MB Power (Madhya Pradesh) Limited v. State Bank of India & Ors.

12. He has also stated that if the power is not supplied as per the PPA, it will also affect the tariff at which the power will be sold by the defendant No. 3 to its consumers.

13. Further he submitted that Section 2 (71) of the Electricity Act states “trading means purchase of electricity for resale thereof and the expression trade shall be construed accordingly”. This would mean that from the very stage of generation of electricity to the ultimate consumption by the consumer, is one interconnected transaction and is regulated at each level by the statutory commission in a manner that the objective of the Electricity Act is fulfilled. To buttress his argument, he has placed reliance on the judgment of this Court in the case of PTC India v. Jaiprakash Power Venture Ltd., 2012 (130) DRJ 351.

14. That apart, it is stated that under Section 94(2) of the Electricity Act, the appropriate commission has the power to grant interim relief in any proceedings before it, as considered appropriate, and has been doing so, including the grant of interim injunctions against invocation/ encashment of bank guarantees. Therefore, the present dispute is to be adjudicated by the appropriate commission, i.e., CERC.

15. It is also stated that the reliance that has been placed by the plaintiff on the case of Global Energy Pvt. Ltd. v. Jindal Power Ltd. & Anr., RFA (OS) 93/2015, decided on October 06, 2015, is misplaced as in the said case the Division Bench of this Court had remanded the matter back to the Single Judge without giving any finding on the applicability of Sections 79 and 86 of the Electricity Act. The same is still pending adjudication before the learned Single Judge. He has also contested the reliance placed by the plaintiff on the judgment in the case of Eastern Power Distribution Company of Andhra Pradesh Ltd. v. GMR Vemagiri Power Generation Ltd., 2018 SCC OnLine Hyd 758, by stating that the said judgment actually supports the contention of the applicant, as can be seen from paragraph 70 of the judgment, which I reproduce under:-

16. He has also stated that as per the decision of the Supreme Court in the case of Rajasthan State Transport Corporation and Anr. v. Bal Mukund Bairwa, (2009) 4 SCC 299, the issue with regard to the jurisdiction of a civil court has to be addressed in view of the facts and the rights and obligations that are sought to be enforced. In the present case, the dispute concerns the rights and obligations of the party specifically with respect to the PPA for the supply of power and thus needs to be adjudicated under the provisions of the Electricity Act.

17. Mr. Kishore has opposed the contention of the plaintiff in the suit that there has been a deemed termination of the PPA as per Article 4.[4] therein, by stating that the applicant/ defendant No. 2 had opened the Letter of Credit, amended the same and sent it to the plaintiff, who had failed to reply to the same. It is his submission that the plaintiff, despite having knowledge of the same, issued the back-dated letter of April 19, 2022 informing the applicant about the deemed termination of the PPA, to wriggle out of its contractual obligations to supply power to the defendant No. 3 through the applicant, with an intent to sell it at a higher price at the power exchange. He stated that in any case, as the deemed termination of the PPA has been contested by the applicant and also defendant No. 3, the same needs to be adjudicated upon by a competent judicial forum.

18. Further, he has submitted that the plaintiff cannot unilaterally terminate the PPA and pray for injunctive relief against the Bank Guarantee, which was furnished by the plaintiff in furtherance of its obligations under the PPA. Therefore, until the dispute of the alleged deemed termination of the PPA is decided by the Commission, the issue of Bank Guarantee cannot be finally decided. He seeks prayers as made in the application.

19. Ms. Anusha Nagarajan, learned counsel appearing on behalf of the defendant No. 3, i.e., Tamil Nadu Generation and Distribution Corporation Limited, while reiterating the contentions made by the learned counsel for the applicant, additionally submitted that the plea of the plaintiff that the PPA is admitted to have been deemed to be terminated is incorrect and misconceived, as both the applicant and the defendant No. 3 have disputed the termination, as is evident from the letter dated April 29, 2022 from the applicant to the plaintiff and the letter dated May 5, 2022 issued by the defendant No. 3 to the plaintiff. The question as to whether the PPA has been deemed to have been terminated itself depends upon an interpretation of various provisions of the PPA, as well as appreciation of the facts and circumstances surrounding such alleged deemed termination. According to her, for instance, at least, the following will have to be considered:-

(i) whether the conditions precedent under Article 4.[1]

(ii) whether the "appointed date'' has been achieved;

(iii) whether the circumstances under which the PPA can be said to be deemed to have been terminated have arisen in the present case;

(iv) rights in relation to the performance security.

20. Further, it is stated that a conjoint reading of Articles 4.1.1, 4.1.[2] and 4.[4] of the PPA would reveal that for the PPA to be deemed to be terminated, the following conditions have to be met:-

(i) there should have been a failure to meet the conditions precedent,

(ii) such failure should subsist for a period of 120 days or an extended period;

(iii) there should have been no waiver on the part of any party.

