Telangana High Court Quashes Centre's Order Directing Telangana Govt To Pay Power Dues To Andhra Pradesh Govt

The Telangana High Court has quashed an order passed by Union of India u/s 92 of Andhra Pradesh Reorganization Act, 2014, whereby Telangana government was directed to pay dues of over 6000 crores to Andhra Pradesh government, holding that the same was passed without following principles of natural justice.

“On plain reading of Section 92 of the 2014 Act, it is axiomatic that it does not neither expressly or by necessary implication, exclude the principles of natural justice, therefore, the principles of natural justice have to be read into Section 92 of the 2014 Act. The observance of principles of natural justice is necessary for a fair and just decision under Section 92 of the 2014 Act. In any case, the order or direction creates a civil liability for the petitioners, the observance of principles of natural justice is all the more necessary.”

Chief Justice Alok Aradhe and Justice NV Shravan Kumar were hearing writs filed by the Telangana State Power Distribution Companies (TSDISCOMs) and the State of Telangana challenging UOI's order directing the State government to pay power dues (principle and surcharge).

After perusing judicial precedents, the Bench held that unless statutes direct ignorance of principles of natural justice (audi alteram partem) they cannot be ignored. Adding to that, in a case where the sum due is being adjudicated, it is especially important to hear both sides.

“It is a well settled legal proposition that unless a statutory provision either specifically or necessary implication excludes the application of principles of natural justice, because in that event Court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into provisions of a statute particularly when order has adverse civil consequences.”

The dispute had arisen in respect of power-purchase agreements (PPAs) entered between undivided Andhra Pradesh's Power Generation Corporation Limited (APGENCO) and Power Distributing Companies. After the bifurcation of the State in 2014, it was stated that State of Andhra Pradesh unilaterally rescinded the PPAs disturbing the power supply to Distribution corporations falling in newly formed State of Telangana.

Between 2014-2017, supply of electricity to Telangana was restarted. Following the State of Andhra Pradesh approaching of Ministry of Power and Ministry of Home Affairs, Government of India for intervention, the impugned order was passed directing Telangana government to pay primary amount along with surge fee.

Senior Counsel CS Vaidyanathan contended on behalf of TSDISCOMs that in terms of the PPAs, disputes between the parties are to be settled by Chief Executives. In an event of failure, arbitration proceedings may be initiated or State Regulatory Commission approached.

Further, it was submitted that the State of Andhra Pradesh had no right to approach UOI u/s 92 of the Act (that allows the Centre to pass directions and orders), as the dispute was between power generating and distributing companies, which has to be adjudicated by the Electricity Regulatory Commission under the provisions of the Electricity Act.

Lastly, it was contended by the Senior Counsel that UOI had passed the order without providing any opportunity of a hearing and on that ground alone the order deserved to be set aside.

UOI submitted that the quantum of amount payable was admitted by TSDISCOMs and in the proceedings leading upto passing of the impugned order, Secretaries of both States were present. Thus, there was no violation of the principles of natural justice.

Senior Counsel CV Mohan Reddy argued for APGENCO that the order passed by UOI could not be equated to a judicial order. He submitted that the order was passed upon admission of liability the petitioners and urged that the writs were not maintainable as only the Supreme Court had power to deal with inter-State disputes under Article 131 of the Constitution.

In rejoinder, it was contended for TSDISCOMs that they had never admitted to the dues. Further, before an admission could be acted upon, the same shall be categorical, conspicuous and deliberate with a view to being bound by the decision.

The Bench noted that UOI claimed to have passed the order keeping in mind admissions made on behalf of TSDISCOMs, but upon close scrutiny, it was evident that no specific or unambiguous admission was made.

“Thus, from the material on record, the admission, if any, can be at best to be a qualified admission. The TSDISCOMs have not clearly or unambiguously admitted the quantum of amount payable by them to APGENCO on account of supply of electricity between the period from 02.06.2014 to 10.06.2017. The admission, if any, is conditional as the TSDISCOMs have insisted for total settlement of the amount either due to it or payable by it. The aforesaid admission in any case does not bind the TSDISCOMs as only a part of statement cannot be acted 46 upon relied against the petitioners.”

It was remarked that UOI failed to acknowledge that amounts were stated to be due from TSDISCOMs to APGENCO. The former being separate legal entities, the State government of Telangana could not have been made liable.

The court appreciated that the PPAs stipulated alternative methods of dispute resolution, i.e. through the State Commission or arbitration.

It was also held that u/s 92 of the Reorganization Act, inter-State disputes can be resolved. APGENCO's contention that power to adjudicate between two States vested only with the Supreme Court under Article 131 was rejected, holding that the dispute was not inter-State, but one between generation and distribution powerhouses.

The impugned order was held vitiated considering that no opportunity was provided to Telangana government or TSDISCOMs.

While setting aside UOI's order, the court urged the companies of both States to resolve disputes amicably.

“We hope and trust that State of Telangana and its distribution companies and the State of Andhra Pradesh and its generating company make an earnest endeavour to sort out the disputes between them through mediation.”

Case Title: Telangana State Southern Power Distribution v. Union of India, W.Ps. 37555 and 37599/2022

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