Supreme Court settles liability for Bay construction costs in power transmission agreement: HPPTC Ltd vs. Brua Hydrowatt Pvt. Ltd. (2025)

Introduction

Date of the Judgment: May 14, 2025

Citation: 2025 INSC 680

Judges: Abhay S. Oka, J., Augustine George Masih, J.

When multiple power companies share infrastructure, who is responsible for the costs? The Supreme Court of India addressed this question in a dispute over the construction costs of a “Bay” (a connection point in a power transmission system). The court clarified the responsibilities of different parties involved in a joint power project, specifically focusing on which company is liable for the construction costs of the Bay. The judgment was delivered by a two-judge bench comprising Justice Abhay S. Oka and Justice Augustine George Masih.

Case Background

The case revolves around the Brua Hydro Electric Project (BHEP) in Himachal Pradesh. Initially planned as a 5 MW project, it was later expanded to 9 MW. The project involved multiple companies sharing a connection point (the Bay) at a 66kV Switching Station at Urni. A dispute arose regarding who should bear the cost of constructing this Bay.

The Himachal Pradesh Government had an agreement with HP Power Transmission Corporation Ltd (HPPTC Ltd) to establish the BHEP. Brua Hydrowatt Pvt. Ltd (BHP Ltd), along with Darjeeling Power Pvt Ltd and Roura Non-Conventional Energy Pvt Ltd, were the generating companies involved.

Initially, the interconnection was planned at Karcham, but it was later modified to Urni. BHP Ltd applied for connectivity, which was approved, leading to a Connection Agreement in 2014. However, HPPTC Ltd later allowed BHP Ltd to use an alternative line temporarily, requiring BHP Ltd to pay a per-unit charge for this interim arrangement.

In 2019, the three generating companies (BHP Ltd, Darjeeling Power Pvt Ltd, and Roura Non-Conventional Energy Pvt Ltd) entered into an Internal Tripartite Agreement (ITA) to share transmission charges, including the cost of the Bay. BHP Ltd was to handle claims and payments, with the other companies reimbursing their share.

In 2021, HPPTC Ltd and BHP Ltd entered into a revised Connection Agreement (CA), making BHP Ltd liable for all payments, including the Bay’s construction cost. When HPPTC Ltd demanded payment for the Bay’s construction, BHP Ltd sought contributions from the other companies. After Roura Non-Conventional Energy Pvt Ltd failed to pay, BHP Ltd offered to pay its share and Darjeeling Power Pvt Ltd’s share, but HPPTC Ltd rejected this, leading to the dispute.

Timeline:

Course of Proceedings

BHP Ltd initially filed a petition with the Himachal Pradesh Electricity Regulatory Commission (State Commission) when HPPTC Ltd demanded the entire construction cost for the Bay. The State Commission dismissed BHP Ltd’s petition, stating that BHP Ltd, as the lead partner, was responsible for the payment, and any recovery from the other companies was an internal matter.

Aggrieved by this order, BHP Ltd appealed to the Appellate Tribunal for Electricity (APTEL). APTEL reversed the State Commission’s findings, stating that the Connection Agreement did not explicitly state that BHP Ltd agreed to pay the entire Bay charges on behalf of the other companies. APTEL directed HPPTC Ltd to provide connection to BHP Ltd and Darjeeling Power Pvt Ltd upon payment of their respective shares.

HPPTC Ltd then appealed to the Supreme Court, challenging the APTEL’s judgment.

Legal Framework

The case involves the interpretation and application of several legal provisions:

• Section 2(28) of the Electricity Act, 2003: Defines a “generating company.”
• Section 86(1)(f) of the Electricity Act, 2003: Deals with the functions of the State Electricity Regulatory Commission, including adjudicating disputes between licensees and generating companies.
• Section 158 of the Electricity Act, 2003: Provides for the determination of disputes.
• Section 111 of the Electricity Act, 2003: Pertains to appeals to the Appellate Tribunal for Electricity.
• Regulations 53, 68, and 70 of the Himachal Pradesh Electricity Regulatory Commission (Conduct of Business) Regulations, 2005: Govern the conduct of business by the Commission.

The core of the legal framework involves interpreting the agreements between the parties, including the Connection Agreement and the Internal Tripartite Agreement, within the context of the Electricity Act, 2003.

Arguments

Arguments by HPPTC Ltd:

• HPPTC Ltd argued that the Internal Tripartite Agreement (ITA) designated BHP Ltd to act on behalf of the other generating companies, with the mandate limited to recovering proportionate charges from them.
• HPPTC Ltd contended that BHP Ltd was the sole applicant in the Connection Agreement (CA) for payment of charges.
• HPPTC Ltd asserted that, as a stranger to the ITA, it could not seek or enforce recovery of charges from Respondent No. 02 and Respondent No. 03, which APTEL failed to appreciate.
• HPPTC Ltd argued that the execution of the O&M Agreement was in compliance with APTEL’s directions and did not imply any concession on its part.
• HPPTC Ltd maintained that BHP Ltd had not paid the Bay charges, and any attempted payment by Respondent No. 02 was refused because HPPTC Ltd had no locus to receive the amount, as the CA was only between HPPTC Ltd and BHP Ltd.