Thus, there is no automatic termination of the PPA as has been contended by the plaintiff. In any case, the right of the plaintiff to seek relief squarely entails adjudication of the rights and obligation of parties under the PPA, which as has been submitted, can only be done by the appropriate Commission. As per Section 2 (4) of the Electricity Act, the appropriate commission may either be the State Electricity Regulatory Commission („State Commission‟, hereinafter) or the CERC. She has relied upon the judgments in PTC India v. CERC, (2010) 4 SCC 603 and Energy Watchdog (supra) to argue that when a PPA contains an intra-state transaction, i.e., when both the seller and the procurer is within one state, the appropriate commission would be the State Commission whereas when a PPA entails an inter-state transaction, the appropriate commission would be the CERC.

21. As per Article 22.[1] of the PPA, any dispute of whatever nature arising out of or in relation to the PPA will first have to be conciliated, and if the conciliation fails and the appropriate commission is of the opinion that it cannot adjudicate upon certain disputes, it may refer such disputes to arbitration. Even assuming that the nature of the dispute is such that it does not fall within the subject-matter jurisdiction of the appropriate Commission, the plaintiff cannot approach a civil court to seek relief; the plaintiff will necessarily have to approach the appropriate commission as per the terms of the PPA, which may then refer the dispute to arbitration in the event it finds that it lacks the jurisdiction to adjudicate the dispute.

22. That apart, Ms. Nagarajan also submitted that the contention of the plaintiff that the scope of CERC‟s jurisdiction is narrower than the scope of the State Commission‟s jurisdiction under Section 86(1)(f) of Electricity Act, on the basis that the language in Section 86(1)(f) is broad to include adjudication of all disputes between generating companies and licensees, whereas, Section 79(1)(f) refers to disputes involving generating companies or transmission licensees, in regard to matters connected with clauses (a) to (d) of Section 79(1), is fallacious, inasmuch as the scheme of the Act does not envisage a difference between the nature and quality of functions exercisable by the CERC and State Commissions; the only distinction is as to whether the subject matter pertains to inter-state generation and sale/ transmission or intra-state transactions. In this context, the purpose of the expression used in Section 79(1) (f), “disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above” is only to carve out the jurisdiction of CERC as being exercisable in respect of such entities as are described in clauses (a) to

(d) of Section 79. In other words, where the State Commission would have jurisdiction in respect of a dispute in an intra-state scenario, if a similar dispute involves the actors mentioned in clauses (a) to (d) of Section 79, or in other words, pertains to an inter-state transaction, it is the CERC, which would have jurisdiction. To buttress her argument, she has relied upon the decision of a Division Bench of this Court in the case of PTC India Ltd. v. Jaypee Karcham Hydro Corp, MANU/DE/1942/2010, wherein it was held that the jurisdiction of the State Commission under Section 86(1) (f) is similar to that of CERC under Section 79(1) (f) of the Electricity Act.

23. According to her, like the State Commission, the CERC would exercise jurisdiction over disputes arising between a generating company and trading licensee, and/ or a distribution licensee, in disputes arising under a PPA. This position would also be borne out from an interpretation of the expression “in regard to matters connected with clauses (a) to (d)” used in Section 79(1)(f). It is wellsettled that the words “in regard to” and “connected with” are broad in their ambit. In the present case, there is no dispute that the plaintiff is a generating company having a composite scheme for generation and sale of electricity in more than one State and hence falls within the scope of Section 79(1)(b). It is pertinent that the composite scheme for generation and sale arises out of PPAs entered into by the plaintiff, such as the present one. The disputes forming subject matter of the present Suit arising out of such PPA, is clearly “in regard to matters connected with” generating companies having a composite scheme for generation and sale of electricity in more than one State, as referred to in 79(1)(b) of the Electricity Act.

24. That apart, Ms. Nagarajan has contended that the present dispute has an impact on tariff, as the plaintiff‟s actions have prevented the applicant from supplying power to the defendant No. 3 under the PSA. The defendant No. 3 has been forced to source this power from the open market at times at rates almost four times the tariff determined under the Pilot Scheme-II. The consumers of the state of Tamil Nadu are also being forced to bear these exorbitant rates of power. Therefore, it is clear that the tariff being affected, the present dispute falls within the jurisdiction of Section 79(1)(f) of the Electricity Act. She has relied upon the judgment in Jaypee Karcham Hydro Corp. (supra) to submit that if the tariff is determined by CERC, then issues relating to termination of PPA also have to be decided by it.

25. She has also contested the stand of the plaintiff that since the PPA has been deemed to be terminated, its provisions are no longer applicable, and therefore for seeking return of bank guarantee the plaintiff has to approach this Court. She stated that it is settled law that the existence of a contractual relationship is not a pre-condition for exercise of the jurisdiction of the commissions. Section 79(1) (f) does not mandate that the disputes between the entities must have arisen pursuant to or under an agreement. Therefore, even assuming that the PPA has terminated, CERC can still exercise jurisdiction to resolve the disputes between the plaintiff and the applicant and defendant No. 3.

26. She has referred to a judgment of the High Court of Bombay in the case of Maharashtra State Electricity Distribution Company Ltd. v. Adani Enterprises Ltd. And Ors., 2016 SCC OnLine Bom 2654, to state that the issue raised by the plaintiff in the plaint is pursuant to the applicant failing to perform its obligations under the PPA and the plaintiff cannot escape the jurisdiction of the proper forum under Section 79(1)(f) by joining non-related parties which are not concerned with the underlying dispute, to the suit.

