Supreme Court clarifies scope of ‘future disputes’ in power purchase agreements: Nabha Power Ltd vs. Punjab State Power Corporation Ltd (2023)

Date of the Judgment: October 09, 2023
Citation: 2023 INSC 883
Judges: Sanjay Kishan Kaul, J., Sudhanshu Dhulia, J., Aravind Kumar, J.
Can a party repeatedly raise the same issues under the guise of “future disputes” to avoid fulfilling contractual obligations? The Supreme Court of India recently addressed this question in a dispute arising from a power purchase agreement, clarifying the scope of what constitutes a ‘fresh dispute’ versus a continuation of previously settled matters. This judgment emphasizes the importance of adhering to court orders and contractual agreements, preventing parties from circumventing their responsibilities through repeated litigation. The bench was composed of Justices Sanjay Kishan Kaul, Sudhanshu Dhulia, and Aravind Kumar, with the judgment authored by Justice Sanjay Kishan Kaul.

Case Background

This case involves a dispute between Nabha Power Limited (NPL), the appellant, and Punjab State Power Corporation Limited (PSPCL), the respondent, regarding deductions made by PSPCL from monthly tariff payments. The core issue revolves around the calculation of coal costs and the Gross Calorific Value (GCV) of coal used for power generation. The dispute originated from a power purchase agreement (PPA) between the parties. NPL contended that PSPCL was incorrectly calculating the costs, leading to underpayment. This matter had previously reached the Supreme Court, which ruled in favor of NPL on certain aspects, including the calculation of coal washing costs and the GCV of coal at the project site. Despite the Supreme Court’s judgment, PSPCL continued to raise objections, leading to multiple contempt petitions and further litigation.

Timeline

Course of Proceedings

Following the Supreme Court’s initial judgment on 05.10.2017, PSPCL attempted to delay payment through various means. They filed an application for the State Commission to determine the payable amount, which was dismissed by the Supreme Court. A review petition was also dismissed. Subsequently, NPL filed a contempt petition due to non-payment. The Supreme Court, in its order dated 07.08.2019, reiterated that the judgment should be followed in letter and spirit and directed payment within eight weeks. PSPCL then filed an application seeking determination of the amount by an appropriate authority, which was also dismissed. Despite these setbacks, PSPCL filed a petition before the Regulatory Commission seeking approval to recover the payments from consumers and also issued a notice of dispute to NPL. The Supreme Court, in its second contempt petition on 09.03.2021, found PSPCL guilty of contempt and directed payment in two installments. Following this, PSPCL filed another petition before the Regulatory Commission, which was deemed maintainable, leading to the current appeal before the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation and implementation of the Supreme Court’s judgment dated 05.10.2017, which dealt with the calculation of coal costs and GCV under the Power Purchase Agreement (PPA). The Electricity Act, 2003, particularly Section 86(1)(a) and Section 62, are also relevant, as PSPCL invoked these provisions in its petition before the Regulatory Commission.

The Supreme Court’s judgment dated 05.10.2017, clarified that:

• The appellant is entitled to the washing cost of coal.
• The GCV of the coal should be taken at the project site.

The relevant sections of the Electricity Act, 2003 are:

• Section 86(1)(a): “The State Commission shall discharge the following functions, namely—(a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be”
• Section 62: “Determination of tariff.—(1) The State Commission shall determine the tariff in accordance with the provisions of this Act for— (a) supply of electricity by a generating company to a distribution licensee: Provided that the terms and conditions of tariff for supply of electricity by a generating company to a distribution licensee under an agreement entered into prior to the commencement of this Act shall continue to be governed by the terms of such agreement”

Arguments

Appellant (Nabha Power Limited) Arguments:

• NPL contended that PSPCL was attempting to re-litigate issues that had already been settled by the Supreme Court’s judgment dated 05.10.2017 and subsequent orders.
• They argued that the issues raised by PSPCL regarding the GCV of coal, washing costs, and the alleged discrepancies in coal quality were not new disputes but were merely an attempt to evade payment obligations.
• NPL highlighted that PSPCL had raised these issues in previous proceedings, including the contempt petitions, and that they had been rejected by the Supreme Court.
• They asserted that the liberty granted by the Supreme Court in its order dated 09.03.2021, to raise “future disputes,” did not allow PSPCL to reopen matters that had already been decided.

Respondent (Punjab State Power Corporation Limited) Arguments:

• PSPCL argued that the order dated 09.03.2021, in the second contempt petition, allowed them to raise fresh disputes before the Regulatory Commission.
• They contended that there were discrepancies in the records maintained for the GCV of unwashed and washed coal, and that the reject coal was more than anticipated.
• PSPCL alleged that NPL had inflated the cost of coal by diverting good quality coal as rejects during the washing process, leading to a mismatch in GCV and higher financial commitments for PSPCL.
• They submitted that the washing of coal was done by a washing operator of the appellant though it was approved by the respondent.
• PSPCL argued that they were remediless if they could not raise these issues before the Regulatory Commission.

Innovativeness of the argument: The respondent’s argument was innovative in that they tried to use the “future disputes” clause to reopen settled issues.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was whether the petition filed by PSPCL before the Regulatory Commission was maintainable, given the previous judgments and orders of the Supreme Court. Specifically, the Court had to determine:

1. Whether the issues raised by PSPCL in its petition before the Regulatory Commission constituted a “fresh dispute” or were merely a continuation of previously settled matters.
2. Whether the liberty granted by the Supreme Court to raise “future disputes” allowed PSPCL to reopen issues already decided by the Court.

