Pranav B Prem

The Appellate Tribunal for Electricity (APTEL), single-member bench of Virender Bhat (Judicial Member), has held that the contractual terms under a Power Purchase Agreement (PPA) remain binding on the parties throughout its tenure, unless expressly overridden by subsequent regulations. The Tribunal set aside the Uttar Pradesh Electricity Regulatory Commission’s (UPERC) order that had quashed an invoice raised by the appellant for Late Payment Surcharge (LPS), and upheld the validity of the invoice.

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Background

The appellant, Rosa Power Supply Company Ltd., owns and operates a coal-based thermal power plant in Uttar Pradesh and had entered into a PPA with Uttar Pradesh Power Corporation Ltd. (UPPCL). Clause 12.17 of the PPA, aligned with the UPERC (Terms and Conditions of Generation Tariff) Regulations, 2004 (“2004 Regulations”), required payment of dues within 30 days from the date of invoice, failing which LPS at 1.25% per month would be levied on the outstanding amount.

On 4 January 2019, the appellant raised an invoice for ₹129.77 crore towards LPS for delayed payment of electricity dues. UPPCL challenged this invoice before UPERC, contending that it violated Regulation 41 of the UPERC (Terms and Conditions of Generation Tariff) Regulations, 2014 (“2014 Regulations”), which prescribed a 60-day trigger period for levy of LPS. UPERC accepted UPPCL’s contention, holding that the 2014 Regulations, being later in time, would override the PPA terms and that the appellant’s invoice was contrary to the prevailing regulations. The Commission set aside the invoice through its order dated 4 May 2020.

Appellant’s Case

Challenging the order, the appellant argued:

• The petition before UPERC was not maintainable as UPPCL had bypassed the dispute resolution mechanism under Clause 12.14 of the PPA, which required amicable settlement before approaching the Commission.

• The 2014 Regulations could not override the contractual terms of the PPA, which had been executed in compliance with the 2004 Regulations then in force and continued to bind the parties for its entire duration.

Tribunal’s Findings on Dispute Resolution

The Tribunal first examined whether the dispute resolution process had been followed. It noted that the letters dated 28 March 2018, 7 June 2018, and 2 February 2019 sent by UPPCL to the appellant merely stated that the LPS levy was not in line with the 2014 Regulations. These communications did not indicate any willingness to amicably resolve the dispute as required under Clause 12.14. The APTEL held that UPERC erred in entertaining the petition without directing the parties to first follow the agreed dispute resolution mechanism.

Tribunal’s Findings on Applicability of 2014 Regulations

On the merits, the Tribunal observed that the PPA was executed after due negotiations between parties with equal bargaining power and within the framework of the 2004 Regulations. Clause 12.17, prescribing a 30-day trigger period for LPS, was consistent with Section 26 of the 2004 Regulations.

The 2014 Regulations did not expressly state that they would apply retrospectively to existing PPAs. APTEL reiterated that unless subsequent tariff regulations explicitly override existing contracts, the original contractual terms remain binding. Thus, the 30-day period under Clause 12.17 continued to apply for the life of the PPA, unaffected by the change to 60 days under the 2014 Regulations.

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Holding the 4 January 2019 invoice to be legally valid and payable, the Tribunal allowed the appeal, set aside the UPERC order, and upheld the appellant’s entitlement to recover LPS as per the PPA terms. The APTEL reaffirmed that the sanctity of PPAs must be preserved, and their terms, if lawfully executed under prevailing regulations, cannot be unilaterally altered by later regulatory changes unless expressly provided.

Appearance

Counsel for the Appellant(s): Sajan Poovayya, Sr. Adv., Shri Venkatesh, Nishtha Kumar, Somesh Srivastava, Vikas Maini, Suhael Buttan, Ashutosh Kumar Srivastava, Abhiprav Singh, Lasya Pamidi  

Counsel for the Respondent(s): Nalin Kohli (Senior Advocate), Shankh Sengupta, Abhishek Kumar, Nived Veerapaneni, Karan Arora, Shubham Mudgil, Kartikeya Yadav, Sujoy Sur, Vedant Kumar, Sumit Panwar, Advocates.

Cause Title: Rosa Power Supply Co. Ltd. v. Uttar Pradesh Power Co. Ltd.

Case No: Appeal No. 107 of 2020

Coram: Virender Bhat [Judicial Member]