In a significant ruling, the Supreme Court clarified that compensation for wrongful diversion of electricity under a Power Purchase Agreement is distinct from the reimbursement of fixed charges. The Court held that the beneficiary is entitled to both remedies concurrently, reinforcing the ‘proportionate principle’ and preventing unjust enrichment by the power generator.
Facts Of The Case:
The dispute originated from a 1996 Power Purchase Agreement (PPA) between Gujarat Electricity Board (GEB, later GUVNL) and Essar Power Limited (EPL). EPL’s plant had a total capacity of 515 MW, with 300 MW allocated to GEB and 215 MW to its sister concern, Essar Steel Limited (ESL). The core issue arose when EPL began supplying more power to ESL from GUVNL’s allocated 58% share, violating the agreed “proportionate principle.” This led GUVNL to claim compensation for the diverted electricity. A partial settlement of ₹64 Crores was discussed for the period from 1998 to 2004, but GUVNL never accepted it as final. The legal journey involved multiple rounds of litigation before the Gujarat Electricity Regulatory Commission (GERC), the Appellate Tribunal for Electricity (APTEL), and finally the Supreme Court. The central controversy revolved around the correct method for calculating compensation for the diverted power and whether GUVNL was additionally entitled to the reimbursement of fixed charges it had paid for the electricity it never received.
Procedural History:
The legal dispute commenced in 2005 when GUVNL filed a petition before the Gujarat Electricity Regulatory Commission (GERC). GERC’s 2009 order was partially favourable to GUVNL, establishing key principles like the “proportionate principle” for power allocation. Both parties appealed to the Appellate Tribunal for Electricity (APTEL), which, in 2010, largely reversed GERC’s findings in favour of EPL. GUVNL then appealed to the Supreme Court, which, in a 2016 judgment, set aside the APTEL’s ruling and restored GERC’s 2009 order, remanding the matter back to GERC for quantification of claims. Following this, GERC passed a fresh order in 2019, which was again appealed by both sides to APTEL. The APTEL’s 2025 judgment, which modified GERC’s 2019 order, was the subject of the present appeals before the Supreme Court, leading to the final judgment in 2025.
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Court Observation:
In its judgment, the Supreme Court made crucial observations clarifying the legal principles governing the dispute. The Court firmly held that the “compensation” for wrongful diversion of electricity, calculated based on the HTP-1 Tariff Energy Charge, is distinct and separate from the “reimbursement” of the proportionate fixed charges. It emphasized that GUVNL was entitled to both remedies concurrently, as the reimbursement of fixed charges is a restitutionary claim for payments made for electricity never supplied, flowing directly from the PPA’s provisions. The Court also upheld the use of a half-hourly computation method for diversion, noting that the parties had mutually adopted this method in practice, and EPL could not resile from it for its own benefit. The observations underscored that the generator cannot unjustly enrich itself by collecting fixed charges from one beneficiary for power it did not receive, while also collecting payment for that same power from another entity.
Final Decision & Judgement:
The Supreme Court partly allowed the appeals and modified the orders of the APTEL and GERC. It ruled that GUVNL is entitled to both compensation for the wrongfully diverted electricity (based on the HTP-1 Tariff Energy Charge) and reimbursement of the proportionate fixed charges it paid for the power it never received. The Court also upheld the use of the half-hourly method for computing the diverted energy. The matter was effectively remanded to GERC for a fresh computation of the total dues payable to GUVNL, incorporating these two distinct financial components and the approved computation methodology.
Case Details:
Case Title: Gujarat Urja Vikas Nigam Limited versus Essar Power Limited and another Appeal Number: Civil Appeal Nos. 6581-6582 of 2025 Date of Judgement: September 25, 2025 Judges/Justice Name: Justice Sanjay Kumar and Justice Alok Aradhe
Download The Judgement Here