27. She has also relied upon Section 174 of the Electricity Act, decisions of the Supreme Court in Gujarat Urja Vikas Nigam Ltd. (supra), and State of West Bengal v. David Mantosh, (2020) 12 SCC 542, and a judgment of the Bombay High Court in Indo Rama Synthetics (I) Ltd. v. Reliance Infrastructure Ltd., 2015 SCC OnLine Bom 4060, to contend that the Electricity Act shall have an overriding effect on any other law inconsistent with it, and as such the jurisdiction of this Court as a civil court is barred under Section 9 of the CPC. She further submitted that if this Court was to deny the relief claimed under the present application, the same would have the effect of holding that this Court, as a civil court, has the jurisdiction to adjudicate upon the disputes between a generating company against a trading licensee and a distribution licensee to the exclusion of CERC under the Electricity Act, which would have significant adverse effects on the settled legal position with regard to the jurisdiction of CERC. She has prayed the application be allowed and the plaint be rejected.

28. The plaintiff, in reply to the application has stated that it is an admitted case of the parties that the PPA executed between the parties has not commenced, and as such the present dispute is not an electricity case, but merely a case of an inchoate agreement without any existing reciprocal promises to be performed by either of the parties. The Bank Guarantee provided by the plaintiff was only to secure the performance by itself, and once the PPA expired on its own terms, the Bank Guarantee became extra and surplus with the defendant No. 2. The defendant No. 1 Bank is required to be directed not to give any effect to the terms of the Bank Guarantee.

29. Mr. Sandeep Sethi, learned Senior Counsel appearing on behalf of the plaintiff, in order to substantiate that the PPA did not commence, stated that under Clause 4.1.[2] (a) of the PPA dated October 28, 2021, the defendant No. 2 as and by way of the conditions precedent, was required to issue a Letter of Credit in the form prescribed in Schedule C of the PPA. The conditions precedent had to be fulfilled by the defendant No. 2 within 120 days from the date of the PPA, i.e., by February 25, 2022. Upon achievement of all the conditions precedent, the Appointed Date would have been announced, as per Article 25 of the PPA. Only upon announcement of the Appointed Date, would the PPA commence. The requirement of the plaintiff to perform the obligations under the PPA would arise only post the achievement of the Appointed Date as per Article 25 of the PPA, which provides that the Appointed Date "shall be the date of commencement of the Contract Period". Thus, the Appointed Date is a sine qua non for the PPA to begin.

30. He stated that the Letter of Credit provided by the applicant has certain material defects and deficiencies, as set out in a tabular form below:-

(i) The first Letter of Credit to be provided by PTC shall expire on

31st March of the year falling after the year in which the Letter of Credit is issued [Clause 2 of Schedule C]. Thus, the Letter of Credit to be provided by PTC shall be valid till 31.03.2023. provided by PTC is valid till 05.01.2023 only.

(ii) The Letter of Credit shall be automatically and compulsorily renewed every year by the Bank - 2 months prior to the date of expiry, for the period of the financial year that commences immediately after the Expiry Date and shall continue to be so renewed until the end of the Contract Period [Clause 2 & 8 of Schedule C] Letter of Credit does not contain any provision for automatic and compulsory renewal every year by the bank.

(iii) PTC shall replenish and reinstate the Letter of Credit to the equivalent of 20% of the annual Capacity Charge or Monthly Payment within 7 days of a drawdown by MB Power [Article 12.1.[4] and Clause 10 of Schedule C]. Letter of Credit has no timeline for replenishment of the amount by PTC in the event of a drawdown by MB Power.

(iv) Partial drawal by MB Power from the Letter of Credit is permitted

31. It is the contention of Mr. Sethi that the above would indisputably establish that the Letter of Credit provided by the applicant was not in the requisite form and therefore on the expiry of 120 days, the PPA was automatically deemed to be terminated with mutual consent of the parties as per Article 4.[4] therein. The said termination did not require any positive action on part of either party. On April 19, 2022, the fact of the automatic deemed termination was communicated by the plaintiff to the applicant.

32. That apart, the fact that the PPA never commenced is evident from the letter of the applicant dated on April 29, 2022 wherein it was admitted that the Appointed Date had not been fixed. It is the case of the plaintiff, as also pleaded in the plaint, that after the lapse of the PPA, the applicant lost the right to retain the Performance Security submitted by the plaintiff. Any retention of the Performance Security without the commencement of the PPA is against the law of bailment as there is no existence of any contract of the plaintiff with the applicant. Reliance in this regard is placed on the judgment of the Supreme Court in the case of Rajinder Singh Bagga v. Harish Chander Chopra, (1993) 50 DLT 224. Further in support of his contention that an agreement between parties shall stand terminated/ be void upon non-fulfillment of the conditions precedent to the agreement, he has relied upon the following judgments:-

(i) Energy Watchdog v. Central Electricity Regulatory

(ii) Tarapore & Co. v. Cochin Shipyard Ltd.: (1984) 2

(iii) Ludlow Jute Company Ltd. v. Apeejay Pvt. Ltd. &

(iv) Karnataka Power Transmission Corporation Ltd. and

Ors. v. Soham Phalguni Renewable Energy Pvt. Ltd. and Ors, 2018 SCC OnLine APTEL 138

(v) Chamundeshwari Electricity Supply Company Ltd. v.