Arguments by Brua Hydrowatt Pvt. Ltd (BHP Ltd):

• BHP Ltd submitted that, following the Impugned Judgment, the parties entered into an agreement for the O&M of interconnection facilities, as stipulated in Clause 2.5 of the CA.
• BHP Ltd contended that its proportionate share of liability had been deposited and acknowledged by HPPTC Ltd, and connection had been provided at the Bay.
• BHP Ltd argued that HPPTC Ltd was precluded from challenging the Impugned Judgment, rendering the Civil Appeal infructuous.
• BHP Ltd asserted that separate bills had been raised by HPPTC Ltd for the three generating companies for provisional O&M Charges.
• BHP Ltd contended that the new Agreement superseded the terms of the ITA and revealed an acceptance by HPPTC Ltd to treat the three projects separately.
• BHP Ltd argued that APTEL rendered its decision after thoroughly examining the relevant facts and circumstances and that the State Commission’s Order was based on a fundamentally erroneous interpretation of the terms and conditions of the CA and other pertinent documents.

Issues Framed by the Supreme Court

1. Whether the Appellate Tribunal for Electricity (APTEL) erred in reversing the State Commission’s order, which held M/s Brua Hydrowatt Pvt. Ltd. liable to bear the entire cost for the Bay at the 66kV Switching Station at Urni?

Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”

Authorities

The court considered the following authorities:

• Tweddle v. Atkinson (1861) 121 ER 762: Relied upon for the Doctrine of Privity.
• Jamna Das v. Pandit Ram Autar Pande and others 1911 SCC OnLine PC 35: Acknowledged the Doctrine of Privity.
• Essar Oil Limited v. Hindustan Shipyard Limited and Others (2015) 10 SCC 642: Denied the Appellant’s ability to sue for recovery of payment as it was not privy to the contract.

Judgment

How each authority was viewed by the Court:

• Tweddle v. Atkinson (1861) 121 ER 762: The Court relied on this case for the Doctrine of Privity, emphasizing that a contract cannot confer rights or impose obligations on any person who is not a party to the contract.
• Jamna Das v. Pandit Ram Autar Pande and others [1911 SCC OnLine PC 35]: The Court acknowledged the Doctrine of Privity as recognized by the Privy Council.
• Essar Oil Limited v. Hindustan Shipyard Limited and Others [(2015) 10 SCC 642]: The Court cited this case to support the principle that a sub-contractor cannot sue for recovery of payment from the main client if there is no privity of contract.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of privity of contract and the explicit terms of the Connection Agreement (CA) dated 02.07.2021. The Court emphasized that the CA solely bound BHP Ltd for the payment of costs and charges related to the Bay construction. The absence of privity between HPPTC Ltd and Respondent No. 02 and Respondent No. 03 in the CA was a critical factor.

Fact:Law Ratio

Logical Reasoning

ISSUE: Whether the APTEL erred in reversing the State Commission’s order holding M/s Brua Hydrowatt Pvt. Ltd. liable for the entire cost of the Bay?

The Court’s reasoning was based on the following:

• The Connection Agreement (CA) dated 02.07.2021 explicitly binds BHP Ltd for the payment of concerned costs and charges.
• Respondent No. 02 and Respondent No. 03 were not privy to the CA dated 02.07.2021.
• HPPTC Ltd was not a party to the ITA dated 27.12.2019 and therefore, could not claim proportionate shares from Respondent No.02 and Respondent No.03 based on the ITA.

Key quotes from the judgment:

• “STU and Applicant are hereinafter collectively referred to as “Parties” and individually as “Party”.”
• “The applicant declares that it shall pay the Monthly Tariff including HPSLDC charges, for use of Intra State Transmission system…”
• “The applicant will execute an agreement with STU for the erection of equipment of applicant or intra -state transmission licensee/Distribution Licensee in the substation premises of the STU for construction of bays, if required. For this purpose the applicant shall pay charges to the STU on mutually agreed terms.”

Key Takeaways

• The principle of privity of contract remains a critical factor in determining contractual obligations.
• Explicit terms in agreements are paramount in determining liability for costs and charges.
• Internal agreements between parties not involving all stakeholders may not be enforceable against those not party to the agreement.

Development of Law

The ratio decidendi of the case is that the explicit terms of a contract, particularly a Connection Agreement, determine the liability for costs and charges. The principle of privity of contract prevents parties not privy to the agreement from being held liable for its terms. This reaffirms existing legal principles rather than introducing new ones.

Conclusion

The Supreme Court allowed the appeal, setting aside the APTEL’s judgment and restoring the State Commission’s order. The Court held that BHP Ltd was solely liable for the construction costs of the Bay, based on the explicit terms of the Connection Agreement and the principle of privity of contract.

Category

• Electricity Law
  • Electricity Act, 2003
  • Contract Law
    • Privity of Contract
  • Himachal Pradesh Electricity Regulatory Commission

FAQ

1. What was the main issue in the HPPTC Ltd vs. Brua Hydrowatt Pvt. Ltd. case?
   The main issue was determining which party was liable for the construction costs of a “Bay” (a connection point in a power transmission system) when multiple power companies shared infrastructure.
2. What did the Supreme Court decide?
   The Supreme Court decided that Brua Hydrowatt Pvt. Ltd. (BHP Ltd) was solely liable for the construction costs of the Bay, based on the explicit terms of the Connection Agreement they had with HP Power Transmission Corporation Ltd (HPPTC Ltd).
3. Why was BHP Ltd held liable?
   BHP Ltd was held liable because the Connection Agreement explicitly stated that they were responsible for all costs related to the Bay’s construction. The Court also emphasized the principle of privity of contract, meaning that only parties to the agreement could be bound by its terms.
4. What is “privity of contract”?
   Privity of contract means that only the parties who signed a contract can be held responsible for its obligations and can enforce its rights. In this case, since other power companies were not part of the Connection Agreement between HPPTC Ltd and BHP Ltd, they could not be held liable under that agreement.
5. What does this case mean for future agreements?
   This case reinforces the importance of having clear and explicit terms in contracts. It also highlights that internal agreements between some parties may not be enforceable against others who are not part of those agreements.