was issued by the Central Government amending the notification (dated 30.03.1992). By this, the Central Government provided that there would no longer be any deemed Generation Incentive payable to any gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and finally resolved. Gujarat Urja continued to pay deemed generation incentive from 05.12.2003 to 23.02.2005. In February, 2005, a high-level committee was constituted to examine the issue of recovery of excess payouts made on the basis of deemed generation incentive. The receipt of the report, of that committee, led Gujarat Urja to file an application for recovery of the amounts from CLP (Petition No.874/2006 under Section 86(1)(f) of the Act, before the Gujarat Electricity Regulatory Commission ( GERC ), claiming for recovery of deemed generation incentive paid to CLP during the period from 1997-98 to 2005- 06. 5. CLP resisted Gujarat Urja's application, contending that principles of estoppel precluded recovery; that in any event, parties had not agreed to change the terms of the PPA and that the previous correspondence evidenced that the matter had been closed, which meant that Gujarat Urja could not claim recovery of any so-called excess amounts. The GERC, by its order held that Note 2 (introduced by the notification of 06.11.1995) was applicable to the project and thus deemed generation incentive is not payable to CLP. However, it permitted recovery of only for a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan capital shall be computed on the outstanding loans, duly taking into account the schedule of repayment as per the financial package approved by the Authority or an appropriate 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 generating stations, declared under commercial operation on or after 1.4.2004,debt-equity ratio as on the date of commercial operation shall be 70:30 for determination of tariff. Where equity employed is more than 30%,the amount of equity for determination of tariff shall be limited to 30% and the balance amount shall be considered as the normative loan. Provided that in case of a generating station where actual equity employed is less than 30%, the actual debt and equity shall be considered for determination of tariff. (2) The debt and equity amount arrived at in accordance with clause (1) shall be used for calculating interest on loan, return on equity, Advance against Depreciation and Foreign Exchange Rate Variation. 10. Gujarat Urja resisted this claim. After adjudication, the GERC rejected the CLP's argument on a plain readin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period 2003. It appealed to the APTEL (Appeal No.44/2009). The APTEL concurred with the decision of the GERC and held that clause 7.5.14(a) of the supplementary agreement did not oblige Gujarat Urja to refund interest paid upon the deemed loan component upon the equity portion treated as deemed loan, i.e. ₹ 53.9 crores for any period prior to 01.07.2003. Therefore, CLP's appeal was rejected. It, therefore, has appealed to this Court on the said findings. Analysis and Findings 14. Section 43A of the Electricity (Supply) Act, 1948 (hereafter the Supply Act ) reads as follows: ＂43A. Terms, conditions and tariff for sale of electricity by Generating Company.- （1) A Generating Company may enter into a contract for the sale of electricity generated by it- （a) with the Board constituted for the State or any of the States in which a generating station owned or operated by the company is located; （b) with the Board constituted for any other State in which it is carrying on its activities in pursuance of sub-section(3) of section 15A; and (c) with any other person with consent of the competent government or governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties and CLP was aware of the fact that the Central Electricity Authority and the Central Government had taken decisions on this aspect. Moreover, as a matter of law, by reason of the amendment, to the notification (dated 06.11.1995), CLP could not have legitimately claimed more tariff based on the incentive policy that was no longer applicable. Therefore, the amounts paid to the extent they were not in conformity with the said amendment, had to be refunded in entirety. 17. On behalf of CLP it was urged, by Mr. Sajan Poovayya, learned senior counsel, that both the authorities below erred in their interpretation of the terms of the PPA, the notification of 30.03.1992 and the amendment of 06.11.1995. It was argued that CLP's generation station is gas-based and not a Naphtha based station. The notification dated 06.11.1995 applied only to 100% Naphtha based stations and not to gas based stations like that of CLP, where Naphtha was used as a secondary fuel when the Gas was not available. The expression Naphtha based station used in the notification is a term of art; it refers merely to the physical characteristic of the plant and not to the nature of fuel to be used. It was fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in power station for generating electricity fuel management' is defined as follows: ＂Fuel Management:-The power station of the GTEC is designed to use natural gas and liquid fuel as fuel. GTEC shall decide selection and use and proportion gas and other fuel in best economic way depending on the situation from time to time. 21. The kind of alternative fuel and its long-term purchase contract could be jointly decided by CLP and Gujarat Urja. The cost of the alternate fuel when used by CLP shall be taken into account for calculation of variable charges as defined in Schedule VII (of the PPA). Clause 7.1 and Clause 7.4 of Schedule VII to the PPA are relevant. For convenience,they are set out as follows: ＂7.1 Tariff GEB shall purchase power from GTEC, generally on the basis of GOI notification No.SO 251(E) dtd. 30-3-1992. The Tariff for the first 6,000 kWH/KW (i.e. 68.5 PLF) of Net Availability in any year during the terms of this Agreement shall be the sum of （a)the Fixed Charge and (b) the Variable Charge. For all the energy of actual and deemed generation in excess of 68.4 % PLF in any