33. Mr. Sethi further submitted that the suit is maintainable in the present form, as it does not fall within either Section 86(1) or Section 79 (1) (f) of the Electricity Act. As per Section 79(1) of the Electricity Act. The CERC has the function to adjudicate upon the disputes involving generating companies or transmission licensee only in regard to matters connected with Clause (a) to (d) of Section 79 (1). Section 79(1) is reproduced herein below: "Section 79. (Functions of Central Commission):- (1) The Central Commission shall discharge the following functions, namely:- (a) to regulate the tariff of generating companies owned or controlled by the Central Government; (b) to regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State;

(c) to regulate the inter-State transmission of electricity;

(d) to determine tariff for inter-State transmission of electricity;

(e) to issue licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations; (f) to adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration; (g) to levy fees for the purposes of this Act; (h) to specify Grid Code having regard to Grid Standards;

(i) to specify and enforce the standards with respect to quality, continuity and reliablility of service by licensees; (j) to fix the trading margin in the inter-State trading of electricity, if considered necessary; (k) to discharge such other functions as may be assigned under this Act.”

34. He also submitted that the power of the CERC to adjudicate upon disputes is limited to Clause (a) to (k) of Section 79 (1) of the Electricity Act. The present dispute is between the plaintiff, who is a generating company, the applicant/defendant No.2 which is an Electricity Trading Licensee, and the defendant No.1, which is a Nationalised Bank, in relation to the unlawful withholding of the performance security submitted by the plaintiff in the form of a Bank Guarantee No. 1895621BG0000004 amounting to INR 15,00,00,000/after the lapse of the PPA. The CERC under Section 79(1) (f) only has the power to adjudicate dispute involving generating companies or transmission licensee in regard to matters connected with Section 79(l)(a) to (d), which pertains to determination and regulation of tariff. The present dispute does not pertain to tariff for supply of power, and hence does not fall under Clause (a) to (d) of Section 79(1) of the Electricity Act. The applicant is not the procurer of the electricity and the defendant No.3 has no relationship with the plaintiff. Therefore, the CERC does not have the jurisdiction to entertain the present dispute.

35. He also contested the stand of the applicant that the present dispute falls within Section 79 (1) (b) of the Electricity Act, i.e., regulation of tariff as the plaintiff had a Composite Scheme of generation of electricity, by stating that the present dispute is not a tariff dispute and also not one of equalisation of tariff. Therefore, the same does not fall within the scope of the said provision.

36. He also sought to distinguish the reliance placed by Mr. Kishore on the judgment of this Court in Jaiprakash Power Venture Ltd. (supra) by stating that the said judgment was rendered in a dispute regarding fixation of tariff. He further stated that the present dispute is on the issue before the formulation of contract and not for any issue that arose after the commencement of the contract and as the PPA has not commenced, there can be no presumption on the impact of tariff, if any at all. Further, he stated that without there being a pleading by the applicant to the effect that there will be impact on tariff as per the relief sought under the application, there cannot be a presumption of the same.

37. That apart, he has also contested the submission of Mr. Kishore that if the PPA is said to have lapsed on its own terms then it would amount to regulating the tariff under Section 79 of the Electricity Act. According to Mr. Sethi, this contention directly militates with the plain language of Section 79(1) (b). He stated that the applicant is seeking to stretch the language of the said provision to artificially include the terms of the PPA. In view of Article 4.[4] of the PPA the condition precedent not having been fulfilled, the PPA stands deemed to be terminated by mutual agreement of parties. Therefore, the PPA did not even commence for all purposes, and thus the issue of supply, sale, transfer and purchase of electricity never arose. The issue of tariff of electricity has no relation to the present case, since there is no dispute amongst the parties regarding tariff. The applicant not having fulfilled the primary obligation of the condition precedent is prohibited from invoking any issue of tariff of electricity under the already lapsed PPA. In any case, tariff obligations under the PPA are not within the expression “to regulate the tariff” as stipulated in Section 79(1)(b) of the Act.

38. Under Section 86(1)(b) of the Electricity Act, disputes relatable to PPA are specifically included within the jurisdiction of a State Commission. Despite there being an express omission of the reference to PPA in Section 79(1)(b) of the Act, the applicant is seeking to artificially extend the expression “to regulate the tariff” and “composite scheme for generation and sale of electricity in more than one state” to include disputes relatable to a PPA within the jurisdiction of CERC. According to him, the applicant is attempting to alter the plain language of Section 79(1)(b) of the Act to the prejudice of generating companies and in favour of distribution licensees and to artificially incorporate Section 86(1)(b) in Section 79(1)(b) of the Electricity Act.

39. He also submitted that the present dispute does not fall under Section 86 (1)(f) of the Electricity Act, which reads as under:- "Section 86. (Functions of State Commission): --- (1) The State Commission shall discharge the following functions, namely: …..(f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration;..…”

40. He contested the submission of Mr. Kishore and the reliance placed by him on Gujarat Urja Vikas Nigam Ltd. (supra), by stating that Section 86 (1) (f) of the Electricity Act is not applicable to the present case, since it is a multi-state PPA.

