Supreme Court Grants Relief To Gujarat Urja Vikas Nigam Ltd; Directs Essar Power To Reimburse Fixed Charges For Electricity Diverted

The Supreme Court has granted relief to Gujarat Urja Vikas Nigam Limited (GUVNL) by setting aside the Appellate Tribunal for Electricity's (APTEL) March 2025 judgment and restoring the 2009 order of the Gujarat Electricity Regulatory Commission (GERC) in its long-pending dispute with Essar Power Limited (EPL) over diversion of electricity in breach of a Power Purchase Agreement (PPA). The Court held that EPL was bound by the PPA to maintain the stipulated proportion of supply, 58% to GUVNL and 42% to Essar Steel Limited (ESL),and that the company's failure to do so amounted to a breach entitling GUVNL to restitution and compensation.A bench of Justices Sanjay Kumar and Alok Aradhe partly allowed the GUVNL's appeal, holding that “the finding of GERC and the APTEL that GUVNL is not entitled to reimbursement of fixed charges is, therefore, unsustainable.” It said that “once GUVNL did not receive the electricity for which such fixed charges had been computed and paid on a monthly basis, it was entitled to reimbursement thereof, not as compensation, but on the principle of restitution as such payment was not at all due from it.”The Bench observed that GUVNL, having paid fixed charges for power capacity that was diverted to ESL, is entitled to reimbursement of fixed charges in addition to compensation for the shortfall. Restoring GERC's February 18, 2009 order, the Court faulted APTEL for misinterpreting the contractual obligations and for disregarding the Commission's reasoning. “Where a purchaser has paid fixed charges for capacity that was wrongfully diverted, principles of restitution demand that the amount be reimbursed,” the Court held.The dispute relates to a 1996 Power Purchase Agreement (PPA) between GUVNL's predecessor, Gujarat Electricity Board, and Essar Power Ltd(EPL) for purchase of 300 MW from EPL's 515 MW power plant. The remaining 215 MW was to be supplied to EPL's sister company Essar Steel Ltd. (ESL), creating a 58:42 capacity-sharing ratio. Disputes arose when EPL diverted more power to ESL, reducing GUVNL's allocation. In 2016, the Supreme Court had ruled that EPL must follow the proportionate sharing principle, compensate GUVNL for diverted power using the HTP-1 energy charge method, and reimburse fixed charges if GUVNL's share was sold to ESL. When the matter returned to the Gujarat Electricity Regulatory Commission (GERC) and APTEL for quantification, both tribunals denied reimbursement of fixed charges and reverted to an hourly computation method. GUVNL challenged these findings before the Supreme Court. Modifying the impugned findings, the judgment authored by Justice Sanjay Kumar noted that GUVNL is entitled not only to compensation for the wrongful diversion (calculated as the HTP-1 Tariff Energy Charge, as previously established) but also to the reimbursement of fixed charges it paid for the power it never received.Explaining the difference between compensation and reimbursement, the court said:“Needless to state, the very connotation of 'compensation' would imply the payment to be made to one party to make good the loss or damage suffered by it owing to a breach or violation of an obligation by the other. Reimbursement of fixed charges flowed from the provisions of the PPA itself and was not traceable only to the breach by EPL, in terms of the diverted capacity which fell to GUVNL's share.”The Court also questioned the computation methodology adopted in the impugned findings, noting that when the power generator itself supported computation based on half-hourly method, then “there is no reason why the very same methodology should not be used for computing the electricity diversion so as to quantify the compensation payable to GUVNL for the excess power supply made to ESL by EPL from out of GUVNL's allocated share.” “Having invited that methodology for supply of power so as to avoid installation of a circuit breaker, EPL cannot fight shy of the same methodology being adopted for computation of the excess power diverted by it to ESL from out of the allocated share of GUVNL.”, the court added. Accordingly, the matter was disposed of, with a direction to the GERC for a fresh computation of the total dues owed to GUVNL, incorporating the Supreme Court's clarified legal principles. Cause Title: Gujarat Urja Vikas Nigam Limited versus Essar Power Limited and anotherCitation : 2025 LiveLaw (SC) 972Click here to read/download the judgmentAppearance: For Appellant(s) Mr. C.A. Sundaram, Sr. Adv. Mr. M.G. Ramachandran, Sr. Adv. Ms. Hemantika Wahi, AOR Mr. Anand Ganesan, Adv. Ms. Ranjitha Ramachandran, Adv. Ms. Jesal Wahi, Adv. Ms. Srishti Khindaria, Adv. Mr. Utkarsh Singh, Adv. For Respondent(s) Mr. C.S. Vaidyanathan, Sr. Adv. Mr. Buddy Ranganatdhan, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Rohan Talwar, Adv. Mr. E. C. Agrawala, AOR Mr. Shashwat Singh, Adv. Mr. Naman Agarwal, Adv. Ms. Shefail Tripathi, Adv.

Supreme Court Grants Relief To Gujarat Urja Vikas Nigam Ltd; Directs Essar Power To Reimburse Fixed Charges For Electricity Diverted

Yash Mittal

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