Treatment of the Issue by the Court

Authorities

The Supreme Court primarily relied on its previous judgment in Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and Anr. (2018) 11 SCC 508, Supreme Court of India, which had already adjudicated the core issues of coal washing costs and GCV calculation. The Court also considered its subsequent orders in the various applications and contempt petitions filed by the parties.

Judgment

The Court relied on the following authorities:

• Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and Anr. (2018) 11 SCC 508: The Supreme Court referred to its previous judgment to emphasize that the core issues of coal washing costs and GCV calculation had already been settled. The Court stated that “the judgment has to be followed, both in letter and in spirit, by working the formula as aforesaid, and consequently, deleting alien figures in both numerator and denominator.”

What weighed in the mind of the Court?

The Supreme Court’s reasoning was primarily driven by the need to ensure that its orders are respected and that parties do not use legal loopholes to evade their obligations. The Court emphasized that the main judgment dated 05.10.2017, and subsequent orders had clearly settled the issues related to coal costs and GCV calculation. The Court was concerned that PSPCL was repeatedly attempting to re-litigate these settled issues under the guise of “future disputes.” The Court noted that PSPCL’s actions were a deliberate attempt to delay payments and circumvent the Supreme Court’s orders.

The Court’s sentiment was that the respondent was trying to delay the payment of the dues by raising the same issues again and again.

The Court’s reasoning was based more on the legal principle of finality of judgments and the need to prevent abuse of the legal process.

Logical Reasoning

The Court considered the argument that the liberty to approach the Regulatory Commission arose from the contract itself but clarified that this liberty could not be used to reopen issues that had already been closed by the Supreme Court’s previous judgments and orders. The Court emphasized that the intention was to allow for future disputes arising after the order dated 09.03.2021, and not to re-litigate past issues. The Supreme Court rejected the argument that the discrepancies in the GCV records constituted a fresh dispute, stating that these issues were part of the core dispute already adjudicated.

The Court’s decision was unanimous. The Court stated, “The liberty granted by the order dated 09.03.2021 cannot be construed to seek refund of the amount paid under the orders passed by this Court from time to time.” The Court further clarified that “The future dispute, thus, must have a reference to a period after the date of the order dated 09.03.2021.” The Court also noted that “the payments were made in terms of the imprimatur granted by this Court as to the quantum and, thus, what was sought to be done was to really reopen the same issue.”

Key Takeaways

• Parties cannot use the guise of “future disputes” to re-litigate issues already settled by the courts.
• Court orders must be respected, and attempts to circumvent them will not be tolerated.
• The concept of “future disputes” applies to issues arising after a specific order, not to reopen past matters.
• Commercial contracts must be interpreted in a manner that promotes finality and avoids repeated litigation.

Directions

The Supreme Court allowed the appeals and set aside the impugned order of the Regulatory Commission. The Court also imposed costs of Rs. 40 lakhs on PSPCL in favor of Nabha Power Limited and Rs. 25 lakhs in favor of Talwandi Sabo Power Limited, to be paid within four weeks.

Development of Law

The ratio decidendi of this case is that the concept of “future disputes” cannot be used to reopen issues that have already been adjudicated by the courts. This case reinforces the principle of finality of judgments and clarifies that attempts to circumvent court orders will not be tolerated. There is no change in the previous position of law but the case clarifies the scope of “future disputes”.

Conclusion

The Supreme Court’s judgment in Nabha Power Limited vs. Punjab State Power Corporation Limited reinforces the importance of respecting court orders and adhering to contractual agreements. It clarifies that parties cannot repeatedly raise the same issues under the guise of “future disputes” to avoid fulfilling their obligations. The judgment serves as a reminder that the legal system is designed to ensure finality and prevent the abuse of the process through repeated litigation.

Category

• Contract Law
  • Power Purchase Agreement
  • Interpretation of Contracts
• Electricity Law
  • Electricity Act, 2003
  • Section 86(1)(a), Electricity Act, 2003
  • Section 62, Electricity Act, 2003
• Civil Procedure
  • Contempt of Court
  • Res Judicata
• Supreme Court Judgments
  • Enforcement of Judgments

FAQ

Q: What was the main issue in the Nabha Power Limited vs. Punjab State Power Corporation Limited case?

A: The main issue was whether Punjab State Power Corporation Limited (PSPCL) could raise issues related to coal costs and Gross Calorific Value (GCV) before the Regulatory Commission, despite the Supreme Court having already ruled on these matters in a previous judgment.

Q: What did the Supreme Court decide in its initial judgment in 2017?

A: In its initial judgment, the Supreme Court ruled that Nabha Power Limited (NPL) was entitled to the washing cost of coal and that the GCV of coal should be taken at the project site.

Q: What does the term “future disputes” mean in this context?

A: In this context, “future disputes” refers to issues that arise after a specific court order (in this case, the order dated 09.03.2021). It does not allow parties to reopen matters that have already been decided by the court.

Q: Can a party repeatedly raise the same issues under the guise of “future disputes”?

A: No, the Supreme Court clarified that parties cannot use the guise of “future disputes” to re-litigate issues that have already been settled by the courts.

Q: What was the outcome of the Supreme Court’s judgment in this case?

A: The Supreme Court allowed the appeals by Nabha Power Limited, set aside the order of the Regulatory Commission, and imposed costs on Punjab State Power Corporation Limited (PSPCL) for attempting to re-litigate settled issues.

Q: What is the practical implication of this judgment?

A: The practical implication is that parties must respect court orders and cannot use legal loopholes to evade their obligations. It reinforces the principle of finality of judgments and prevents the abuse of the legal process through repeated litigation.