41. Reliance has been placed on the judgment of a Division Bench of this Court in the case of Global Energy Pvt. Ltd. (supra) wherein the judgment in Gujarat Urja Vikas Nigam Ltd. (supra) was held to be distinguishable if the dispute is between a generating licensee and trading licensee, as is in the present case. Relevant part of the said judgment is reproduced as under:- “2.... The other decision in Gujarat Urja Vikas Nigam ltd. 's case was rendered with respect to a dispute concerning a power generating company, an electricity distributing company and a captive consumer of power purchasing directly from the Vikas Nigam. The facts were that Gujarat Urja Vikas Nigam ltd. had a license to generate 515 MW electricity out of which it had to allocate 300 mega watt to the Gujarat Electricity Board for purposes of distribution to consumers in the State of Gujarat i.e. the State Board was a distributing licensee, and the remaining 2 I 5 was to be sold to the Essar Group of Companies. The dispute arose with reference to the supply made by the Vikas Nigam to Essar Group of Companies the Vikas Nigam did not generate 515 MW electricity and did not supply 300 MW to the Board. As per the Board the Vikas Nigam was to allocate whatever electricity it generated in the ratio 300 MW: 2 I 5 MW. It is apparent that the dispute was between a generating licensee and a distributing licensee. The captive purchaser being a necessary party. The decision would not be an authority if the dispute is between a generating licensee and a trading licensee.

3. The learned Single Judge had to consider the provisions of the Electricity Act, 2003 concerning a dispute between an electricity generating company and a company having a license to trade in electricity, with further fact that the generating company is in one State and the company purchasing the power is in another State. The learned Single Judge had to consider the applicability of Section 86 in twin context. Whether the State Commission had the power to adjudicate a dispute between a power generating company in one State and a trader of power in the other State. With reference to the Central Commission, the learned Single Judge had to take note of and decide, with reference to Section 79 of the Indian Electricity Act, 2003, whether the Central Commission have the power to adjudicate a dispute between a generating company and a trading company. The learned Single Judge had to keep in mind that the power of the Central Commission was limited to clause (a) to (k) of sub- Section I thereof. Under which clause, if at all, the dispute between the parties was within the domain of the Central Commission had to be discussed.”

42. Mr. Sethi further contended that the PPA having been deemed to be terminated by mutual consent of the parties as per Article 4.[4] therein, the only dispute which remains is that of the Bank Guarantee which was given only to secure the performance of the PPA.

43. Mr. Sethi stated that it is settled law that no legal provision justifies withholding of performance security once the underlying agreement between the parties comes to an end. A Bank Guarantee is in the nature of a special contract depending upon the occurrence of a specific event and when the event has occurred, the guarantee comes to an end. In the present case, since the PPA stood deemed terminated w.e.f. February 25, 2022, the purpose of the performance security has been served and it came to an end and ought to be returned by the applicant. In this regard, reliance is placed upon the judgment of the Supreme Court in Syndicate Bank v. Vijay Kumar, (1992) 2 SCC 330. The plaintiff is legally entitled to seek return of such performance security and the applicant is under legal and contractual obligation to return the same. He submitted that retention or invocation of the performance security by the applicant will be ex-facie unlawful, arbitrary and illegal, and would also amount to unjust enrichment and misappropriation of the plaintiff's property. Further, the continued retention of the Bank Guarantee by the applicant with the looming threat of its invocation is causing irreparable damage to the plaintiff since the same is blocking its credit line to the extent of its value.

44. He has also opposed the reliance placed by Mr. Kishore and Ms. Nagarajan on Section 174 of the Electricity Act to contend that the Central and State Commissions have exclusive jurisdiction to entertain the present dispute. As per Mr. Sethi, Section 174 of the Electricity Act merely states that the Act would prevail over anything inconsistent in any other law. However, Section 175 of the Act provides that “the provisions of this Act are an addition to and not in derogation of any other law for the time being”. It is a well settled principle that civil courts have jurisdiction to try all suits of civil nature except those which are expressly or impliedly barred. Any statute which excludes such jurisdiction is, therefore, an exception to the general rule that all disputes shall be triable by civil courts. Any such exception cannot be readily inferred by the Courts. The Court would lean in favour of a construction that would uphold the retention of jurisdiction of civil courts and shift the onus of proof to the party that asserts that such jurisdiction is ousted. In this regard he has placed reliance on the following judgments:i.Dhulabhai etc. v. State of Madhya Pradesh & Anr, AIR 1969 SC 78. ii.Rajasthan State Road Transport Corporation v. Bal Mukund Bairwa(2), (2009) 4 SCC 299. iii.Ramesh Gobindram v. Sugra Humanyun Mirza, (2010) 8 SCC 726. He stated that no provision under the Electricity Act bars the jurisdiction of civil courts to decide the dispute of the present nature and, therefore, the present suit is maintainable.

45. He has vehemently opposed the submission of the applicant that the question whether the present dispute falls under the jurisdiction of CERC should also be decided by CERC, by relying upon the judgment of the Supreme Court in the case of Natraj Studios (P) Ltd. v. Navrang Studios and Anr., (1981) 1 SCC 523, wherein it was held as under:-

46. Having heard the learned counsel for the parties, and perused the record the issue which arises for consideration is whether the suit filed by the plaintiff needs to be rejected on the ground that it is barred by law.