Year ,the Tariff payable by GEB shall be the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such other factors as may be determined from time to time by the Central Government by a notification in the official gazette. These provision clearly indicate that the agreement can be on such terms as may be agreed by the parties except that the tariff is to be determined in accordance with the provision contained in Section 43-A(2)and notifications issued thereunder. Merely because a contract is entered into in exercise of an enacting power conferred by a statute that by itself cannot render the contract a statutory contract. If entering into a contract containing prescribed terms and conditions is a must under the statute than that contract becomes a statutory contract. If a contract incorporate certain terms and conditions in it which are statutory then the said contract to that extent is statutory. A contract may contain certain other terms and conditions which may not be of a statutory character and which have been incorporated therein as a result of a mutual agreement between the parties. Therefore, the PPAs can be regarded as statutory only to the extent that they contain provisions regarding determination of tariff and other statutory requirements of Section 43A(2). is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not include fixed cost element. While computing the level of generation, the extent of backing down, as ordered by the Regional Electricity Board shall be reckoned as generation achieved. The payment of fixed charges shall be on monthly basis, proportionate to the electricity drawn by the respective Boards. Necessary adjustment based on actual sales and deemed sales shall be made at the end of each year: That condition was amended by the notification dated 06.11.1995 which clearly stated, by Note(2) that: ＂Note:2-For Naptha based thermal plants, the extent of backing down, as ordered by Regional Electricity Boards, beyond plant Load Factor of 6000 kwh/kw/year, shall not be reckoned as generation achieved for incentive purpose. 25. There is no dispute that the PPA which the parties entered into specifically referred to the notification of 30.03.1992 and further went on to state that for the first Kwh/KW, a plant load factor of 68.5% fixed charges and variable charges were deployed. For generation achieved over and above this by the concerned unit CLP, an incentive @ 5.75% for every 1% increase over and above the fixed and variable charge payable was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of Section 18 of the Limitation Act, are correct. 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 excess payments. 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. S.S.Rathore v State of Madhya Pradesh 1989 (4) SCC 582; Union of India v Har Dayal 2010 (1) SCC 394; Schlumberger Asia Services Ltd vs. Oil and Natural Gas Corporation Ltd. 2013 (7) SCC 562 27. The third, and last issue, is with respect to payment of interest on deemed equity. Clause 1.5 of the 30.03.1992 notification provided for interest on loan, as a component of tariff; it stipulated that interest (on outstanding loan) shall be computed as per financial package approved by the Authority (CEA). The PPA of 03.02.1994 (Schedule VII) clause 7.5.10 defined interest on loan capital as＂the sum of all payments of interest along with bank charges and all associated financing costs paid to the bank annually on the outstanding loans paid by GTEC. The Central Commission's order of 21.02.2000 led to a stipulation in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Sale of Goods Act,1930, and the interest by way of damages was payable as per this statutory provision itself. The liability had been crystallised and the interest had become payable because of the failure to pay the amount as per the liability. Besides, there was nothing in the agreement between the parties to the contrary on the issue of grant of interest. In the present matter, we have the second proviso to Regulation 79(2) of the 1999 Regulations which permitted the generating company to continue to charge the existing tariff for such period as may be specified in the notification by the Commission, and the notifications permitted continuation of the existing tariff as on 31-3-2001, until the final tariff was determined. There was no provision for payment of interest therein. The very fact that interest came to be provided subsequently by a notification under the Regulations of 2004 is also indicative of a contrary situation in the present matter viz. that interest was not payable earlier. 30. A somewhat analogous issue, i.e. interest on normative deemed loan (i.e. deemed loan), in the context of changed debt-equity ratios, under tariff regimes was considered in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVC as per the provisions of Section 38 of the DVC Act. It is thereafter paragraph A-16 which we have already extracted, the Tribunal proceeded to observe that under the DVC Act if there is any deficit in the capital contributed by the participating Governments,it is to be made good by taking loan on behalf of the participating Governments. The said debt would attract interest. The average interest rate of the repayment payable is to be applied on a 50:50 normative debt capital. This means that out of the aggregate equity including reserves, equity considering the normative debt ratio of 50:50 would be eligible for return on equity as specified in the Regulations and the excess of equity,if any, over the equity earning ratio of 14% is to be considered as interest bearing debt. In the example which has been given it is shown that if the debt equity ratio is 40:60, return on equity at 14% will be available on 50% equity whereas interest would be available at 10% portion of equity and 40% loan which were reduced by repayments. 21. On the basis of the remand, the Commission has worked out the debt equity ratio as directed by the Appellate Tribunal. It has further provided ret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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