Court’s Decision
The Supreme Court dismissed the civil appeals filed by Haryana Utilities and GRIDCO challenging the Appellate Tribunal for Electricity (APTEL) judgment upholding the Central Electricity Regulatory Commission (CERC) order. The Court held that coal allocations, whether firm or tapering linkages, are for the entire power project and not for individual Power Purchase Agreements (PPAs). Thus, costs arising from shortfall in domestic coal, met by imports or open market coal, must be apportioned pro-rata among all beneficiaries—Haryana Utilities, GRIDCO, and Bihar Utilities.
The Court found no substantial question of law under Section 125 of the Electricity Act, 2003 and emphasised that repeated litigation despite concurrent findings of expert bodies causes undue burden on consumers. Appeals were dismissed with costs.
Facts
GMR Kamalanga Energy Limited (GKEL) set up a thermal power project in Odisha under a 2006 MoU with the State Government. Coal blocks and linkages were assured, and GKEL entered into long-term PPAs:
- GRIDCO (Odisha) – 25% of output under 2006 PPA.
- Haryana Utilities – 300 MW under 2008 PPA through PTC.
- Bihar Utilities – 260 MW under 2011 PPA.
Coal allocation was initially through firm linkage (2.14 MTPA) and tapering linkage (2.384 MTPA), later supported by a Fuel Supply Agreement with Mahanadi Coalfields Ltd.
Disputes arose when CERC in 2016 recognised “Change in Law” events (royalty increase, clean energy cess, excise duty, etc.) and ordered relief. GKEL raised supplementary bills for additional coal costs, which Haryana refused to pay, arguing allocation was PPA-specific. CERC (2018) and APTEL (2019) rejected this, holding coal was project-wide and costs must be shared proportionately. Haryana and GRIDCO then appealed to the Supreme Court.
Issues
- Whether coal allocation under FSAs and LoAs was for the project as a whole or tied to specific PPAs.
- Whether Haryana Utilities could restrict their liability to imported coal costs, excluding tapering linkage costs.
- Whether CERC and APTEL orders went beyond their earlier rulings in directing pro-rata apportionment.
- Whether any substantial question of law arose under Section 125 of the Electricity Act, 2003.
Petitioner’s Arguments
The Haryana Utilities argued that their PPA was based only on firm linkage coal and they should not bear tapering linkage costs, which were relevant only for GRIDCO and Bihar. They contended that FSAs were unit-specific and pro-rata apportionment unfairly shifted costs onto Haryana consumers.
GRIDCO submitted that it was a necessary party as its PPA was operationalised first and its rights were affected by orders passed without its impleadment. GRIDCO asserted that as Odisha had facilitated the project, its consumers had a primary right over firm coal.
Respondent’s Arguments
GKEL argued, through Dr. Abhishek Manu Singhvi, that coal allocation by the Government of India was for the entire 1050 MW project, not PPA-specific. It submitted that Haryana had accepted pro-rata allocation under CERC’s 2016 order, paid bills till 2016, and could not later resile.
Bihar Utilities supported CERC and APTEL, stating that equitable sharing was essential; otherwise, disproportionate burden would fall on one State’s consumers. GKEL stressed that Haryana’s stance was “approbation and reprobation” and cited UHBVNL v. Adani Power Mundra, where Haryana earlier accepted similar methodology.
Analysis of the Law
The Court analysed Section 125 of the Electricity Act, clarifying that appeals to the Supreme Court lie only on substantial questions of law under Section 100 CPC. It emphasised judicial restraint when expert bodies like CERC and APTEL concurrently decide technical matters.
The Court reviewed FSAs, LoAs, and Standing Linkage Committee minutes, concluding that coal was allocated for the station as a whole. Clause 4.1 of the 2013 FSA expressly required Annual Contracted Quantity (ACQ) to be proportionate to generation under all PPAs, not any single PPA.
It rejected Haryana’s attempt to limit liability, noting that allocation to one procurer exclusively would discriminate against others and violate Article 14.
Precedent Analysis
- Energy Watchdog v. CERC (2017) 14 SCC 80 – Confirmed relief for Change in Law events and equitable adjustment of costs. Relied on by CERC in 2016 and reiterated here.
- MSEDCL v. Adani Power (2023) 7 SCC 401 – Held courts must defer to expert regulators’ concurrent findings unless perverse. Cited extensively.
- GMR Warora v. CERC (2023) 10 SCC 401 – Warned against frivolous electricity appeals causing consumer burden. Applied to caution DISCOMs here.
- Reliance Infrastructure v. State of Maharashtra (2019) 3 SCC 352 and Assn. of Industrial Electricity Users v. State of A.P. (2002) 3 SCC 711 – Judicial review of tariff limited; courts should not substitute expert bodies’ decisions.
- Vivek Narayan Sharma v. Union of India (2023) 3 SCC 1 (Demonetisation Case) – Reaffirmed limited scope of judicial review over expert decisions.
These precedents reinforced the need for deference to regulators and equitable pro-rata allocation.
Court’s Reasoning
The Court observed: “Coal supply is to the project as a whole and not procurer-specific. Apportionment ensures equality; restricting liability to one DISCOM would unfairly burden others.”
It held that CERC’s 2016 order had already devised a formula for pro-rata allocation, accepted by Haryana until 2016. Haryana could not selectively interpret one paragraph to claim exemption.
The Court further noted that repeated litigation despite concurrent findings delayed payments, increased carrying costs, and ultimately harmed end-consumers. Such “unwarranted litigation” must be curbed.
Conclusion
The appeals were dismissed. The Court upheld pro-rata sharing of coal costs among Haryana, Odisha (GRIDCO), and Bihar Utilities. It reiterated that coal allocations are project-wide, not PPA-specific, and Change in Law relief must be shared proportionately.
The Court warned DISCOMs against filing unnecessary appeals that prolong disputes and increase consumer tariffs.
Implications
This judgment clarifies that fuel allocations are for entire projects, not individual contracts, ensuring uniform burden-sharing among States. It strengthens the authority of expert regulators like CERC and APTEL and limits Supreme Court interference to genuine questions of law.
The ruling sends a strong message to DISCOMs: avoid frivolous litigation that delays dues and burdens consumers. It also provides certainty for power developers and utilities on cost-sharing principles under Change in Law.
FAQs
Q1. Can DISCOMs restrict liability to specific PPAs when coal is allocated to a project?
No. The Court held that coal allocation is project-wide, and costs must be shared pro-rata among all procurers.
Q2. What role did Section 125 of the Electricity Act play in this case?
It limited appeals to substantial questions of law, preventing the Supreme Court from re-examining concurrent factual findings of CERC and APTEL.
Q3. Why did the Court caution against frivolous appeals?
Because prolonged disputes increase carrying costs payable to generators, which are passed on to consumers, defeating the object of the Electricity Act.