47. Before proceeding to decide the said issue, at the outset I may state that the purpose of the provisions containing the Order VII Rule 11 of the CPC is to reject plaints that are frivolous, vexatious, improper, and are bound to prove abortive, at the start of the litigation in order to extricate the Courts from spending its valuable time. The remedy under Order VII Rule 11 of the CPC is an independent and special remedy wherein the Court is empowered to summarily dismiss the suit at the threshold without proceeding to record evidence, and conducting a trial, if it is satisfied that the action should be terminated on any of the grounds contained in this provision. It is a law well settled that the scope of an application under Order VII Rule 11 of the CPC is limited only to examine whether in terms of the averments made in the plaint and the documents filed along with the plaint, the suit is maintainable or not.

48. Since the plea raised by the applicant is that the suit is barred by law as the issue goes to the root of the maintainability of the suit, the Court can, even on an oral submission, without there being an application under Order VII Rule 11 of the CPC, independently consider and decide such a plea.

49. The case of the applicant as contended by Mr. Kishore is that in view of the provisions of Section 79(1) (b) and (f) of the Electricity Act, the suit is not maintainable. I have already reproduced the Section 79 (1) of the Electricity Act in paragraph 33 above. The case of the applicant is that though the suit has been filed for declaration, mandatory and permanent injunction restraining the defendants from invoking the Bank Guarantee furnished by the plaintiff in furtherance of its obligations under the PPA between the plaintiff and the applicant. As per Clause 22.[4] (which I have reproduced in paragraph 6), the word „Commission‟ necessarily means the appropriate Electricity Regulatory Commission or any successor thereof. It is his contention that any dispute involving a generating company, i.e., plaintiff, would be a matter connected with regard to clauses (a) to (d) of Section 79(1) and as such, as per Section 79(1)(f) need to be adjudicated by the CERC.

50. I am not in agreement with said submission of Mr. Kishore. In this regard, it is important to state and clarify that it is not the case of the parties that dispute between them need to be adjudicated by the State Commission in terms of functions stipulated in Section 86 of the Act. In any case, the Supreme Court in the case of Energy Watchdog (supra) has in paragraph 24, held as under: “24. The scheme that emerges from these sections is that whenever there is inter-State generation or supply of electricity, it is the Central Government that is involved, and whenever there is intra-State generation or supply of electricity, the State Government or the State Commission is involved. This is the precise scheme of the entire Act, including Sections 79 and 86. It will be seen that Section 79(1) itself in clauses (c), (d) and (e) speaks of inter-State transmission and inter-State operations. This is to be contrasted with Section 86 which deals with functions of the State Commission which uses the expression “within the State” in clauses (a), (b) and (d), and “intra-State” in clause (c). This being the case, it is clear that the PPA, which deals with generation and supply of electricity, will either have to be governed by the State Commission or the Central Commission. The State Commission's jurisdiction is only where generation and supply takes place within the State. On the other hand, the moment generation and sale takes place in more than one State, the Central Commission becomes the appropriate Commission under the Act. What is important to remember is that if we were to accept the argument on behalf of the appellant, and we were to hold in the Adani case that there is no composite scheme for generation and sale, as argued by the appellant, it would be clear that neither Commission would have jurisdiction, something which would lead to absurdity. Since generation and sale of electricity is in more than one State obviously Section 86 does not get attracted. This being the case, we are constrained to observe that the expression “composite scheme” does not mean anything more than a scheme for generation and sale of electricity in more than one State.”

51. The issue which need to considered is whether the dispute falls within the ambit of Section 79(1)(b) to enable the CERC to adjudicate the same under Section 79(1)(f).

52. The submission of Mr. Kishore and Ms. Nagarajan in this regard is primarily by relying upon the judgment of the Supreme Court in the case of Transmission Corporation of Andhra Pradesh Ltd. (supra) to contend that the Supreme Court has held that the regulatory power of Commission is extensive and includes whatever needs to be done for achieving the objects and purposes of the Electricity Act.

53. Similarly, reliance was also placed on the judgment of the Supreme Court in the case of Jiyajeerao Cotton Mills Ltd. (supra) wherein the Supreme Court observed that the word „regulate‟ should be construed in the context in which it is used, giving due regard to the purpose and object of the relevant provisions.

54. Similarly, they have relied upon the judgment in the case of Energy Watchdog (supra) to contend that „composite scheme‟ means nothing more than a scheme for generation and sale of electricity in more than one state and in the present case, the plaintiff is having a composite scheme.

55. Reliance was also placed on the judgment in the case of Jaiprakash Power Venture Ltd. (supra) by referring to Section 2(71) of the Electricity Act to contend that „trading‟ means purchase of electricity for resale thereof and the expression trade shall be construed accordingly. According to them, the generation of electricity to the ultimate consumption by the consumer involves one interconnected transaction and as such the objective of the Electricity Act having been fulfilled, the Commission shall have the jurisdiction to adjudicate the dispute between the plaintiff (a generating company) and the defendant Nos. 2 and 3.

56. To understand the aforesaid submission of the learned counsel for the defendant Nos.[2] and 3, it is important to highlight certain facts as urged by them. On October 22, 2021, the defendant No.2 / applicant entered into a PSA with the defendant No.3 and on October 28, 2021, it entered into a back-to-back PPA with the plaintiff. In terms of the PPA, the defendant No.1 issued performance security in the form of a Bank Guarantee dated November 2, 2021 for an amount of ₹15 crore on behalf of the plaintiff in favour of the applicant. The PPA entails certain conditions to be fulfilled by the plaintiff and the applicant. One of the conditions to be fulfilled by the applicant is the issuance of a Letter of Credit in terms of Clause 12.[1] of the PPA as per the form specified in Schedule C of the PPA. Some objections with regard to the Letter of Credit were raised by the plaintiff and accordingly, amendments were sought in the Letter of Credit.

57. It is the case of the applicant that an amended Letter of Credit was communicated to the plaintiff. Despite reminders, no response was received from the plaintiff. Finally on April 21, 2022, the applicant / defendant No.2 communicated to the plaintiff that they have amended the Letter of Credit as requested by the plaintiff.

58. However, subsequently, on April 22, 2022, the applicant received a letter dated April 19, 2022 from the plaintiff informing them of the deemed termination of the PPA in terms of Article 4.[4] therein. This Article 4.[4] inter alia stipulates that if the appointed date does not occur for whatever reason, on expiry of 120 days from the date of the PPA, the PPA is automatically deemed to be terminated with the mutual consent of the parties without requiring any positive action on the part of either party.

59. It is the case of the plaintiff that in view of the termination, the PPA never commenced as the appointed date has not been fixed. The aforesaid position is disputed by the defendant Nos.[2] and 3, inasmuch as according to them, the PPA has not come to an end.

60. It is in this background, the jurisdiction of the CERC has to be seen. Sub clauses (a), (c) and (d) of Section 79(1) have no applicability to the present issue. In fact, it is the case of defendant Nos.[2] and 3 that the dispute relates to Section 79(1)(b), as it involves a generating company (plaintiff) having a composite scheme for generation and sale of electricity in more than one state, and as such, the same needs to be adjudicated in terms of Section 79(1)(f) by the CERC. Section 79(1)(b) stipulates the functions of the CERC to include regulating the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies entered into or otherwise, have a composite scheme for generation and sale of electricity in more than one state. In the case in hand, the agreement for procurement of electricity between the plaintiff and the applicant which is a trading company, stood terminated, and in that sense, there is no agreement or a composite scheme governing the plaintiff and defendant No.2 for generation and sale of electricity. In fact, it is the submission of Mr. Sethi that it has not commenced. This plea is not disputed. So, in the absence of any agreement / scheme governing the plaintiff and the defendant No.2 / applicant, there exists no dispute with respect to tariff to be adjudicated by the CERC.

61. The functions of CERC are limited to matters covered by clauses (a) to (k) of Sub-Section 1 of Section 79 of the Act. In fact, as noted in paragraph 11 above, it is the plea of Mr. Kishore that Section 79(1)(b) will come into play only when a PPA for supply to more than one State is in place. It follows, if the PPA has not commenced, then Section 79(1)(b) is not attracted. This has been held by the Division Bench of this Court in the Judgment in the case of Global Energy Pvt. Ltd. (supra) which is reproduced as under:- “3. The learned Single Judge had to consider the provisions of the Electricity Act, 2003 concerning a dispute between an electricity generating company and a company having a license to trade in electricity, with further fact that the generating company is in one State and the company purchasing the power is in another State. The learned Single Judge had to consider the applicability of Section 86 in twin context. Whether the State Commission had the power to adjudicate a dispute between a power generating company in one State and a trader of power in the other State. With reference to the Central Commission, the learned Single Judge had to take note of and decide, with reference to Section 79 of the Indian Electricity Act, 2003, whether the Central Commission have the power to adjudicate a dispute between a generating company and a trading company. The learned Single Judge had to keep in mind that the power of the Central Commission was limited to clause (a) to (k) of sub-Section 1 thereof. Under which clause, if at all, the dispute between the parties was within the domain of the Central Commission had to be discussed.” (emphasis supplied)

62. For the above reason, the submission of Ms. Nagarajan that since the composite scheme for generation and sale arises out of the PPAs entered into by the plaintiff such as the PPA dated October 28, 2021, the disputes forming the subject matter of the present suit arising out of the PPA is clearly in regard to matters connected with generating companies having a composite scheme for generation and sale of electricity in more than one State, as provided in Section 79(1)(b), and as such needs to be adjudicated by the CERC under section 79(1)(f) is also liable to be rejected. For this Court to accept this submission, it must be apparent that the dispute between the parties essentially relates to tariff of the generating company, i.e., the plaintiff. Ms. Nagarajan has endeavored to show that the present issue has had an impact on tariff, as the actions of the plaintiff have prevented the applicant from supplying power to the defendant No. 3 under the PSA, and as such the defendant No. 3 has been forced to secure power from the open market at rates much higher than the tariff determined. This contention would be wholly irrelevant and cannot be taken into consideration while deciding this application filed under Order VII Rule 11 of the CPC, as the same has been raised in the written statement of the defendant No. 3 and does not flow from the plaint or the documents of the plaintiff. Even otherwise, as stated above since the PPA has not commenced, surely PSA cannot be put in operation and as such no issue relating to tariff arises in the Suit for determination by CERC.

63. Therefore, the submission of the learned counsel for the defendant Nos. 2 and 3 that the present matter relates to Section 79(1)(b) and as such needs to be adjudicated by the CERC under Section 79(1)(f) is liable to be rejected. Further, there are no averments in the plaint and/or the documents filed by the plaintiff which shows that the dispute is with regard to tariff of the generating company (plaintiff). In fact, the prayer made is with regard to return of the Bank Guarantee pursuant to termination of the PPA by the plaintiff.

64. A plea has been taken that in view of Section 174 of the Electricity Act, Civil Courts have no jurisdiction. In this regard, reliance has been placed on the judgments in the cases of Gujarat Urja Vikas Nigam Ltd. (supra), Chief General Manager (IPC) MP Power Trading Co. Ltd. (supra), Hindustan Zinc Ltd. (HZL) (supra), David Mantosh (supra), and Indo Rama Synthetics (I) Ltd. (supra). I have considered the said provision, which reads as under:- “174. Act to have overriding effect- Save as otherwise provided in section 173, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.” Insofar as the present case in concerned, the said provision would only be applicable to the extent the field is governed by Section 79 of the Electricity Act, i.e., if the dispute is covered by the provisions contained in Section 79(1). Suffice to state, in view of my finding above that the dispute raised in the plaint is not covered by the provision of Section 79(1)(b), the CERC has no jurisdiction to entertain the same. The suit filed by the plaintiff shall be maintainable. The plea that the right of the plaintiff to seek relief squarely entails adjudication of the rights and obligations under the PPA, and can only be done by the Commission is also not appealing in the facts of this case when the PPA has not commenced which governs tariff. It is not to be construed that the dispute with regard to tariff relatable to the period when the PPA was in operation before termination, the Commission shall not have jurisdiction. In other words, a dispute relatable to tariff for the period when PPA was in operation before termination, surely, can be decided by the Commission as the same falls within the ambit of Section 79(1)(b) of the Act.

65. Insofar as the judgments relied upon in this regard are concerned, it is clear that the disputes therein are with regard to Section 86(1)(f) of the Electricity Act, relating to the jurisdiction of the State Commission. As such the judgments shall have no applicability in the facts of this case.

66. Another submission of the learned counsel for the defendant Nos. 2 and 3, was that the Supreme Court in the case of Jaypee Karcham Hydro Corp. (supra) held that the provision of Sections 86 (1)(f) and 79(1)(f) are pari materia and as such the dispute which has been raised by the plaintiff in the present petition need to be adjudicated by the CERC is concerned, the same is without merit. No doubt, any dispute between a licensee and a generating company can be adjudicated or referred to arbitration by the State Commission, as is contemplated by Section 86(1)(f), however, such a provision is found to be absent in Section 79. In other words, as has been held by the Division Bench of this Court in Global Energy Pvt. Ltd. (supra), the jurisdiction of CERC shall be only with regard to the dispute contemplated by Clauses (a) to (k) of sub clause 1 of Section 79. Hence this plea is also rejected. Insofar as the reliance placed by Mr. Kishore on the judgment of the Rajasthan State Road Transport Corporation (supra) to contend that the plaintiff cannot circumvent the provisions of law in order to attract the jurisdiction of the civil court which it otherwise may not possess is concerned, in view of my conclusion above, the said judgment has no applicability in the facts of this case.

67. Reliance has been placed by Ms. Nagarajan on the Judgment in Maharashtra State Electricity Distribution Company Ltd. (supra) to the contend that the plaintiff cannot escape the jurisdiction of the proper forum under Section 79 (1)(f) by joining a non-related parties who are not concerned with the underlying dispute to the suit. In the said case, a contention was raised by the plaintiff therein that there are parties to the dispute who are neither licensees nor generating companies. The Bombay High Court held that merely because the plaintiff had chosen to join such parties to the suit, it cannot be said that Section 86(1)(f) of the Electricity Act would not apply. At the outset, I may state such a plea has not been advanced by Mr. Sethi. Even otherwise, in view of my conclusion above that CERC does not have the jurisdiction in the present case, the reference made to the judgment is totally misplaced.

68. Another judgment relied upon by the learned counsel for the defendant Nos. 2 and 3 is Coastal Andhra Power Ltd.(supra). In that case, the PPA between the parties had already commenced, unlike the present case, where the PPA was deemed to be terminated without commencement. Hence, this judgment is also distinguishable.

69. At the risk of repetition, I state the termination of the PPA is not relatable to the issue of tariff, in order to attract the provisions contained in sub-clauses (b) or (f) of Section 79(1) of the Electricity Act. The present application is liable to dismissed. It is ordered accordingly. CS(COMM) 282/2022, I.As. 6629/2022, 7022/2022, 7224/2022

70. Subject to orders of Hon‟ble the Chief Justice, list before the Roster Bench on February 14, 2023.

71. The interim order passed on April 29, 2022 to continue.

V. KAMESWAR RAO, J

JANUARY 13, 2023